Data Center Energy Demand Will Not Save The US Coal Industry

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Last Updated on: 10th April 2025, 08:45 am

A fast-growing wave of electricity demand sparked by the data center industry has coal producers in the US hoping to fill the gap, but a new report from the International Energy Agency, titled “Energy and AI,” indicates that the hope will be short-lived.

Filling Data Center Energy Demand With Coal, Or Not

Somewhat ironically, just a few days before the IEA issued its new report on data center energy demand, US President Trump took steps to prop up domestic coal production — according to Trump, partly as a means of ensuring enough energy to supply the rapid buildout of data centers in the US.

Trump also framed the measure as an effort to preserve coal jobs. It’s true that about 45,500 people in the US currently depend on coal mines to make a living, which is no drop in the bucket. However, Trump had no concerns about choking off thousands of current and potential jobs in the domestic offshore wind industry earlier this year when he suspended the federal offshore lease program.

Be that as it may, the IEA does not see much future for coal in terms of matching the growth in data center energy demand on a global basis. In fact, coal barely gets a mention in report’s executive summary. “A diverse range of sources will be needed to meet demand,” the IEA summarizes before going on to note that about half of the growth in data center electricity demand will be met by renewables, with storage and various grid mixes in support.

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

Digging into the report itself, the IEA notes that “renewables remain the fastest-growing source of electricity for data centres.”

“Even so, new demand from data centres is a significant near-term driver of growth for natural gas-fired and coal-fired generation, through both higher utilisation of existing assets and new power plants,” the IEA adds, before going on to observe that the combination of nuclear energy and renewables after 2030 will result in an “absolute decline in coal-fired generation for data centre operations by 2035.”

Ouch!

Geothermal Beats Coal For Data Center Energy Demand, Eventually

In addition to taking note of the tech sector’s interest in nuclear energy, the IEA also takes a glance at geothermal technology, and that’s where things get interesting here in the US.

US Energy Secretary Chris Wright is the former CEO of the leading oil and gas services firm Liberty Energy, which is an investor in the promising geothermal startup Fervo Energy. Coincidentally or not, geothermal energy won a slot in Trump’s fossil-friendly “American Energy Dominance” plan, despite the obvious conflicts with fossil energy producers.

As noted by IEA, the US is one of the global hotspots for growth in data center energy demand, mainly clustered in five regions. However, there is an asymmetry in the US between data center distribution and geothermal energy. Every geothermal power plant in the US is located in a scattershot of areas west of the Rocky Mountains, where optimal combinations of rock, heat, and water exist.

Well, that was then. Geothermal innovators have borrowed technology from oil and gas producers to extend their range into new regions, a circumstance that has already caught the eye of data center developers.

Rhodium Group is among the research firms anticipating that a new generation of geothermal power plants will play an outsized role in meeting data center energy demand over the coming years. In a new report issued on March 11, Rhodium cited high capacity factor output, wide geographic dispersion, and the “sheer amount of subsurface energy available to harness” among the advantages.

“We find that if the growth patterns of data centers follow historical clustering trends, geothermal could economically meet up to 64% of expected demand growth by the early 2030s,” Rhodium summarizes, while noting that an even more economical approach would be to eschew historical clustering trends.

“If data centers locate in areas with the best geothermal resource, geothermal has the potential to meet all projected data center demand growth at prices 31-45% lower than in a clustered approach,” Rhodium concludes.

Less And Less Wiggle Room For Coal In Data Center Energy Demand

The IEA emphasizes that many known unknowns make it difficult to anticipate exactly how the world will meet the growth in data center energy demand. On page 87, the IEA indicates that the US has already locked itself into a series of new gas power plants, but growth in the biogas and green hydrogen markets could tamp down demand for fossil gas to run them.

Other emerging trends that could raise the profile of renewables in data center energy demand include energy efficiency improvements and new perovskite solar cell technology that makes solar power an even more economical option than it is now. New energy storage systems that enable solar and wind to fill baseload responsibilities are also in the mix.

Among the more futuristic scenarios tracked by CleanTechnica is a fresh burst of investor interest in the space solar field. Meanwhile, at least one innovative startup is planning to launch data centers into space, where their thirst for energy can be satisfied on a 24/7, weather-free basis.

In another interesting development, on April 3, the Energy Department announced that it has identified 16 federal properties with available land for development and grid connections to support rapid data center construction. The effort seems aimed at providing a fossil- and nuclear-friendly alternative for data center developers that might be otherwise tempted to invest in new solar-plus-storage projects. However, the Energy Department lists the National Renewable Energy Laboratory in Colorado among the selected sites, with broader implications for the role of renewables in meeting data center energy demand.

“NREL aims to establish a site where a developer can continue its usual business operations while using the site as a proving ground,” the lab explains. “The approach would not only allow the developer to focus on its business objectives but also provide national stakeholders with valuable insights into accelerating AI data center construction and power deployment, paving the way for future industry innovations.”

Image (cropped): Data center energy demand is soaring, but a new report indicates that competition from renewables, gas, and nuclear energy will shrink the opportunities for coal stakeholders (courtesy of EIA).