The explosive growth of Artificial Intelligence (AI) is reshaping not only how we work, live, and consume but also how we generate and consume energy. The increasing demand for computing power, fuelled by AI and data centres, is placing unprecedented pressure on global energy markets. However, there’s an emerging trend: this surge in energy demand is expected to accelerate Europe’s transition to renewable energy sources, even as fossil fuels remain a temporary solution. This shift is providing new opportunities for renewable energy investment and could lead to a fundamental transformation of Europe’s power landscape.
AI and Energy Demand: A Double-Edged Sword
As AI systems require vast amounts of electricity to function — particularly data centres running complex algorithms and simulations — their energy demands are skyrocketing. According to recent reports, data centres alone are projected to account for nearly 25% of global electricity demand by 2030. This growing consumption of power is prompting policymakers and investors to take urgent action. As a result, Europe’s renewable energy sector, which has long grappled with stagnation, may find new momentum in AI’s wake.
A notable shift is occurring. The International Energy Agency (IEA) forecasts a 60% increase in global electricity production from renewable sources by 2030, accounting for 45% of total electricity generation. In Europe, renewable energy’s share is projected to reach nearly 50% by 2024, spurred by large-scale solar and wind power projects now awaiting grid integration.
However, one major challenge remains: the intermittent nature of renewable energy, especially solar and wind, complicates their integration into existing electricity markets. As Peter Osbaldstone, head of research for European power and renewables at Wood Mackenzie, points out, “The challenge lies in ensuring a stable, continuous supply despite the fluctuating nature of renewables. The system needs to be ready to manage this variability.”
Fossil Fuels: A Necessary Evil or a Temporary Solution?
As AI-driven demand for electricity escalates, many stakeholders have called for the continued use of fossil fuels to address immediate supply gaps. However, industry experts like Agate Freimane, partner at venture capital firm Norrsken, warn that relying on fossil fuels is a “short-term crutch” that could jeopardize long-term sustainability. “Renewable energy is the only way to win in the long term,” she emphasizes, noting that the prices of solar and wind energy have fallen by over 90% over the last decade.
This cost reduction has made renewable energy increasingly competitive. A report from Ember reveals that 91% of new renewable energy projects commissioned in 2024 were cheaper than their fossil fuel counterparts. This trend indicates a shift toward long-term economic sustainability, even as fossil fuels continue to play a role in addressing current energy bottlenecks.
The EU’s Historic Milestone: A Green Transition Gains Momentum
In 2025, the EU is set to reach a historic milestone: wind and solar power are expected to surpass fossil fuels for the first time in electricity production. According to a report from Ember, wind and solar will account for 30% of the EU’s electricity, compared to just 29% from fossil fuels. This marks a significant turning point for Europe’s energy market and is expected to reshape the continent’s energy future.
“The significance of this shift goes far beyond the power sector,” says Beatrice Petrovich, lead author of Ember’s report. “The geopolitical and economic risks associated with fossil fuel dependency are becoming increasingly clear. As Europe diversifies its energy mix, the risk of energy price volatility and supply disruptions is diminishing.”
Indeed, solar power has reached new heights, contributing 13% of the EU’s electricity, while wind power now generates 17%. Meanwhile, coal power has fallen to an all-time low of less than 10%. This diversification of energy sources, bolstered by AI’s demand-driven investment, underscores the growing importance of renewables in Europe’s energy security.
Overcoming the Challenges: The Road Ahead
While Europe’s renewable energy sector has made remarkable strides, significant challenges remain. One of the key obstacles is the intermittency of renewable energy sources, such as solar and wind, which produce power based on weather conditions. To address this, investment in grid infrastructure and energy storage solutions, such as batteries, is critical. The latest Ember report highlights promising advancements in battery technology, noting that these systems are beginning to meet peak evening demand, which had previously been covered by gas-fired power plants at high costs to consumers.
Despite these challenges, the long-term outlook for Europe’s renewable energy transition remains positive. The accelerating deployment of renewable technologies, supported by AI-driven demand and innovation, is poised to create a more resilient, sustainable, and cost-effective energy landscape for the future.
A Call to Action: The Path Forward
As AI continues to drive up energy consumption, Europe’s energy markets must evolve to accommodate both the growing demand and the ongoing transition to renewable sources. The next step will involve robust investments in energy storage, smart grid systems, and technologies that enhance the efficiency of renewables. Moreover, strategic policy interventions will be crucial in ensuring that the shift to cleaner energy is both equitable and sustainable.
The coming years will be critical as Europe pushes towards a greener, more energy-efficient future. As businesses, governments, and investors align their interests, it is clear that AI and renewable energy are set to drive one of the most profound transformations in Europe’s power sector in decades.
In our next issue, we’ll explore how European businesses can capitalize on the growth of AI-driven renewable energy solutions and the implications of these shifts for corporate sustainability strategies. Stay connected with us for insights on navigating this new energy landscape.
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