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RIYADH: Electricity consumption by data centers is expected to double by 2030 to reach 945 terawatts per hour, driven by the rapid use of applications powered by artificial intelligence, according to a think tank. 

In its latest report, the International Energy Agency said that this rise in electricity demand will create new challenges for energy security and carbon dioxide emission goals. 

According to the IEA, electricity consumption by data centers has increased by 12 percent annually since 2019 to reach 1.5 percent of the global amount in 2024.

The agency added that even though AI is driving the use, the technology can also unlock opportunities to produce and consume electricity more efficiently. 

“AI is one of the biggest stories in the energy world today — but until now, policymakers and markets lacked the tools to fully understand the wide-ranging impacts. Global electricity demand from data centers is set to more than double over the next five years, consuming as much electricity by 2030 as the whole of Japan does today,” said Fatih Birol, executive director of the IEA. 

He added: “The effects will be particularly strong in some countries. For example, in the US, data centers are on course to account for almost half of the growth in electricity demand; in Japan, more than half; and in Malaysia, as much as one-fifth.” 

The IEA further said that generative AI requires colossal computing power to process information accumulated in gigantic databases. 

The report added that data centers in the US are set to consume more electricity than the cumulative power used for the production of aluminum, steel, cement, chemicals and all other energy-intensive goods combined by the end of this decade. 

In advanced economies more broadly, data centers are projected to drive more than 20 percent of the growth in electricity demand between now and 2030, putting the power sector in those economies back on a growth footing after years of stagnating or declining demand in many of them. 

In March, another report by the IEA revealed that energy demand globally rose by 2.2 percent in 2024 compared to 2023, driven by usage of electricity and growth in emerging and developing economies. 

In that analysis, the agency revealed that energy demand growth last year was also faster than the average annual increase of 1.3 percent between 2013 and 2023. 

Meeting rising demand 

According to the IEA, the world should tap a diverse range of energy sources to meet data centers’ rising electricity needs. 

Data centers are set to account for around one-tenth of global electricity demand growth to 2030, less than the share from industrial motors, air conditioning in homes and offices, or electric vehicles. 

The report projected that renewables and natural gas are set to take the lead in this journey due to their cost-competitiveness and availability in key markets.

“Renewables generation is projected to grow by over 450 TWh to meet data center demand to 2035, building on short lead times, economic competitiveness and the procurement strategies of tech companies,” said the IEA. 

It added: “Dispatchable sources, led by natural gas, also have a crucial role to play, with the tech sector helping to bring forward new nuclear and geothermal technologies as well.” 

The report further said that natural gas and nuclear power capacity is projected to grow by over 175TWh each by the end of this decade to meet electricity demand in data centers. 

Aligning with this trend, in October Google signed a deal with Kairos Power to to use small nuclear reactors to generate the vast amounts of energy needed to power its AI-based data centers. 

In the same month, Amazon also signed three agreements with X-Energy to develop nuclear power technology called small modular reactors to power its data centers. 

Microsoft is also eyeing to use nuclear energy from new reactors at Three Mile Island, the site of America’s worst nuclear accident. 

Earlier this month, in a separate report, the IEA said that the range of new energy technologies under development globally is broader and appears more promising than ever before, catering to the rising demand. 

The think tank added that modern energy technology landscape is highly dynamic, with both emerging and established economies contributing to the growth of innovation in the sector. 
Unlocking opportunities through AI 

According to the IEA, while data centers could negatively impact energy security, wise implementation of AI has the potential to transform the energy sector in the coming decade. 

The report said that effective use of the technology could unlock significant opportunities to cut costs, enhance competitiveness, and reduce emissions.

“With the rise of AI, the energy sector is at the forefront of one of the most important technological revolutions of our time,” said Birol. 

He added: “AI is a tool, potentially an incredibly powerful one, but it is up to us – our societies, governments and companies – how we use it.”

According to the report, countries that want to benefit from the potential of AI need to quickly accelerate new investments in electricity generation and grids. 

The IEA also urged these nations to improve the efficiency and flexibility of data centers, and strengthen the dialogue between policymakers, the tech sector and the energy industry.

The report added that countries should also consider establishing new data centers in areas of high power and grid availability. 

The Paris-based agency further said that AI could intensify some energy security strains while helping to address others. 

“Cyberattacks on energy utilities have tripled in the past four years and become more sophisticated because of AI. At the same time, AI is becoming a critical tool for energy companies to defend against such attacks,” said the IEA. 

The emission factor

The IEA said that the growth of data centers will inevitably increase carbon emissions linked to electricity consumption, from 180 million tons of CO2 today to 300 million tonnes by 2035. 

However, these emissions remain a minimal share of the 41.6 billion tonnes of overall global emissions estimated in 2024. 

“While the increase in electricity demand for data centers is set to drive up emissions, this increase will be small in the context of the overall energy sector and could potentially be offset by emissions reductions enabled by AI if adoption of the technology is widespread,” said the report. 

The think tank added that AI could also accelerate innovation in sustainable energy technologies such as batteries and solar photovoltaics, thus contributing to the global climate goals. 

RIYADH: The Gulf bloc must fast-track diversification, strengthen regional integration and deepen global ties in Asia, Africa and Latin America to cushion against the long-term impact of newly imposed US tariffs, a top risk strategist has told Arab News.

Mohammad Fheili warned that while the Gulf region has the capacity to withstand short-term turbulence, it remains exposed to the deeper ripple effects of a shifting and increasingly fragmented global trade environment.

President Donald Trump’s sweeping tariffs triggered a new wave of global trade tensions, sending financial markets into a tailspin and prompting urgent diplomatic responses.

With a baseline 10 percent tariff imposed on all imports and a staggering 125 percent levy on Chinese goods, the policy aims to combat what Trump calls unfair trade practices and to revive American manufacturing.

Key US trade partners, including the EU, Japan and South Korea, were also hit with elevated tariffs, drawing strong rebukes and pushing some nations to the negotiating table in hopes of exemptions or revised terms.

“If the region is to shield itself from the long-term consequences of Trump’s trade war, it must take decisive steps — starting now,” Fheili, who also works as an economist, told Arab News.

To avoid long-term vulnerabilities, he urged policymakers across the region to adopt a proactive, multi-pronged strategy.

This includes expanding partnerships beyond Asia to emerging markets in Africa and Latin America, strengthening intra-Gulf Cooperation Council economic integration, and boosting domestic demand by investing in wage growth, labor reforms and support for small and medium-sized enterprises.

“Strategic patience, economic flexibility and deeper regional integration will be essential to navigating what lies ahead,” Fheili said.

These measures, he noted, were essential in transforming the GCC from a strategically positioned bloc into a globally competitive economic force.

The market reaction to Trump’s tariff announcement was swift and severe: US indices plunged, with the S&P 500 falling nearly 10 percent in the first two days, while global exchanges echoed the selloff amid fears of a prolonged economic downturn.

“US markets initially spiked after hours following the tariff announcement on April 2, but the rally lasted only minutes before a sharp reversal sent markets tumbling,” Makram Makarem, senior director at Investment and Capital Bank, told Arab News.

“By the close on April 3, US indices were down by around 5 percent. The following day brought more turmoil, as China’s retaliatory measures triggered an additional 6 percent drop,” he added.

“After some breathing room on April 7 and into the morning of April 8, markets staged a modest rebound. But later that afternoon, Trump’s announcement of even higher tariffs on China triggered another wave of selling — though losses remained above Monday’s lows,” Makarem said.

Trump later introduced a 90-day pause on most global tariffs but simultaneously hiked levies on Chinese goods to 125 percent.

“Markets reacted positively to the pause, with the S&P 500 surging 9.5 percent as investors welcomed the temporary relief despite rising friction with China,” Makarem said.

Trump has insisted the tariffs could become permanent unless trade imbalances are corrected, casting a long shadow over global supply chains and export-driven economies.

While the GCC countries were spared the harshest penalties, the ripple effects — especially through weakened global oil demand and investor caution — pose indirect risks to the region’s economic outlook.

“While the GCC has so far managed to stay out of the direct line of fire, it cannot avoid the indirect exposure to global economic turbulence,” according to Fheili.

“In the short term, GCC states may be able to absorb the initial shockwaves. But if this trade war persists, the structural weaknesses of the region’s economies will be tested — and possibly exposed,” he said.

Short-term resilience

GCC economies have built a notable buffer against immediate shocks through a decade of reforms, fiscal discipline and diversification efforts.

National strategies such as Saudi Arabia’s Vision 2030 and the UAE’s economic transformation agenda have laid the groundwork for expanding non-oil sectors such as tourism, logistics and financial services.

The region has also strengthened trade ties beyond traditional partners, deepening economic relationships with fast-growing markets in Asia and Africa. Sovereign wealth funds and robust central banking systems further support macroeconomic stability.

Moreover, President Trump’s recent tariff policy notably spares oil and gas imports — offering near-term relief for the GCC’s energy-dependent economies and preserving their most critical revenue stream amid rising global uncertainty.

“Countries like Saudi Arabia, the UAE and Kuwait have built significant reserves through sovereign wealth funds, providing liquidity and investment continuity even during global slowdowns,” said Fheili.

Turning to Saudi Arabia, the analyst said that the Kingdom is well-positioned to benefit from shifting global dynamics.

“In a fragmented trade environment, energy security becomes even more critical. Saudi Arabia’s vast oil and LNG resources remain attractive to countries seeking reliable long-term partners, potentially locking in stable export relationships,” he said.

Long-term trade turbulence requires structural overhaul

As the global trade environment shifts toward deeper fragmentation, the GCC faces mounting long-term challenges that could erode the region’s economic resilience.

While the initial shock of US tariffs may spare the GCC from direct impact, Fheili warns that prolonged trade conflict poses far-reaching risks — especially for nations still reliant on hydrocarbon exports and global capital flows.

Indeed, weakening global industrial output could shrink demand for petrochemical exports, a major revenue stream for Saudi Arabia and Qatar. Tightened US export controls may also complicate technological and defense cooperation with American firms, further entrenching strategic vulnerabilities, according to the expert.

Despite visionary plans such as Saudi Vision 2030, many structural weaknesses persist.

“Diversification is still in its early stages,” Fheili said. He added: “The non-oil economy, while growing, isn’t yet mature enough to offset a drawn-out global slowdown.”

The region’s reliance on imports — from food to industrial equipment — adds another layer of exposure. If global supply chains continue to strain, the GCC could face inflationary pressures and shortages.

Additionally, China, the Gulf’s largest oil customer, remains deeply entangled in the trade war crossfire. A slowdown in Chinese energy demand would reverberate across the Gulf’s public finances, Fheili said.

Fiscal disparities across the bloc could also widen the gap between nations including Saudi Arabia and the UAE — armed with sovereign wealth reserves — and more vulnerable economies such as Bahrain and Oman. Meanwhile, intra-GCC trade remains modest, limited by overlapping sectors and weak integration.

“A more connected and cooperative Gulf economic bloc could serve as a buffer against global headwinds,” said Fheili, adding: “The time is ripe to turn the GCC from a strategic alliance into a true economic force.”

Strengthening domestic demand and supporting small and medium enterprises will also be crucial in buffering external shocks. Furthermore, leveraging strategic assets — such as gold reserves, energy logistics and emerging green technologies — can provide the GCC with an edge in a shifting global order.

According to Fheili, one of the most underused tools may be gold. In the Gulf, it is more than a hedge — it is heritage, trade and untapped financial strategy. As global faith in fiat currencies wavers, GCC central banks can treat gold not just as a stabilizer, but a strategic asset that reinforces financial sovereignty and hedges against geopolitical volatility.

“Resilience must evolve from a cushion into a capability,” he added.