Google said it has signed energy-saving agreements with two power utilities in the US under which it will cut energy usage at peak times, amidst soaring demand for electricity to power AI data centres.

Such agreements, called demand-response programmes, are typically used in other energy-intensive fields such as heavy industry or cryptocurrency mining, in exchange for which the companies may receive payments or reduced power bills.

It is the first time Google has entered into such formal deals, in a fresh signal of how the power industry is being forced to adapt to the massive energy demands of AI facilities.

Demand-response

Google said its agreements with Indiana Michigan Power and Tennessee Power Authority involve scaling back power use at its data centres when the utilities need to free up capacity on the grid, for example at certain times of the day or year.

The company said this increases flexibility for utilities.

“It allows large electricity loads like data centers to be interconnected more quickly, helps reduce the need to build new transmission and power plants, and helps grid operators more effectively and efficiently manage power grids,” the company stated.

Google said the deals build on its demonstration with Omaha Public Power District, through which it reduced power usage for data centres during three grid events last year.

“As we add new large loads to our system, it is critical that we partner with our customers to effectively manage the generation and transmission resources necessary to serve them,” said I&M president and chief operating officer Steve Baker.

Google said such deals can also help bridge the gap between immediate energy requirements and a longer-term transition to clean energy systems.

In 2024 the company’s environmental report showed that its carbon emissions had increased by 48 percent since 2019, partly due to rising power consumption at its data centres.

The chief executive of Hitachi Energy, Andreas Schierenbeck, said last month that the spikes in demand from AI data centres running training workloads are a significant threat to world energy stability and should be reined in by governments.

Unpredictable spikes

In addition to such facilities’ spiralling energy demands, they also put out huge and unpredictable surges in demand that make it difficult to maintain stable supplies, Schierenbeck told the Financial Times.

He described the spikes and troughs along with uneven renewable energy supplies as “volatility on top of volatility” that is unprecedented in any other industry.

Comparing such surges to smelters in the steel industry, he said such uses usually require a company to “call the utility ahead”.

“No user from an industry point of view would be allowed to have this kind of behaviour,” he said, adding that governments should impose similar rules on data centres.

In order to secure their expected power needs for AI, tech companies such as Google and Facebook parent Meta Platforms have been investing in nuclear power and even fusion power, a technology that has not yet reached commercial viability.