Data Center Outlook: No Sign of Slowing Down
- Yoann Hispa
- 11 hours ago
- 4 min read
Data center demand in the United States is not slowing down. Driven by a growing dependence on AI, power demands are also rising significantly alongside development of new data centers and the infrastructure that supports them. According to Amazon and Nvidia executives, fears of a looming recession have not affected plans for continues data center growth and expansion.
The first quarter of 2025 has been a crucial time for the U.S. data center industry, in particular. As the demand for AI-driven services and cloud applications continues to rise, data centers are seeing a significant increase in energy usage. U.S. data centers are expected to consume more than 600 terawatt-hours (TWh) of electricity by 2030, compared to 147 TWh in 2023 and an estimated 200 TWh in the first quarter of 2025.
This increase accounts for 11.7% of the total U.S. electricity demand, highlighting the vast expansion of the sector. Consequently, developers are tasked with addressing the rising power needs of next-generation technologies while ensuring energy sources remain sustainable and reliable. With approximately $500 billion flowing into the AI industry this quarter, data centers have experienced significant growth and increased demand, prompting developers to search for ideal locations for their projects. With over 4 million jobs created and contributing more than $700 billion to the US GDP, the data center industry continues to thrive, adding numerous hyperscale and colocation facilities to the landscape.
Emerging Hurdles for Data Center Developers
The rapid expansion of the data center industry comes with its own set of challenges. A major issue is the shortage of skilled labor. The increasing demand for data centers has surpassed the supply of qualified construction workers, especially in the areas of electrical, mechanical, and plumbing systems, which are essential for building large-scale data centers. To bridge these workforce gaps, industry leaders are investing in training programs at community colleges and technical schools to increase the number of skilled workers who can support the sector’s growth. Additionally, ISOs are struggling to meet the rising demand for power across various locations. However, given the significant increase in returns for the data center industry, states are intensifying efforts on power solutions and exploring alternative power generation for these sites. For example, Indiana’s ISOs have developed integrated resource plans to address the surge in demand. To complement this, several data center providers have transitioned to renewable energy and alternative resources such as gas and nuclear power to generate electricity in their data centers.
Power: The Foremost Priority for Data Center Developers
As power requirements for data centers escalate, the focus for developers has shifted significantly. Traditional data centers typically demand between 30-50 MW of power per site, while modern facilities are now anticipated to require 100 MW or more. This dramatic increase in power needs has led developers to seek locations with dependable power supplies, robust connectivity, and scalable infrastructure. Areas near natural gas pipelines, nuclear power plants, and renewable energy sources are becoming increasingly desirable due to their capacity to deliver consistent, high-output energy essential for the continuous operations associated with AI and cloud computing. For example, Microsoft’s $2.1 billion AI-centric data center in Phoenix is utilizing a mix of solar, nuclear, and natural gas energy sources to fulfill its power requirements, highlighting a growing trend toward energy diversification in the industry. The impact of the data center sector extends beyond its immediate operations, influencing real estate markets, labor income, tax revenues, and overall economic activity across the United States.
Offtake Capacity Data: The Solution to Data Center Power Struggles
Offtake capacity refers to the amount of energy that can be safely and reliably withdrawn from the electric grid at any given point to power various installations, including the rapidly growing number of data centers driven by artificial intelligence (AI) advancements. This capacity is critical for ensuring that energy supply meets the increasing demand from facilities like data centers, industrial plants, and other large-scale operations. It is important to distinguish Offtake Capacity from Available Transfer Capacity (ATC) which indicates the amount of power that can be processed through the electric grid.
Understanding offtake capacity is essential for several reasons, especially in the context of surging data center development. It helps prevent grid overload, ensures a reliable energy supply, and supports the strategic planning of new projects. For energy developers and utility companies, knowing the offtake capacity can streamline site selection processes, leading to more efficient and cost-effective implementations of data centers that are increasingly reliant on robust energy sources to meet the high demands of AI technologies.
Moreover, the existing grid infrastructure must be examined critically when evaluating power needs. Developers must assess how effectively the local power grid can support the data center's operations. This includes evaluating the distance to substations, the strength of transmission lines, and the dependability of the local power grid. Spending time to understand these aspects can help prevent costly upgrades or unexpected disruptions, ensuring a smoother development process.
LandGate provides subscribers with offtake capacity data for every substation across the US, making the data center site selection process easier and supporting the growth of the data center industry nationwide.
