Powering the Future: Investors Rush to Acquire Energy Sources Amid Growing Global Demand

As artificial intelligence continues to revolutionize industries and reshape the future, a lesser known but critical consequence is beginning to concern investors: the surge in energy consumption required to power these types of advanced technologies.  

“The numbers we’re seeing are pretty crazy,” says Daniel Brooks, VP of integrated grid and energy systems at the Electric Power Research Institute, a D.C.-based nonprofit. According to 2023 FERC filings, projected future power consumption needs have forced grid planners to double growth in the projected U.S. load forecast from 2.6% to 4.7%, an increase of nearly 38 gigawatts through 2028. Such an increase is substantial given that historical power consumption in the United States has held relatively stable over the last 15 years, averaging about 4,000 terawatt-hours per year.   

“It’s the equivalent of adding another two New York states to the U.S. power grid in five years”, says Rollyn Reyes, Co-CEO of Energia.com, an energy investing platform. According to Reyes, “While A.I. algorithms, including large language models such as ChatGPT, allow us to come up with insightful answers to complex problems, the growth of AI has huge implications for hardware design and fundamentally changes how we build large-scale manufacturing and industrial facilities.” A recent report from Grid Strategies, a well-known power sector consulting firm, draws a similar conclusion. In its December 2023 report, The Era of Flat Power Demand is Over, Grid Strategies suggested data centers and new projected manufacturing and industrial infrastructure, specifically, vehicle manufacturing and battery production, will be the core drivers of this projected increase in power consumption. Mr. Reyes goes on to say: “The grid is only half of the equation for us to meet this increased demand. The other half is the generation. How can we produce the energy needed for all this additional expected demand?”  

This question was the key topic of discussion at this year’s flagship energy conference, CERAWeek, in March.  

Notable guests included Bill Gates, John Kerry, the U.S. Secretary of Energy, and the CEOs of ExxonMobil, Chevron, Shell, BP, and Saudi Aramco, among others. All agreed that A.I. would require tremendous energy resources, but few were aligned on where this additional energy would come from. John Podesta, the President’s Senior Advisor on Clean Energy believes that AI makes the Biden administration's pledge to achieve net zero by 2035 more difficult, but not impossible. “We’re putting the accelerator down on developing clean resources.” However, some experts predict that the anticipated rise in energy production and infrastructure enhancements may not materialize quickly enough to meet the escalating power demands. 

Former U.S. Energy Secretary Ernest Moniz remains more skeptical of the Biden administration’s pledge to reach net zero by 2035 and meet the increased demand from A.I. “We’re not going to build 100 gigawatts of new renewables in a few years. You’re kind of stuck,” according to Moniz. Toby Rice, CEO of EQT, America’s largest natural gas producer, echoes a similar sentiment: “Tech is not going to wait seven to 10 years to get this infrastructure built. That leaves you with natural gas.” Though there are converging views on the most effective path forward, platforms like Energia are actively creating avenues to meet the tight deadline. 

Mr. Reyes remains more optimistic. “It’s one of the reasons we built Energia,” he says. “We believe the capital needed to build all this infrastructure can’t come solely from corporations or from the public sector. We need a free-market solution to solve this problem where individuals can directly invest in all forms of energy projects” Mr. Reyes points to a recent report indicating 13% of fund managers were underweight energy, falling to over a one-standard-deviation discount to its longer-term average.  

Morgan Stanly reports that for individuals, lack of guidance and limited knowledge about the sector have been barriers to sustainable investing. Growth in sustainable investing is expected over the next year, and the 77% of individual investors globally who have expressed interest in the sector could benefit from an increase in guidance and investment options. According to Reyes: “real estate has become a widely adopted asset class over the last 20 years. Why shouldn’t energy be one too? We are about to enter a period where global energy consumption will increase in magnitude on a scale never seen before. Imagine the consequences for energy prices and investor portfolios if we can’t build the infrastructure to meet all this energy demand. It’s terrifying to think about.”  

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