- The Fourth Industrial Revolution Drives Unprecedented Electricity Demand Growth in the United States and Global Markets
Over the past few years, numerous industry experts and analysts have predicted that the ongoing Fourth Industrial Revolution will lead to significant growth in electricity demand both in the United States and globally. Last year, the power sector consulting firm Grid Strategies released a report titled “The Era of Flat Power Demand is Over,” which highlighted that United States grid planners, including utilities and regional transmission operators (RTOs), had nearly doubled their growth projections in five-year demand forecasts. For the first time in decades, electricity demand in the U.S. is expected to grow by up to 15% over the next decade, driven by the growth of Artificial Intelligence (AI), clean energy technologies, and the rise of cryptocurrencies.
One key driver of this surge in power demand is the adoption of AI technologies. According to the Electric Power Research Institute (EPRI), data centers are projected to consume up to 9% of total electricity generated in the United States by the end of the decade, a significant increase from the current level of around 1.5%. The rapid adoption of power-hungry technologies like generative AI is expected to contribute to this increase. Notably, AI servers are known for their high power consumption, with estimates suggesting that a single NVIDIA DGX A100 server can consume as much electricity as several households combined. As AI tasks require more powerful hardware compared to traditional computing tasks, the global power sector is expected to see a significant increase in electricity demand driven by AI technologies.
The unprecedented growth in electricity demand does come with challenges. The North American Electric Reliability Corporation (NERC) has warned that these mega-trends are putting a strain on U.S. energy supplies, leading to challenges for energy sources to keep pace with the growing demand. NERC has projected that summer power demand in 2024 will reach its highest level since 2016, while winter demand will hit its highest level since at least 2015. As more fossil fuel generation sources are retired, the growth in energy needs and grid stability are becoming more challenging.
Fortunately, the AI power boom also presents significant opportunities for investors and companies in the power sector. According to Goldman Sachs, the increasing electricity needs for AI data centers will generate investment opportunities benefiting utilities, renewable energy generation, and the industrial sectors. The investment bank has forecasted a 15% compound annual growth rate (CAGR) for data center power demand from 2023-2030, with data centers consuming 8% of total U.S. electricity output by the end of the forecast period. Approximately 47 GW of additional power generation capacity will be needed to meet the growth in U.S. data center power demand by 2030.
Moreover, UBS has projected that global AI revenue is expected to reach $420 billion in 2027, representing a substantial increase from $28 billion in 2022. Infrastructure spending, driven by GPU cloud and other emerging trends, is also set to rise significantly. This growth in AI technologies is expected to drive capital investment in U.S. power generation capacity, with approximately $50 billion expected by 2030.
In light of these projections, three stocks have been identified as key players to capitalize on the AI power boom:
1. Vertiv Holdings Plc (Market Cap: $37.2 billion, 12-Month Returns: 415%)
Vertiv Holdings designs, manufactures, and services critical digital infrastructure technologies for data centers, communication networks, and industrial environments. The company’s focus on power and cooling equipment for data centers positions it well to benefit from the AI power boom.
2. Quanta Services Inc. (Market Cap: $40.7 billion, 12-Month Returns: 55.1%)
Quanta Services provides infrastructure solutions for the electric and gas utility, renewable energy, and communications industries. The company is expected to benefit from increased electricity demand driven by AI technologies and related infrastructure investments.
3. Eaton Corporation (Market Cap: $133 billion, 12-Month Returns: 84.1%)
Eaton Corporation is a global intelligent power management company poised to capitalize on the sustained growth in power demand. The company’s recent financial performance and outlook indicate strong potential for growth in the AI power boom.
As the Fourth Industrial Revolution continues to shape the global economy, the unprecedented growth in electricity demand driven by AI technologies presents both challenges and opportunities for the power sector. Companies and investors that position themselves strategically to take advantage of this trend stand to benefit from the significant growth potential in the AI power boom.
By Alex Kimani for Oilprice.com.
Data Centers Set to Consume 9% of US Electricity by 2030 – OilPrice.com
Data centers are projected to consume 9% of US electricity by 2030, according to a report from the Department of Energy. This increasing demand for power is driven by the growth of cloud computing, big data, and the Internet of Things. Data center operators are exploring ways to become more energy efficient and reduce their carbon footprint, such as using renewable energy sources and adopting new cooling technologies. The industry is also looking into energy storage solutions to help manage their power needs more effectively. With the rising demand for data center services, the challenge of meeting this energy demand sustainably will continue to be a priority for the industry.