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CONTRIBUTORS

John Kohli

Portfolio Manager, Franklin Equity Group, United States

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Executive summary:

  1. Artificial intelligence (AI) computing and its significant energy demands have caused the power and utilities industry to reassess its own electricity demand projections and the resources required to fulfill future economic growth.
  2. The power and utilities industry has been achieving its own energy transition goals over the past decade primarily in a simplistic manner, but continuation of this strategy is not accommodative of the needs of the current wave of technological growth.
  3. The next stage of the energy transition will include technologies that may not yet be identifiable but have the support of federal and state legislative efforts.
  4. The power industry should not sacrifice carbon reduction targets to meet the demands of growth expectations arising from AI computing needs.
  5. We are encouraged that the power and utilities industry will be able to meet these challenges being faced today.

Tech advances demand the next stage of energy transition

“Energy transition” has been a theme that the US electric utility industry has focused on for more than a decade. A shift toward using more renewable energy resources, such as solar and wind, and less reliance on traditional energy forms, such as coal and nuclear, has characterized this theme. However, the recent, rapid growth in electricity demand forecasts—due to widespread adoption of AI technological advancements and the power requirements needed to support this level of computing—are challenging the power industry’s desire to shake its reliance on carbon intensive fuels. As the technology industry looks to usher in a new era of supercomputing capabilities, such as Microsoft's ambitious US$100 billion “Stargate” machine, the power industry finds itself at a crossroads. If it comes to fruition, the Stargate machine alone could demand a staggering five gigawatts (GW) of power,1 which, in our view, highlights a critical challenge that extends far beyond the realm of manufacturing capacity and algorithmic innovations: the monumental demand for power.

Download the full paper to learn more about power demand, whether coal and nuclear can meet power demands, the pressing need for energy innovation, and seeking the right solutions.

Endnotes:

  1. Source: “Microsoft & OpenAI consider $100bn, 5GW 'Stargate' AI data center.” Data Center Dynamics. March 29, 2024.

 

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