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Japan Estimates a Steep Spike in Energy Needs Due to AI and Data Centers

In this post:

  • The Japanese government has estimated that their energy requirements may increase by up to 50% in the next 25 years.
  • The data center industry is expected to grow to $29.2 billion in 2026.
  • Digital infrastructure is considered the cause of the increase in demand.

According to government forecasts, Japan’s need for energy output is expected to increase by 35% to 50% by 2050 as a result of increased demand from semiconductor factories and data centers supporting artificial intelligence (AI).

The impact of data centers and other digital infrastructure

On Monday, the government published a document saying that power production should increase from 1 trillion kilowatt-hours (kWh) estimated for the current decade to nearly 1.35–1.5 trillion kWh in 2050 to fulfill the demand as more data centers, chip factories, and other power-hungry infrastructures will be built in the country reported Reuters.

A shift to remote or hybrid work and learning, as well as a growth in e-commerce driven by artificial intelligence, have resulted in a burgeoning worldwide data center business. 

The adoption of cloud-based video streaming services and the push to convert paper records from file cabinets to databases are also viewed as major development drivers in Japan. 

According to projections by the Fuji Chimera Research Institute, the data center industry in Japan is expected to grow at an average annual rate of 5.5 percent, from $23.5 billion (3.2 trillion yen) to more than $29.2 billion (4.0 trillion yen) in 2026.

The Japanese government is taking swift action to implement its digitization plan because of the explosive growth in online data usage. It is trying to leverage significant investments and legislative changes so that the plans might boost the third-largest economy in the world. 

They include building more underwater cables across the archipelago and expanding fiber optic connections to 99.9% of Japanese houses. It’s also significant for the nation’s $370 billion (51.0 trillion yen) information and communications technology sector, the third largest in the world, with over 10% of nominal GDP.

Heavy investments are required to meet the demand in Japan

The document also noted that sizable investments in power production sources will be required as the increase in electric demand will be the first of its kind in 20 years.

The government is working on designing a new strategy for reducing the carbon footprint and industrial policy for 2040, which it has planned to finalize by the end of May. 

It is feared that unless Japan increases renewable electricity generation, a reliable supply of power could not be made sure, said the government.

Japan passed a law aimed at increasing investments in decarbonization initiatives, which it aims to be more than $962 billion (150 trillion yen) over the next ten years in the private and public sectors.

Currently, Japan relies mainly on fossil fuel imports from Middle Eastern suppliers, and it imports coal from Australia and America. The country produces 60% of its energy requirements from coal and oil.

According to the document, the nation is depending on the deployment of next-generation reactors, restarts of nuclear power facilities, floating offshore wind farms, and next-generation solar cells, also known as perovskite solar cells, to meet demand.

At the moment, Japan is the fourth-largest consumer of electricity in the world, in spite of its low population, which is 120 million, which equals only 2.1% of the entire world’s population.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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