Goldman Sachs has released a forecast indicating that Europe's datacenter market capacity could grow to 40 gigawatts by 2031, up sharply from the approximately 15 gigawatts reported today. This projection, drawn from consultations with the European Datacenter Association (EUDCA), suggests a growth trajectory exceeding prevailing market expectations.
The predicted expansion carries implications for the power sector, with Goldman Sachs estimating that datacenters may contribute an additional near 1.5% annual increase in electricity demand from 2027 through 2031. This projection is separate from existing growth trends driven by electrification and gross domestic product increases.
Geographically, the anticipated datacenter expansion spans the continent with strong representation across several key markets. Germany and the United Kingdom stand as the largest projected contributors, each expected to develop about 4 gigawatts of new datacenter capacity. Countries including the Netherlands, France, Ireland, Italy, Spain, and Norway are poised to add at least 2 gigawatts apiece. Meanwhile, Denmark, Sweden, Finland, and Portugal are forecasted to augment capacity by between 1 to 1.5 gigawatts individually.
Regulatory frameworks may catalyze this trend further. The European Union is expected to introduce a Cloud and AI Development Act by March’s end, which would enhance investment incentives for datacenter infrastructure. Additionally, a separate initiative known as the Grids package aims to accelerate grid connection processes and foster the integration of a pan-European super-grid, supporting increased energy demands.
Goldman Sachs has identified sectors likely to benefit from these developments. Power generation companies such as RWE and Solaria have been assigned Buy ratings by the firm, reflecting expectations of improved margins as energy markets become more constrained. Furthermore, the firm upholds positive ratings for equipment producer Siemens Energy and transmission operators Elia and National Grid, highlighting a possible undervaluation of Europe's imperative for enhanced high-voltage transmission infrastructure.
Focusing on National Grid (NGG), which trades around $80.18 near its annual peak, the company has delivered a 40.48% return over the past year alongside a notably low beta of 0.55, indicating relative stability. Dividend resilience is evident as the firm has upheld payments for 30 consecutive years, featuring a current yield of 2.61%. With a "GOOD" Financial Health rating and fair valuation according to InvestingPro analytics, National Grid appears strategically positioned to leverage the expansions in Europe's grid infrastructure.
These insights underscore a broader narrative of growth in European datacenter infrastructure, powered by regulatory support and robust investment potential in energy and grid-related sectors.