Data Centers and Policy Shifts: A New Era for Global Renewable Markets
August 29, 2025
By: Ethan Janke, Delanie Player, Romin Nejad, & Natalie Chandra
As artificial intelligence and digital infrastructure expand at breakneck speed, the world’s energy systems are struggling to keep up. Once niche facilities, data centers are now central to national economies and global innovation. But their energy appetite is staggering. In the United States alone, demand from data centers around Chicago has surged to 26 gigawatts, equivalent to the output of 100 utility-scale renewable projects.
Global Demand Is Accelerating, But Can Renewables Keep Up?
According to Goldman Sachs, global power demand from data centers is expected to grow 165% by 2030. AI workloads alone could account for more than a quarter of that demand by 2027. Without a rapid scale-up in renewable energy, the world cannot meet its carbon reduction targets and also supply this increasing global energy demand.
But beyond the headline numbers, developers are facing a new set of strategic decisions that go far beyond power procurement. As the energy landscape shifts, so must the way developers think about location, resilience, and long-term sustainability.
United States: Racing Against the Clock
In the U.S., the Department of Energy predicts that power demand from data centers could triple by 2028, creating urgent challenges for the electric grid. This surge in demand is already reshaping the energy landscape—and the solar industry is stepping up to meet it.
According to the Solar Energy Industries Association (SEIA), solar accounted for 69% of all new electricity-generating capacity added to the U.S. grid in Q1 2025, its highest share ever. The U.S. solar industry is projected to add an average of 43 GW annually through 2030, driven in large part by corporate demand from data-intensive sectors like AI.
Many companies are bypassing tax credits altogether, opting instead to fast-track projects that already have permits in hand. The pressure is intense. With a five-year backlog on gas turbines and a growing reliance on rare earth minerals, the race to build is on. Battery plants are emerging across the country, but questions remain about where their materials will come from and at what cost.
According to the EIA’s Annual Energy Outlook 2025, renewables, especially solar and wind, are expected to account for over 80% of new capacity additions through 2026.
The DOE emphasizes that clean energy deployment is critical to meeting the surge in electricity demand from AI and data centers.
The DOE’s 2024 Data Center Energy Use Report (Lawrence Berkeley National Lab) estimates:
- Data centers consumed 176 TWh in 2023.
- Projected to consume 325–580 TWh by 2028, or 6.7–12% of total U.S. electricity.
- AI workloads are a primary driver of this increase.
The Inflation Reduction Act (IRA) is the largest climate investment in U.S. history, offering:
- Long-term tax credits for clean energy.
- Incentives for grid modernization and storage.
- Support for domestic clean tech manufacturing.
Grid Interconnection: With long queues and limited capacity, choosing the right location near renewable-rich zones with available transmission is more critical than ever.
24/7 Clean Energy: Corporate sustainability goals are evolving from annual offsets to hourly matching. Developers should explore renewable portfolios that enable true 24/7 carbon-free energy.
Resilience Planning: AI workloads require ultra-high uptime. Hybrid renewable + storage systems can reduce reliance on diesel and improve grid stability.
Policy Navigation: Incentive stacking across federal and state levels can unlock significant value but only if developers know where to look.
Community Engagement: Local support is no longer optional. Projects that deliver co-benefits like community solar or agrivoltaics are more likely to succeed.
Canada: Friendly Terrain, But Supply Chain Strains
Canada presents a more stable regulatory environment, but it’s not without its own hurdles. While provinces like Ontario are fast-tracking projects to meet rising demand, Alberta remains a challenging landscape for renewables. The provincial government’s oil stance has slowed solar and wind development, and major players have pulled back from the renewables space.
Supply chain issues are also a concern. Canadian developers often find themselves second in line for critical materials like solar panels and inverters, as products are routed to the U.S. first. And while Canada is rich in rare earth minerals, mining operations are still five to ten years out, meaning domestic battery production remains a long-term goal rather than a near-term solution.
Canada’s renewable capacity is projected to grow from 115 GW in 2025 to 149 GW by 2030, led by wind and hydro.
Alberta and Ontario are leading in utility-scale solar and wind deployment.
Canada is attracting hyperscale data centers due to:
- Low-carbon electricity (especially hydro in Quebec and B.C.).
- Cooler climates that reduce cooling costs.
- Alberta has 10+ GW of proposed data center projects; many tied to AI and blockchain.
Carbon pricing (CAD 170/tonne by 2030) and Clean Electricity Regulations are accelerating decarbonization.
Permitting reforms also enable faster project development.
Low-Carbon Advantage: Provinces like Quebec and B.C. offer abundant hydroelectricity which is ideal for AI workloads with high energy intensity.
Cooling Efficiency: Canada’s cooler climate reduces operational costs and improves energy efficiency.
Grid Flexibility: Developers should consider demand response strategies, like Microsoft’s peak-shaving agreements in Quebec.
Australia: A Market in Motion
Australian data centers (of which there are more than two hundred and fifty) are estimated to consume 47 billion litres of water a year and consume an estimated 5 per cent of all electricity in the country.
Western Australia and the Northern Territory are set to become the new hubs for green data centres in the Asia-Pacific region due to their proximity and accessibility to growth markets, abundance of solar and wind, and competitive power costs. The Australian Government has two funding programs to offset the cost of building green data centers:
- The Industrial Energy Transformation Studies program – funding for engineering designs to be more energy efficient.
- The Clean Building Management Investment Trust – reduces the withholding tax concessions for managed investment trusts by 5 per cent.
Australia is on track to reach 99 GW of renewable capacity by 2030. The National Electricity Market (NEM) is seeing record renewable penetration, especially from solar and wind.
Australia is becoming a green data center hub, with:
- Microsoft and others investing in solar-powered AI infrastructure through Power Purchase Agreements (PPAs).
- Favorable conditions: abundant solar, stable grid, and government subsidies.
- Its prime location, being part of the Asia-Pacific region
The Capacity Investment Scheme and Hydrogen Headstart Program are driving clean energy investment. The Australian Energy Market Operator (AEMO) 2025 Integrated System Plan focuses on:
- Grid resilience.
- Storage and interconnection to support AI-driven demand.
Site Selection: Proximity to solar and wind zones with strong interconnection potential is key. The site should also consider proximity to end users.
Hybrid Systems: Combining solar with battery storage can help meet AI’s 24/7 uptime needs. There is talk that gas-powered generation and nuclear energy should be considered as supplementary power sources.
Additional Generation, such as Power Purchase Agreements (PPAs) and Virtual Power Plants (VPPs): PPAs enable businesses to purchase renewable energy from off-site sources and VPPs connect smaller energy systems (e.g. solar panels to batteries) into one network using software
Client Wants and Needs: As Australia pushes for net-zero, businesses will favor green data centers. If data centers use renewable energy and opt in the large-scale generation certificates (LGCs) or the Renewable Energy Guarantee of Origin scheme (REGO), clients can have confidence in their sustainability program.
Policy Leverage: Australia’s federal programs offer long-term certainty—developers should align projects to qualify early.
Sustainability Metrics: ESG expectations are rising. Projects that minimize water use and land impact will stand out. The National Australian Built Environment Rating System (NABERS), a national initiative managed by the government, has set rating streams including the universal power usage effectiveness (PUE) metric. Australian data centers must obtain a five-star NABERS rating for their facilities.
Stay Ahead of the Energy Transition
As we navigate this pivotal transition in energy demand driven by data centers and AI, it’s clear that innovative solutions and strategic investments are essential for a sustainable future. By understanding the evolving landscape and the complexities of regulatory frameworks, stakeholders can position themselves for success in this new era. To stay informed and further explore how these trends will shape the energy markets, we invite you to delve into more insightful renewable resources.
The Current State of Utility-Scale Energy: Economic Insights for Developers
