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A Booming Energy Appetite: What Does AI Need?

Since its birth, ChatGPT has sparked a transformative wave across the global AI landscape, gathering unprecedented focus on the AI sector. In recent years, many AI companies have focused on developing generative AI technologies to transform enterprise productivity. A Statista Market Insights report forecasts that the market size of artificial intelligence is expected to show an annual growth rate (CAGR) of 28.46% from 2024 to 2030, resulting in a market volume of USD 826.70 billion by 2030. However, as generative AI becomes more prosperous in many fields, there is a popular saying that AI's surging demand could use a large amount of electricity, even as much as an entire medium-sized country. Many tech industry leaders also warn: “AI will run out of electricity and transformers in 2025," said Elon Musk. Mark Zuckerberg, the founder and CEO of Meta, confirmed that energy constraints have become the largest bottleneck to building out AI data centers. It appears that the infrastructure underpinning AI development—including large language models, architectural frameworks, algorithms, and databases—demands a more robust energy supply.

Data Display (1).png(Source: Statista Market Insights)

Energy consumption has been a critical factor limiting advancements in science and technology. In the AI industry, a surprising fact is that a generative AI search consumes nearly 10 times more power than a Google search. The primary reason lies in the complexity of the AI search process. It not only searches the internet but also involves multiple models that have been trained to give AI knowledge. Because of its complexity, efficiency, and accuracy, much more energy will be used through the whole search process compared to a normal search. As data centers provide stronger computational support for AI, their energy consumption has experienced rapid growth in recent years. A significant shift is occurring: traditional data centers are transitioning to cloud data centers and hyperscale data centers. According to research by Goldman, data center power demand is projected to increase by 160% by 2030 compared to 2023 levels globally. The United States, as one of the most technologically advanced countries in the world, has a huge market for data centers. The IEA estimates that the U.S. data center's electricity consumption rate will rise from about 200 TWh in 2022 to almost 260 TWh in 2026. The data center power consumption in the US is expected to reach 35 GW by 2030, which is almost double that of 2022, according to Newmark.

Data Display (2).jpg(Source: 165 Halsey)

The 2022 Artificial Intelligence Index Report indicated that the U.S. and China dominated cross-country collaborations on AI, and they both are in the first tier according to the 2022 AI Innovation Index scores; the second tier includes 11 countries such as the United Kingdom, Germany, and Singapore, etc. The third and fourth-tiers include 32 countries, such as Denmark and Finland. A report from Statista mentioned that the market for artificial intelligence grew beyond USD 184 billion in 2024, a considerable jump of nearly 50 billion compared to 2023. This staggering growth is expected to continue with the market racing past USD 826 billion in 2030. There is a lot of analysis about the potential market: undoubtedly, the United States has secured a significant portion of the global market, and China also has considerable potential to build data centers. Africa's data center market is projected to reach USD 7 billion by 2028. In Southeast Asia, Vietnam's data center market is estimated to reach USD 1.26 billion by 2030. The data center market in Latin America is expected to reach USD 10.06 billion by 2029. As a result, with the rapid development of AI industries, it can be estimated that the global electricity consumption of data centers will reach more than 1,000 TWh in 2026.

Data Display (3).jpg(Source: IoT Analytics)

However, energy consumption is not the only issue that needs to be solved in the future, aging electrical equipment, which requires more maintenance and updates, also poses a risk that hinders AI development. In some countries with large electrical infrastructures, such as the United States, their electrical distribution systems and equipment have been in place for several decades, even dating back to the late 19th century. The U.S. Department of Energy indicates that 75% of power transformers and 70% of transmission lines are equipped for more than 25 years, while 60% of circuit breakers are more than 30 years. Therefore, the biggest challenge of using that aging equipment is that it is less resilient, inefficient, and poses safety risks, making it prone to outages during operation. It might be dangerous for data centers to use such a distribution system and equipment to save and protect data. While it poses a challenge for aging electrical systems, it also presents an opportunity for electrical equipment manufacturers.

Data Display (4).jpg(Source: AKCP)

As an indispensable part of the power supply system, the transformer plays a very important role in electric power distribution. A survey by Global Market Insights points out that the data center transformer industry size is expected to register a 7% CAGR between 2024 and 2032, and its market value could reach USD 16.8 billion by 2032. There are many types of transformers for AI industries and data centers: isolation transformers, energy-efficient transformers, smart transformers, etc. Particularly, it is worth mentioning that many companies commit to implementing modern and eco-friendly solutions, so the dry insulation type transformer gains increasing attention for its low fire risks, low maintenance, and eco-friendliness. 

Data Display (1).jpg(Source: Global Market Insights)

With the global AI industry rapidly developing and driving the transformation of global energy structures, along with the continuous growth in electricity demand, and power transformers, it can be witnessed that the electric transformer shortage might influence numerous industries because of the demand for new transformers and the rise of emerging industries. As a Chinese advanced electrical manufacturer, CEEG has a long history of manufacturing advanced transformers, substations, switchgear, etc. CEEG integrates research, design, manufacturing, and selling all together and insists on providing the highest-quality product, the most excellent service, and the most various solutions to customers. CEEG has one of the largest transformer industrial bases in the world, and the product types and the quality will exceed the customers' expectations. We anticipate collaborating with all kinds of industries and companies and selling our products overseas!

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