China's data centre industry is booming, fueled by rapid growth in artificial intelligence (AI), cloud computing, and digital services. As demand for data processing soars, so too does the pressure on the country's power grid and carbon reduction goals. With the world's second-highest data centre electricity consumption, China is racing to find ways to balance technological growth with environmental responsibility.
Surging Energy Demand from Data Centres
At the end of 2023, China had 449 data centres — more than any other country in the Asia-Pacific region. The International Energy Agency (IEA) estimates that in 2024, China accounted for 25% of global electricity consumed by data centres, second only to the United States.
While electricity demand from data centres is rising fast, it still represents a modest share of overall national consumption. Depending on the source, current demand ranges from 77 to 200 terawatt-hours (TWh) per year — equivalent to 0.9% to 2.7% of China's total electricity use. For comparison, the manufacturing sector in China added 300TWh of power demand in 2024 alone.
However, the trend is upward. Some projections suggest China's data centre electricity usage could reach 400 to 600TWh annually by 2030, which could produce up to 200 million tonnes of carbon emissions — about 1% of China's total emissions.
Policy Push for Greener Data Centres
To manage these risks, China's central and local governments have introduced a wide range of energy efficiency and sustainability measures. A major milestone was the three-year action plan launched in 2021, which set targets for building "efficient, clean, optimised and circular" data centres. A key goal was to lower the average power usage effectiveness (PUE) — a key metric for energy efficiency in data centres. By 2024, the national average PUE dropped from 1.54 to 1.48, with a target of 1.25 for large data centres by 2025.
China is also decentralizing its digital infrastructure through the "East Data, West Computing" strategy, launched in 2022. The initiative encourages moving new data centre developments to the less populated, resource-rich western regions of the country. These areas have abundant wind and solar power, making it easier to pair data processing with renewable energy.
Under this system, non-time-sensitive computing — like storage backups and offline data analysis — can be handled in the west, while real-time operations remain in the eastern urban hubs. This not only spreads out electricity demand but helps leverage the geographic distribution of China's renewable energy.
Local Innovations and Renewable Integration
Several local governments have rolled out unique policies and incentives to further improve sustainability. For example:
Inner Mongolia has introduced policies requiring data centres to be paired with renewable energy.
Beijing offers financial support for improving energy efficiency metrics like PUE.
Guangdong, a southern tech hub, is experimenting with undersea data centres, which could reduce the need for cooling and cut power use significantly.
The central government is also tracking the energy transition of data centres. As of 2024, over 50 centres have met national green standards, including those operated by major internet firms and the State Grid.
Despite these efforts, significant hurdles remain in ensuring clean electricity flows to data centres. One major issue is transmission: while the northwest is rich in renewables, most of the demand is concentrated in the southeast. Long-distance power transmission can be costly and complicated, limiting the real-world use of renewable energy even when it's available.
To address this, the government has established green power industrial parks that co-locate renewable energy sources and data centres, along with storage capacity. This model reduces transmission costs and provides a more direct route for renewable electricity use.
Challenges Beyond Electricity
Another overlooked challenge is water usage. Many data centres use large volumes of water for cooling, raising concerns about water stress, especially in arid regions like Ningxia and Gansu. In response, local authorities are setting stricter water-use efficiency standards and phasing out facilities that fail to meet them.
The future growth of AI may also drive the development of hyperscale data centres with gigawatt-level power demands. These facilities require advanced infrastructure and a cleaner national power mix to prevent emissions from skyrocketing.
Power Mix and Long-Term Outlook
Currently, about 60.5% of China's electricity comes from coal. Most of China's data centres are located in the east, where nearly 70% of electricity is coal-fired. This poses a significant emissions challenge, especially as data centre capacity continues to expand.
However, the energy mix is changing. The IEA expects that by 2035, renewables and nuclear could make up 60% of electricity used by data centres in China. As policy frameworks strengthen and infrastructure improves, the country may be able to scale digital development without significantly increasing emissions.
China's digital transformation is reshaping its energy landscape. With demand from data centres set to multiply, the country is actively designing policies and infrastructure to guide this growth sustainably. While challenges persist — from coal dependency to cooling water usage — coordinated national strategies, renewable integration, and local innovation are pushing the sector toward a greener future.
How China manages this delicate balance will not only impact its own climate goals, but could also set an example for other countries navigating the intersection of technology and sustainability.