Renewable Energy: Is It Enough to Power Europe's AI Data Infrastructure?

The European Union (EU) has accelerated its use of renewable energy, with record-breaking adoption year-to-date, as the explosive growth in data infrastructure fuels demand in power.

Renewable sources generated 54% of the EU's net electricity in the second quarter this year, up from 52.7% the same period the previous year, according to Eurostat data. Denmark achieved a 94.7% renewable electricity rate.

While solar panels blanket rooftops and wind turbines dot coastlines, Europe will need to invest heavily to meet the demands of AI-driven use, high-performance computing, and cloud services. As a result, the bloc has a multi-trillion-euro bill in capital expenditures ahead of it.

Goldman Sachs Research has estimated that Europe needs approximately €3 trillion in power sector investment through 2035 to avoid a potential power crisis. This represents a 60-100% increase compared to the €1.4 trillion spent over the previous decade, according to Goldman.

So far, Europe's private sector has been slower to adapt than its US peers in meeting the rising demand expected from power-hungry data centers. US companies, such as Cipher Mining (NASDAQ:CIFR) and Iren Ltd (NASDAQ:IREN), have pivoted from crypto mining to hybrid models that include AI/HPC hosting, colocation deals, and AI cloud services.

Japan's NTT (OTCPK: NTTYY) has expanded its data center footprint in Europe. The firm operates multiple facilities across Germany, Spain, the Netherlands, and Switzerland, and is currently undergoing expansion in the UK.

Europe's Renewables Use Soars in 2025

Europe has maintained its reliance on renewables despite some doubts about whether they can meet the power consumption driven by AI. Solar power emerged as the undisputed champion, producing 122,317 gigawatt-hours and capturing nearly 20% of the total electricity generation mix.

In June, solar became the EU's single largest electricity source for the first time, edging out nuclear, wind, hydro, and natural gas. However, Europe's reliance on renewable energy has raised doubts about its ability to meet demand.

"To date, data centers don't run directly off renewables at scale and are instead supplying the renewables to the grid," Dan Thompson, S&P Global Sustainability and Data Center Analyst, said in March. "Most renewables are just too intermittent to supply what is effectively a baseload requirement from the data centers."

U.S. Energy Secretary Chris Wright on CNBC's Power Lunch described Europe's dependence on renewables as a "bad choice" after blackouts hit Spain and Portugal on April 28. He added that if "you choose to have expensive, unreliable energy, you can't have a thriving economy."

Electricity Use in Advanced Economies Increases

Whether its conventional energy supplies or renewables, AI and data centers are driving an increase in power demand. After a 15-year downturn, electricity consumption has increased again in advanced economies.

"In Europe, a surge in connection requests received by energy providers indicates that technology companies are planning to build new data centers," Goldman said. "The increasing need for electricity for the infrastructure is reversing more than a decade of falling demand."

Electricity use for AI-optimized data centers is expected to more than quadruple by 2030, according to the International Energy Agency (IEA). This will contribute to a doubling of data center electricity use to around 945 TWh globally.

Goldman forecasted in August that data center power demand will increase from 1%-2% of the overall global rate in 2023 to 3%-4% by the end of the decade. In the US, the weighting of power for data centers is expected to increase significantly, doubling by 2030 from its current 4% in 2023.

US, China Represent 80% of Global Data Center Power Use

The IEA has forecasted that advanced economies will contribute 15% to global demand growth over the next two years. China and the US will account for nearly 80% of global growth by 2030, the IEA said.

Following a 1.8% decline in 2023, US power consumption rebounded by 2% in 2024 to a new high. The IEA expects the trend in the US to continue through 2027, adding an equivalent of California's entire demand over a three-year period.

"At the end of the day, if you're going to generate tens of trillions of tokens, and you're going to create intelligence and drive the economy forward, you're going to need computing power and energy," Michael Dell, CEO of Dell Technologies, said on October 7.

European Power Consumption Remains Modest

In contrast, EU electricity consumption remained modest. In 2024, the bloc reported growth of just 1.4%, driven by residential and commercial sectors, particularly through the adoption of heat pumps and electric vehicles.

Data centers consumed an equivalent of 1.8-2.6% of the EU's total electricity use in 2022, according to a 2024 report by the European Commission's Joint Research Centre.

The IEA has projected that this demand will rise by more than 45 TWh by 2030—a 70% increase from 2024 levels—reaching approximately 115 TWh.

Parts of most European power grids are around 40-50 years old. They need to be reconfigured to suit decentralized generation and new customers, according to Goldman.

Goldman Sachs Calls for Higher Capex in Europe

For the EU to compete and meet its needs, the bloc has to address multiple challenges, Goldman said. The bloc must invest and modernize its aging power grids, the investment banks said.

Transmission and distribution infrastructure alone requires €1.2-1.4 trillion—twice the amount spent in the previous decade, Goldman forecasted. Power generation requires an additional €1-1.4 trillion for new capacity and backup systems, it added.

Alberto Gandolfi, head of European utilities research at Goldman Sachs, also warned that without adequate backup infrastructure, the EU power system becomes less "secure."

"The power system is becoming increasingly volatile, and increasingly reliant on weather-dependent supplies," Gandolfi said. "This would make the system less ‘secure'—unless backup measures (batteries, gas plants, power grid upgrades) are put in place."

European Utilities Could Benefit

Goldman sees a potential for utility companies operating in the sector to grow at a rate of 9-11% annually through 2030. The leading German utility provider, RWE AG (OTCPK: RWEOY), has significantly outperformed the market year-to-date, rising by 37.35%.

However, Gandolfi cautioned that "capex acceleration could bring on challenges: logistics, supply chain, permitting, financing, and affordability." Yet he stressed that "the cost of inaction could cost Europe significantly more," highlighting the existential nature of these investments.

"Without rapid innovation in how we finance grid infrastructure, Europe risks having world-class renewable generation that can't reach consumers because the grid hasn't kept pace," Tom Brijs, BCG partner, warned in July.

Disclaimer:

Any opinions expressed in this article are not to be considered investment advice and are solely those of the authors. European Capital Insights is not responsible for any financial decisions made based on the contents of this article. Readers may use this article for information and educational purposes only. 

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.