AI boom puts growing strain on electricity grids, says Hitachi Energy CEO

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NEW DELHI: The rapid growth of artificial intelligence and power-hungry data centres is putting greater pressure on electricity grids worldwide, according to Hitachi Energy CEO Andreas Schierenbeck.

Speaking to CNA on the sidelines of the Bloomberg New Economy Forum in New Delhi on Wednesday (Oct 14), Schierenbeck said the scale of electricity demand from data centres has grown significantly.

"The size of these data centres is something we haven't seen. Years ago, a data centre was maybe 20-30 megawatts … the size of the energy consumption of London Heathrow in summer. And now we're talking about two gigawatts," he said. 

The International Energy Agency (IEA) estimates that electricity consumption by data centres will roughly double from 485 terawatt-hours in 2025 to 950 TWh by 2030 – slightly more than Japan currently consumes in a year. 

GRID INFRASTRUCTURE A KEY BOTTLENECK

AI is adding constraints to electricity grids already dealing with volatility and the need for more power generation assets, Schierenbeck said.

He identified inadequate grid infrastructure as the first obstacle to meeting rising electricity demand and expanding renewable energy capacity.

"If the grid is not there, you have no base, no foundation for transmitting energy which is generated," he said.

He cited Germany as an example of a country where grid limitations have delayed the connection of renewable energy projects.

According to the IEA, more than 2,500 gigawatts of renewable energy, large-load and storage projects are stalled in grid-connection queues worldwide.

India, in contrast, had made significant progress in strengthening its electricity network before connecting more renewable energy sources, Schierenbeck said, noting that the country had previously struggled with power outages, grid instability and limited interconnections.

He said Hitachi Energy is supporting India's grid expansion through high-voltage direct current (HVDC) transmission technology, which enables large amounts of electricity to be transported efficiently over long distances.

The company is also expanding its manufacturing operations in India to meet domestic and international demand.

In June, it announced plans to invest about 20 billion rupees (US$210 million) in a new power transformer factory in Vadodara, Gujarat.

Schierenbeck said expanding electricity networks would require substantial investment, but argued that failing to upgrade infrastructure would prove more costly in the long run.

He said stronger grids could eventually help lower energy costs by allowing more power generation facilities, including renewable energy projects, to connect to electricity networks.

Asked who should bear the cost of upgrading power grids, Schierenbeck said the expense would ultimately fall on consumers and taxpayers.

EXPANDING GLOBAL MANUFACTURING FOOTPRINT

As demand for grid infrastructure grows, Hitachi Energy is investing US$9 billion globally to expand manufacturing and other capabilities.

Its investments span markets including the United States, Canada, Europe, India and China.

In August, the company announced a US$300 million investment in China to expand its power transformer and component manufacturing capacity in Hefei, Anhui province.

Schierenbeck said disruptions during the COVID-19 pandemic and energy crises had reinforced the importance of diversifying the company's sources of supply to reduce risks.

"We're looking very diligently at our supply chain and trying to de-risk that and that we have multiple sources that we know what is coming, that we can react," he added.

POLITICAL, FINANCING HURDLES FOR ASEAN POWER GRID

On the prospects for a unified Association of Southeast Asian Nations (ASEAN) power grid, Schierenbeck said electricity networks were becoming larger and more complex as more renewable energy was added, while greater interconnectivity was another growing trend.

The regional bloc aims to establish an interconnected power grid by 2045 to facilitate cross-border electricity trade and strengthen energy security.

Schierenbeck highlighted HVDC technology as a way to connect electricity networks across regions and national borders, allowing countries to diversify and reduce risks to their power systems.

He described this growing layer of interconnections as "another grid developing on top of the grid".

Schierenbeck said securing project approvals and financing remained key challenges, particularly when multiple countries were involved.

"The bottleneck is not the technology. The bottleneck is the time to get these projects approved and financed, especially if you have two countries agreeing or discussing who is paying what," he said.

"There are sometimes more political discussions, but energy is politics and politics is always energy."