Digitisation is advancing rapidly. It will enable a wave of new technologies over the next decade – including 5G, the Internet of Things, artificial intelligence, autonomous vehicles, virtual reality and blockchains.
That requires powerful data centres. Add in the adoption of electric vehicles and environmental pressure to replace gas heating with electric and the world is facing massive demand for power. But can the electricity industries supply it?
Without infrastructure investment, grids may have difficulty meeting demand, introducing instability and security risks and potentially slowing the uptake of new data-heavy applications. And unless incremental power generation is low carbon, attempts to decarbonisation the world are threatened.
Digitisation is part of the solution to the problem it is creating: by improving the flexibility and efficiency of power systems, overall power consumption has remained flat despite higher data usage. However, beyond 2021, efficiency gains may be harder to achieve.
Since 2010 the total power requirement by ICT (information and communications technology) has remained roughly stable at about 2,000TWh – roughly 9 per cent of global electricity consumption – even though global data-centre IP traffic increased sevenfold. The rising electricity demand from data centres has been offset by more power efficient devices.
But as new technologies take off, global data-centre traffic is set to balloon from 9,000 Exabytes a year to 170,000 by 2030.
Decreasing industrial activity in developed countries has reduced power consumption there but outsourcing production to emerging countries has increased their electricity demand. While power growth between 2000 and 2017 was only 0.8 per cent in OECD countries, for the BRIC nations, it was 6.9 per cent.
The top ten countries for power-consumption growth over those years are all emerging economies, with China at almost 10 per cent; nine of the lowest ten are developed economies with the UK’s usage even contracting.
Buildings account for 51 per cent of global power consumption and industry 40 per cent, with only 3 per cent powering transport. However, electric vehicles will drive that higher.
The rapid growth of electric vehicles is unlikely to tip the scales for global power demand but it could push peak demand far beyond the level existing power systems can generate. So, although risks to overall power supply are low, a surge of cars charging each evening could create localised pressure points on electricity.
Many more devices will connect globally, thanks to 5G technology. That means more antennas, increasing power demands despite 5G’s greater energy efficiency.
The International Energy Agency estimates data centres will use only about 1 per cent of global electricity by 2021 with similar consumption by networks. But that assumes a highly optimal scenario where energy efficiencies keep materialising. We think the efficiency gains of the past could taper (just as Moore’s and Koomy’s laws would suggest) with considerable implications for the power industry and electricity grids.
We have considered three scenarios. In our base-case scenario, ICT could use 13 per cent of global electricity by 2030. The slow-burn possibility would consume 9 per cent of global electricity demand, but the accelerated digital scenario is almost 20 per cent – akin to adding 60 per cent of what the United States consumed in power in 2017.
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The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Davey Jose
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