Digitalisation and the Energy Transition: Integrating a Digital Services into the WITCH

Digitalisation and artificial intelligence (AI) are rapidly increasing global electricity demand through the expansion of data centres, cloud computing, and digital infrastructure. At the same time, digital technologies can improve energy efficiency, system flexibility, and technological innovation. This paper develops a structured digitalisation extension for the WITCH integrated assessment model to analyse the interaction between digitalisation, electricity demand, and long-run decarbonisation pathways.

The extension introduces a dedicated digital-services sector into the WITCH production structure. Digital services are produced through a CES combination of digital capital and electricity, while simultaneously acting as an efficiency-enhancing input within aggregate production. The framework therefore captures the dual role of digitalisation: increasing electricity demand while improving the productivity of energy use. Digital capital accumulation and electricity demand evolve endogenously within the model across all 17 WITCH regions.

The model is calibrated using regional data-centre capacity estimates, global investment benchmarks, and electricity-demand data from the IEA Energy and AI report. Results show that global electricity demand associated with digital services increases from approximately 200 TWh in 2020 to more than 450 TWh by mid-century before stabilising near 500 TWh by 2100. The regional dynamics are highly heterogeneous. Advanced economies dominate early digital electricity demand, while emerging economies such as India, Indonesia, and Sub-Saharan Africa experience sustained long-run growth driven by digital infrastructure expansion and economic convergence.

The analysis further shows that digitalisation systematically increases calibrated energy productivity within the model, reflecting the efficiency-enhancing role of digital services in production. The results highlight that AI and digital infrastructure may become important drivers of future electricity demand, infrastructure investment, and decarbonisation dynamics. The framework developed in this paper provides a new basis for integrated assessment modelling of the co-evolution of digital and green transitions under alternative climate-policy pathways.