The data center market thrived in 2024, boosted by surging processing and storage demand, but that growth could begin to stall due to a lack of energy resources to power those increasingly important data centers.

That warning was presented by real estate consulting firm JLL, which in a new report noted North America data center tenants gobbled up 4.4 gigawatts (GW) of power last year, which was quadruple of what was consumed in 2020. That demand was met by more than 2.6 GW of colocation capacity that was constructed last year, a “record-setting 6.6 GW of colocation capacity” that under construction at year end, and a pipeline of planned projects that totaled 22.9 GW of additional capacity.

However, meeting those energy demands could hobble future growth plans.

Matt Landek, who leads JLL’s Data Center Project Development and Services, described North America’s power grid as “taxed,” and that power remains the biggest hurdle toward expanding data center capacities.

“We've been talking about the power problem for years, but there was still available capacity on the grid,” Landek told SDxCentral. “We're just slowly working ourselves toward maxing out the grid.”

Landek described ongoing logistical and technical challenges of coordinating the delivery of power resources to new data center locations that can delay the construction of those data centers for years. That has forced many to turn to alternative power sources to act as “bridge solutions,” which can help meet the “speed game” that has emerged.

“I think what we have seen is organizations that want to get connected first,” Landek said. “There's been a lot of focus in the industry of just getting connected to power.”

Landek pointed to natural gas turbines and hydrogen as alternative power sources that have gained initial traction, with others like solar, wind, fuel cells, and geothermal in various stages of deployment.

“All options are on the table at this point, which is a positive push for the renewable industry in that what could have been pushed off before because they had options to go right to the grid, now, organizations are having to look extra hard at alternate options,” Landek said.

This hard look has also veered toward a nuclear option.

Google Cloud last year signed a deal to purchase nuclear-generated power from multiple SMRs being produced by Kairos Power. This includes the eventual acquisition of up to 500 MW of nuclear-based energy.

Amazon Web Services (AWS) also jumped on board announcing plans to invest millions of dollars into nuclear power projects to meet data center energy demands. Those plans include support for the development of three nuclear energy projects, including “enabling the construction of several new small modular reactors (SMRs)” that are described as nuclear reactors with a smaller footprint that allows them to be constructed quicker and closer to the energy grid.

Ed Anderson, a distinguished VP analyst at Gartner, previously told SDxCentral that AWS was running into a pair of problems: how to power these data centers and how do they stay on track with their sustainability goals.

“The answer to the problem has to be ‘we’re going to invest in new sources of energy, but it has to be clean energy,’” Anderson said. “That could have been, ‘we’re going to build solar farms. We’re going to build wind farms, or hydroelectric, or geothermal, or something like that, or, in this case, nuclear. The announcement is interesting because it indicates that Amazon is adding that nuclear option.”

JLL’s Landek said he expects more clarity on the fiscal viability of these alternatives throughout the year.

“The investor community is very interested in getting powered land available as soon as possible and driving a return, and that won't go away,” Landek said. “There's still more work that needs to be done in the industry as a whole to really bring viable, large-scale solutions to the forefront, and that requires an ecosystem of partners … you can't just go at that alone. And I know we've seen some partnerships, and I think we'll see more in [2025] around trying to find a holistic solution of multiple renewable sources for some of these data center campuses.”

Data center power brokers

In the meantime, the current power crunch has put data center operators in an enviable position. JLL’s data showed that data center vacancies stood at a record low of just 2.6% at the end of last year, with rents surging 12% year over year.

“Tenants renewing five-year leases are experiencing significant sticker shock, facing up to 50% rent increases, and landlord concessions are becoming increasingly rare in this tight market,” the firm’s report notes.

Landek added that this dynamic will impact how enterprises work through their cloud migration strategies.

“Landlords really do hold leverage at this point, and whether that's a hyperscaler that can take down gigawatts of power or organizations that have deep pockets, they do hold all the cards,” Landek said. “With 70% [of capacity] pre-leased, there's not a lot of places to go and that's where the enterprise decision is of what they're going to do with their compute load, … they're really at an inflection point of what to do because it's not going away anytime soon. When you look at the capacity that came on in [2024], near 100% was leased by the time it came online, and that was mostly – from a wholesale perspective – with the hyperscalers. So, it's a legitimate problem.”