Cheap energy advantage helps China catch up with US in AI race

The United States leads the world in access to cutting-edge semiconductor chips, but when it comes to the power needed to run the vast data centers that underpin artificial intelligence, China holds a clear advantage.

Data centers—the sprawling computing facilities required to train and run AI models—consume enormous amounts of electricity. According to the International Energy Agency, a typical data center can use as much power as 100,000 homes, while next-generation “hyperscale” facilities consume the equivalent of two million households.

China currently produces more than twice as much electricity as the United States, a gap expected to widen thanks to heavy state investment in the national grid. BloombergNEF estimates that over the next five years China will add six times the power generation capacity of the United States, mostly from renewable sources such as solar and wind.

In 2025 alone, China added more than 430 gigawatts of wind and solar capacity, accounting for more than half of the renewable energy added worldwide.

A key element of China’s AI strategy is integrating data centers with its rapidly expanding renewable energy sector. Under the “Eastern Data, Western Computing” initiative, Beijing is steering new data centers to sparsely populated inland regions where land and renewable sources are more abundant than on the crowded eastern coast.

In early May, Beijing announced it had begun operating the first “large-scale” renewable energy project directly connected to a data center. A 500-megawatt wind-solar project in the Ningxia autonomous region in northwest China will supply power to a cloud data center run by China Datang via a dedicated transmission line.

“In the long run, the country that can provide cheap, stable and low-carbon electricity will have a major advantage in AI infrastructure,” Qiyang Xiong, a doctoral candidate at Renmin University of China specializing in AI and energy policy, told Al Jazeera. “China is the global leader in solar, wind and ultra-high-voltage transmission, allowing it to deliver large amounts of cheap clean power to data-center clusters in the west.”

Although the United States still leads in the total number of data centers—5,427 facilities in 2025, compared with 449 in China, according to Stanford University—the gap is closing rapidly. China’s data-center construction grew by 30 percent per year from 2016 to 2023, according to the China Academy of Information and Communications Technology.

By 2030, China’s data-center capacity is expected to reach 60 gigawatts, almost double the current level, accounting for 2.3 percent of the country’s total electricity demand. “A large manufacturing base and a less stringent regulatory environment allow China to build data centers and energy infrastructure much faster than the United States,” said Leah Fahy, senior China economist at Capital Economics. “Huawei’s modular data centers can be built in six months, whereas comparable facilities in the United States take at least a year.”

Meanwhile, the United States is grappling with power constraints. Consultant Wood Mackenzie said U.S. grid limitations led to a 50 percent quarter-on-quarter drop in new data-center projects by late 2025. At least 36 data centers were blocked or stalled in the United States between May 2024 and June 2025. U.S. tech leaders including Elon Musk, Nvidia’s Jensen Huang and OpenAI’s Sam Altman have acknowledged China’s energy advantage.

“The AI race is now as much about electricity as it is about chips,” said Howard Yu, director of the Center for Future Readiness at IMD Business School. “The winner will be the one that owns the silicon, the power purchase agreements and the cooling water, in that order—and China has built its strategy around the factor it controls.”

China’s energy advantage, however, has limits. Most data centers remain concentrated in eastern megacities such as Beijing, Tianjin, Shanghai, Guangzhou and Shenzhen, where power supplies are already strained. China’s grid is highly fragmented, making it difficult for electricity to flow smoothly between regions. In addition, the quality of some data-center construction is problematic, and capacity utilization rates are only 20–30 percent, according to Beijing’s estimates.

“The United States has chips and lacks electricity; China has electricity and lacks chips. Each side is racing to fix its bottleneck,” Yu concluded.