Power Law: Editorial March 2025
John Vellone
National Lead, Energy, Resources, and Renewables, Borden Ladner Gervais, Toronto
Outgoing Newsletter Editor, IBA Power Law Committee
Krzysztof Cichocki
Soltysinski Kawecki & Szlezak, Warsaw
Incoming Newsletter Editor, IBA Power Law Committee
krzysztof.cichocki@skslegal.pl
Data centres and AI
The data centre boom is reshaping global energy markets, with many countries angling to lead in this high-stakes sector. Yet AI development is not a competition that can be won, as software and innovation transcend borders. While these facilities generate relatively few jobs compared to other national infrastructure, they promise technological advancement, data sovereignty, and national security. However, their staggering energy demands are straining power grids that are already facing massive load growth.
At the 2024 IBA Annual Conference in Mexico City, several topics were raised as existential questions facing members of the Power Law Committee, of which with data centres and AI garnered the most attention among the Committee’s global cohort. Consequently, this edition of the Power Law Committee newsletter covers the intersection of power law and AI, focusing on the legal issues relating to grid optimisation, power demands of data centres and AI in energy trading and energy security issues relating to AI.
The unprecedented growth of data centres is challenging existing energy transition plans and regulatory frameworks, which have been slow to adapt. The jurisdictions covered in this newsletter offer different demand growth forecasts:
- the European Data Centre Association (EUDCA) reports that data centres currently account for approximately two-to-three per cent of global electricity demand, with projections rising as high as 13 per cent by 2030 (Italy);
- according to extrapolated data from the Lawrence Berkeley National Laboratory, data centres will represent between 6.7 and 12 per cent of total electricity consumption by 2028 (United States);
- Hydro Québec anticipates that high-tech AI data centres will boost the demand for hydroelectricity by 14 per cent from 2023 to 2032 (Canada).
Yet AI itself offers tools for the energy transition. Predictive analytics and machine learning can enhance forecasting, optimise resource allocation, and improve grid management. It is essential to marshal every cost-effective resource to power the energy transition, and AI is a crucial tool for approaching this at scale.
In the US, behind-the-meter power generation is being explored to mitigate cost impacts and expedite delivery. However, Author David Beckstead (Projects Officer) notes that state and local regulations often obstruct such initiatives, and behind-the-meter solutions do not contribute to long-term grid expansion. While traditional nuclear power is too costly and time-consuming, SMRs as a power generation solution hold promise. These face licensing issues, however, an ongoing litigation involving the Nuclear Regulatory Commission could result in a more permissive regulatory structure for SMRs. But these face licensing challenges. The Inflation Reduction Act of 2022 expanded tax incentives for clean energy, but an Executive Order signed by President Trump in late January complicates access. Overall, Beckstead finds that regulatory reform around behind-the-meter structures is most needed in states with stringent retail power restrictions to sustain data centre growth.
AI could revolutionise Mexico’s grid management through the energy transition via optimised resource allocation, resiliency and efficiency. Authors Ariel Garfio and Edmond Grieger (Scholarship Officer) describe how Mexico’s abundant natural resources offer it an opportunity to lead in constructing clean energy-powered data centres. However, this is limited by regulatory gaps governing the energy and environmental impact of AI and data centres. AI-driven energy trading could also revolutionise efficiency in Mexico’s wholesale electricity market, but the risks they raise, such as market manipulation, require legal safeguards that are not yet in place. The authors suggest that Mexico develop a regulatory framework, enhance coordination between CENACE, CRE, and the Ministry of Energy, and foster public-private partnerships to fully harness AI’s benefits.
In Canada, authors Matt Saunders and Hélène Deschamps Marquis describe how Canada sees AI as a potential remedy for its productivity challenges. The federal government has introduced a CAD15bn incentive to encourage pension fund investments in green-powered data centres. However, there are concerns about the impact of data centre demand on energy affordability and reliability. Canada’s federal AI and data centre regulations remain stalled due to parliamentary prorogation, leading some provinces to establish independent cybersecurity-focused frameworks. The authors propose aligning data centre regulations with Canada’s mining framework to ensure clarity and predictability.
Author Agustin Siboldi (Events Officer) describes Argentina’s Incentive Regime for Large Investments (RIGI) and its impact on the country’s prospective large-scale energy projects by ensuring regulatory stability, tax incentives, and foreign exchange protections. This is particularly relevant for data centres, which require a stable gigawatt-scale power supply. Some key frameworks of RIFI include: enabling private PPAs to facilitate long-term renewable energy procurement, allowing unrestricted access to foreign exchange markets for project financing and repatriation of profits (addressing a historical barrier to foreign investment in Argentina’s energy sector) and ensuring that local governments do not impose additional regulatory burdens on participating energy projects. Siboldi suggests that whether RIGI succeeds will depend on its consistent enforcement and provincial cooperation, but Argentina is positioning itself as a hub for data centre growth.
Portugal, as author Tiago Corrêa do Amaral shares, is striving to reconcile digital infrastructure growth with decarbonisation goals. While no dedicated legal framework exists, mechanisms such as Projects of National Interest allow environmentally sustainable data centres like the 1.2 GW hyperscale centre in Sines to utilise unused grid capacity. However, administrative bottlenecks remain a challenge. A recent Decree-Law mandates reporting requirements for large data centres regarding power consumption and renewable energy use, hinting at future incentives for integrating DERs, PPAs, and BESS projects.
In Italy, authors Andrea Marega and Cristina Maria Celotto describe Italy’s approach to data centre energy governance as largely shaped by the EU’s European Green Deal and Fit for 55 frameworks. The Italian jurisdictional frameworks, the National Integrated Energy and Climate Plan (PNIEC) and the ENEA Guidelines focus on enhancing energy efficiency in technology infrastructure. Italian legal experts propose leveraging Power Purchase Agreements (PPAs) as a regulatory tool to compel data centres to source renewable energy, but regulatory uncertainty around these tools raises challenges.