- The Impact of AI on Electrical Power
In recent years, the rise of Artificial Intelligence has been remarkable but with this advancement comes a significant increase in energy consumption, particularly in data centers. This growing trend as it has wide-ranging implications for the energy sector.
One notable example is Exelon (NYSE: EXC), the power utility serving Illinois, which has revealed plans for 25 data center projects in the Chicago area alone. The power demand from these data centers is expected to surge by 900%, with Chicago area data centers currently consuming 11% of Exelon’s electricity output.
Across the United States, data centers already consume 2% of total electrical output, a figure comparable to the energy consumption of Brazil. However, within two years, this consumption is projected to double to the level of power usage in Japan. This surge in energy demand poses challenges for the nation’s electricity generation and distribution networks.
There is a pressing need for a diversified approach to electricity generation, encompassing a mix of renewables such as solar and wind, as well as traditional sources like coal and natural gas. Renewables are expected to make up 23.7% of total electricity generation in the U.S. within the next three years, with natural gas slipping to 21.9% and coal to 28.9%.
In response to the escalating energy demands, companies are exploring alternative solutions. Georgia Power, a subsidiary of Southern Co (NYSE: SO), recently brought two new nuclear reactors online at the Vogtle plant in Georgia, making it the largest nuclear power facility in the country. The construction costs exceeded initial projections, highlighting the challenges associated with large-scale nuclear projects.
However, small nuclear reactor (SMR) technology may offer a viable solution for individual companies seeking to meet their energy needs. NuScale Power (NYSE: SMR) has developed a compact water-pressurized reactor capable of generating 750 megawatts of electricity, providing a potential avenue for more sustainable energy generation.
In addition to nuclear solutions, companies are also turning to renewable energy sources. Brookfield Renewable Partners (NYSE: BEP) recently secured a deal with tech giant Microsoft to supply 10.6 gigawatts of power from renewable sources. This partnership underscores the growing importance of renewable energy in meeting the energy demands of large corporations.
Despite these advancements, challenges remain in the renewable energy sector. First Solar (NASDAQ: FSLR), the largest U.S. solar panel company, faces stiff competition from Chinese manufacturers offering cheaper solar panels. This dynamic underscores the need for a comprehensive strategy to support domestic renewable energy production while remaining competitive in the global market.
As the United States grapples with the need to upgrade its electricity generation infrastructure, investors are urged to consider the opportunities presented by the evolving energy landscape. By diversifying investments across traditional and renewable energy sectors, investors can position themselves to capitalize on the shifting energy demands driven by the rise of Artificial Intelligence.
Artificial Intelligence is rapidly growing in popularity, leading to a surge in data center projects and subsequently an increase in energy consumption. Across the U.S., data centers now consume 2% of total electrical output, a number that is expected to double in the next two years. The increasing demand for electricity underscores the urgent need for an upgrade in electricity generation and transmission infrastructure.