Energy efficiency is AI's biggest missed opportunity, industry leaders warn
Experts say artificial intelligence is finally making energy efficiency impossible to ignore, as data centers face surging power demands
The energy transition has a paradox at its heart. The technology most needed to accelerate it is also one of its fastest-growing consumers of power. Artificial intelligence (AI) is driving electricity demand to levels that grids struggle to meet, yet it is also emerging as one of the most powerful tools for cutting the energy waste that has frustrated efficiency targets for decades.
The case for urgency is stark. Despite offering some of the fastest investment paybacks available, energy efficiency has been chronically deprioritized by companies and governments alike. The world has consistently missed its own targets, including those set at COP28.
“What we need is energy intelligence. The first thing when we are in a company's boardroom is: why are you not implementing energy efficiency? The payback is one to three years depending on the energy conservation measures (ECMs) you have, and it’s the best return on investment,” said Raquel Espada, vice-president of energy services and sustainability at SE Advisory Services, a division of Schneider Electric.
“Energy efficiency has been the hidden gem, and nobody has been thinking about it. It is critical because we are talking about sustainability and return on investment (ROI). The best energy is the one that is not produced,” she said.
Schneider Electric supports companies globally on decarbonization roadmaps through its advisory services arm. Espada said AI is now changing the calculation by making invisible waste visible.
Building management systems powered by machine learning can identify exactly where energy is being lost, removing one of the most persistent barriers to action. Paybacks of one to three years are available to companies willing to look.
The data center industry is among those now demonstrating what AI-driven efficiency can deliver in practice.
Doug Adams, president and chief executive of NTT Global Data Centers, the third largest data center platform in the world with 150 facilities across 21 countries, said his company has deployed AI across its sensor networks.
“We deployed AI in our data centers so that we can monitor sensors in real time and drive 20% of our power cost out by monitoring the sensors and reducing fan pressure,” he said.
He said operating a data center involves thousands of sensors that generate what he described as “alarm overload,” a volume of alerts no human team can process. AI-driven correlation cuts through that noise to identify where consumption can be reduced.
His company also uses direct liquid-cooled chips across hundreds of megawatts of capacity. This reduces power draw by around 5% compared with traditional air cooling, equivalent to five megawatts saved across a single 100-megawatt facility.
NTT channels rejected heat from its German data centers to warm 10,000 homes. Adams said the arrangement improves the company’s bottom line as much as its carbon footprint.
Why efficiency keeps losing
The discussion took place at the 12th annual Sustainability Week, organized by Economist Enterprise and held in London. It was moderated by Vijay Vaitheeswaran, global energy and climate innovation editor of The Economist.
Vaitheeswaran opened by noting that despite fast paybacks and clear returns, governments and companies have consistently failed to meet their own efficiency targets, including commitments made at COP28.
Espada said the barriers have historically included financing constraints, short-term payback expectations and a lack of data.
“For me, sustainability is a financial value creator, and efficiency is going to be the first topic on the table because of cost reduction. Sometimes people didn’t have the data, and that’s where artificial intelligence is supporting efficiency right now, because you can really get the data on where you are wasting energy,” she said.
Sophie Graham, chief sustainability officer of IFS, an industrial software and AI company, said her firm’s experience across large field-service organizations provides real-world evidence of what AI-driven efficiency looks like at scale.
“IFS works with the 70% of the workforce that’s not behind the desk, but is in the field, on the factory floor. When we talk about AI, we’re talking about embedding it within those industrial processes. It is not the entertainment ChatGPT. It is really built into the processes and systems that ultimately run the country,” she said.
“We use AI-driven scheduling and optimization over a network of engineers, and we found, in a study last year with over 60 customers, that on average it reduces travel distance by 37%. That’s a huge reduction if you scale across tens of thousands of engineers and many different companies,” Graham said.
The gain simultaneously cuts carbon, raises productivity and reduces costs.
Power grids and buildout
One of the most practical applications discussed was the use of AI sensors to unlock transmission line capacity without new infrastructure. Graham described a customer deploying dynamic line rating, with AI-driven sensors on transmission lines that can unlock around 30% more capacity on existing lines.
“Without building out more, we can get more capacity on the grid, which in turn allows us to bring in more renewables,” she said.
Line ratings have historically been based on predicted rather than actual weather conditions. Real-time data frequently shows lines can safely carry far more power than static ratings suggest. With “not in my back yard” (NIMBY) opposition blocking new transmission projects across Europe and the US, extracting more from existing infrastructure has become urgent.
She also pointed to Ireland as an early regulatory test case. Data centers there consume 22% of the country’s electricity. A new mandate requires new facilities to source 80% of their annual energy from new clean energy projects.
“Microsoft is unveiling its data centers there. It’s one that other energy-constrained countries such as the Netherlands and the US are closely watching,” she said.
Adams said the scale of the global infrastructure challenge is difficult to overstate.
“Only in the last two years has anyone even known what a data center is. I spent the first 23 years explaining to people that the data center was a hotel for computers. Now it’s on the tip of everybody’s tongue, and I’ve seen more change in the last two or three years than in the previous 20-plus years,” he said.
A McKinsey report he cited estimated between three and seven trillion dollars of new investment will be needed just to meet data center demand through 2030. Bridging solutions involving natural gas turbines are being deployed as a temporary fix while grid capacity catches up.
He pushed back against media distortion of the sector’s energy footprint.
“AI is a tremendous technology when applied responsibly, and the key is responsibly. Data centers account for about 1.5% of the power globally. They don’t use a third of the power like the media sometimes makes you believe,” he said.
Espada said the question has moved rapidly up the boardroom agenda.
“This is a question now on boards. CEOs are asking not why I’m going to use AI, but how I’m going to use it. What is the environmental impact? It’s not only energy. It’s water, materials, resources, and sometimes the community impact,” she said.
She drew a parallel with renewable energy projects that once faced community resistance in rural areas, and said data centers are now encountering the same dynamic.
Electrification of industrial processes is emerging as a key resilience strategy for companies seeking to reduce gas dependency. Espada cited Roca, a Spanish ceramics manufacturer, as a case study in full industrial electrification.
“We support a Spanish company called Roca, which makes ceramics, and we have electrified all their process. It’s an interesting case, and we are starting to see many more cases like that. It’s not only because of a sustainability driver. It’s also not to depend so much on gas,” she said.
Energy-intensive European companies have grown acutely sensitive to gas price volatility since the disruption of Russian supplies, and EU subsidies now support electrification investments. Espada said energy security and risk diversification are now the primary drivers of boardroom energy conversations, making it easier to win the case for efficiency investments at the CFO level.