Rethinking the Energy Systems of the AI ​​Age – Earth State

This story was originally published by the Columbia Center for Sustainable Investment United Center Columbia Law School and Columbia Climate School.

The world’s energy systems and digital infrastructure are undergoing rapid and interconnected transformations. The continued expansion of data centers is driven by the growing demand for cloud computing, artificial intelligence, machine learning and next-generation digital services, which has promoted rapid and significant growth in energy consumption in certain markets, which has had an impact on global energy systems. Meanwhile, these data center-enabled suites of digital technology are reshaping the design, efficiency and resilience of the energy systems they rely on – and also changing essential public services in various sectors, including healthcare, education, food systems, transportation and financial services. Much of the coverage of data center expansion has been fixed on the concerns about grid reliability, power availability, and the climate impact of surge in energy demand.

But this narrative misses the opportunity for change in data center growth– Given the convergence of energy systems, digital infrastructure and the Sustainable Development Goals. Technology companies, especially high standards, can play a unique role in our low-carbon, integrated energy future. Through their system-level optimization tools and their impact in digital connectivity, they could be a key partner in accelerating the global energy transition and shaping a more inclusive and resilient future.

Strategic collaboration between technology companies, policy makers, utilities and financial institutions has three interconnected challenges that can be addressed collectively:

1. Data centers require continuous high-quality electricity, and more Requires electricity to be 100% zero carbon. They also want to remove component parts from suppliers powered by clean energy. However, in many markets, especially in emerging economies, this surge in demand for clean electricity is exceeding the system’s preparations, while grid decarbonization is slow.
2. Clean energy and energy storage projects face ongoing financing and integration barriers. Despite the decline in technology costs, many renewable projects are plagued by delayed grid interconnection processes, challenging and allowing delays from the United States to Southeast Asia. These bottlenecks exacerbate basic financial barriers. In EMDE, high capital costs (usually three to five times that of OECD countries) are the main reason why renewable energy remains overpriced. In developed countries, storage solutions that will promote renewable energy integration face ongoing financing challenges due to uncertain revenue sources and high upfront costs.
3. Digital inclusion remains unbalanced around the world – especially in rural areas, underserved or otherwise marginalized communities. While digital tools are changing the delivery of energy, healthcare, education, agriculture, financial inclusion and transportation, nearly 2.7 billion people are still offline. This “digital divide”, even if not resolved, has the potential to put risks of existing inequality, just as innovation provides a new path forward.

This is where technology companies can play a transformative role. When embedded in strategic policy frameworks and coordinated with public and private partners, they can actively address these three challenges and unlock significant development dividends.

Anchoring clean energy and storage integration through demand

Energy demand in data centers today is unusual: high, stable and predictable demand, expected growth and emphasis on zero carbon procurement. Without coordination, tech companies may opt for custom, off-grid solutions – bypassing national or regional systems that require strategic investment and financing for grid infrastructure upgrades and expansions. But if integrations were made with utilities and energy planners early on, their long-term procurement commitments could anchor the expansion of the green grid and the marginal cost reduction for all users.

Crucially, the reliability needs of high standards of people also provide financing needs for large-scale storage. Global storage deployments have been struggling due to uncertainty and multi-layer revenue streams. Storage generally relies on arbitrage, ancillary services and capacity markets – volatile in nature and not enough to be “bankable”. Long-term storage subscription contracts in data centers may generate reliable cash flows, allowing storage to eventually be financed at scale. Despite the global relevance of this financing model, it may be particularly transformative in emerging economies (EMDEs), which often face more severe capital constraints and operate in flexible grid infrastructure. In these cases, embedding storage solutions into early mesh designs takes a leap forward towards clean, reliable and resilient energy systems.

In addition to electricity, data centers also require advanced water and cooling systems, which have thus far been considered liable for limited resources. But water and cooling demand can also be reimagined as a driving force. The need for water treatment and cooling systems in data centers can be learned from development practices in the field of mining to ensure affordable water and cooling infrastructure available for surrounding communities. In the mining industry, this approach has proven to be an integrated multi-user water supply system that can be successfully developed through clear governance, cost allocation and operational arrangements. Data centers are already using captured heat waste to support regional heating and significantly reduce emissions. Through intentional integration, data centers can anchor a wider community infrastructure, expand access, build resilience, and reduce emissions and waste across the local/municipal system.

Optimize energy systems with digital technology

Technology companies are not only high-intensity consumers, but also produce the tools needed to optimize and upgrade our energy systems. Such technical applications include:

• Intelligent grid design: Identify the best sites for renewable generation, storage deployment and transport upgrades to minimize costs and maximize reliability.
• Accelerate interconnection: Simplifies the interconnection review process and reduces the delay in slow clean energy deployment.
• Extended distributed energy (DE) solutions: DE Solutions requires advanced technology to combine energy from a variety of energy sources with intelligent control systems to ensure that decentralized solutions are reliable and resilient.
• Optimized demand response and load management: Use AI to dynamically manage power demand, reduce peak load, stabilize grids and reduce system costs.
• Preventive maintenance: Use real-time data from predictive analytics to detect problems early and optimize maintenance.

While promising, these technologies (such as the data center itself) are not strategically or systematically deployed in most developed markets where they can significantly increase energy and grid efficiency, reduce costs or delays and increase resilience. As energy systems become increasingly integrated, distributed and dynamic, many of these digital tools will become crucial to ensure grid efficiency, resilience, and scalability. In emerging markets, integrating these optimizations early in grid design will enable these countries to develop smarter energy systems across early technologies, both online and off-grid. However, realizing their full value requires coordination with grid operators, regulators and system planners and ultimately with other extrapolations from grids to integrate tools into the right development and ensure interoperability and supportive regulatory frameworks.

Expand access to broadband and digital solutions

Modern economies are rapidly digitizing, with innovative digital tools delivering transformative benefits to healthcare, education, land use management and agriculture, financial inclusion and transportation systems, and other regions, as well as other regions of the economy. In fact, access to widespread access to broadband and digital services is increasingly seen as the basis for achieving the Sustainable Development Goals. However, access to broadband and digital tools remains unbalanced, undermining access to valuable services and widening the digital divide.

Technology companies are strategic partners to expand access to digital infrastructure, including data centers, fiber optic networks and wireless towers that enable Internet connectivity, data processing and digital services. Just this year (2025), IFC provided Raxio Group with $100 million in debt financing to expand Africa’s digital infrastructure. In India, National Broadband Mission 2.0 sets an ambitious goal to expand fiber to 270,000 villages by 2030, with its strategic data centers acting as the core node for allocating capacity in rural areas.

In more developed markets, data centers can serve as anchor tenants for broader digital infrastructure, catalyzing high-speed fiber investments and other digital infrastructures that all serve data centers and benefit from the surrounding communities.

As digital services expand, the need for affordable and reliable electricity comes with it, forming a link between broadband access, clean energy deployment and inclusive economic growth.

Strategic Ways to Go

Thinking of data centers as primarily energy-intensive European involved, missed their systemic potential as digital and energy infrastructure multipliers, is the skeleton of grid and digital transformation. With the appropriate cross-sectoral planning framework, policy development, incentives and market design, data centers can help address restrictions that inhibit clean energy deployment, energy system efficiency and universal digital access. By doing so, they can help achieve national and regional climates and broader Sustainable Development Goals.

At the Colombia Center for Sustainable Investment (CCSI), we are working with partners to design policies and investment pathways that will expand these integrated models. Building on our groundbreaking work on shared mining-related infrastructure, we are investing in institutions, investments and operations that can support this converged approach. Through advanced dialogues, such as the high-level convening of ASEAN Energy and Digital Future in 2025 and our ongoing collaboration across regions and sectors, we hope to shape a new approach to planning and decision making to reflect the opportunities and requirements of an interconnected low-carbon economy.

The views and opinions expressed here are those of the author and do not necessarily reflect the official position of the Columbia Climate School, the Institute of Earth Studies or Columbia University.