The Symbiotic Growth of AI and Energy
I’ve always been intrigued by the dynamics of industries that thrive not on their own, but because they are deeply linked to the growth of another. These are the supplementary industries—those that don’t always make headlines but power the broader ecosystem, often behind the scenes. One of the most compelling relationships today is between AI and energy.
AI, with its breathtaking pace of innovation, is driving seismic shifts across sectors. But beneath the surface, its rise is placing immense pressure on the energy industry, especially electricity generation. This isn’t merely about AI’s transformative potential—it’s a story of how technological revolutions ripple through downstream industries, creating opportunities, challenges, and profound economic and environmental consequences.
For informational purposes only: this blog explores these themes.
AI’s energy consumption is staggering. Training a single large AI model like OpenAI’s GPT-4 requires hundreds of megawatt-hours (MWh) of electricity—the equivalent of what an average U.S. household consumes over several decades. Inference, or running these trained models, consumes just as much energy, particularly as AI applications become ubiquitous across industries. A study by MIT found that the energy required to run large models at scale rivals that of small data centers.
This voracious energy demand has already made data centers one of the largest energy consumers globally. In 2021, they accounted for 1-1.5% of total global electricity consumption. Projections by the International Energy Agency suggest this figure could soar to 8% by 2030.
As these hubs of computation expand to accommodate AI workloads, energy providers that can meet this demand are seeing opportunities for growth. Companies like NextEra Energy, the leader in wind and solar energy, are particularly well-positioned to benefit from this trend. Their ability to scale renewable energy projects to meet AI’s demand makes them critical players in this ecosystem.
Energy Under Pressure
AI’s energy demands are straining power grids in unexpected ways. In North America, the North American Electric Reliability Corporation (NERC) has warned that the confluence of AI-driven data center expansion and the electrification of vehicles and homes risks destabilizing grids during peak demand. Ireland’s grid is under similar strain, with data centers consuming more electricity than all urban households combined—a reality that forced the government to halt new developments near Dublin until 2028 !!
This pressure is driving transformation in the energy sector. Renewable energy companies like Enphase Energy, which provides solar solutions, and Ormat Technologies, specializing in geothermal energy, are emerging as vital partners to AI-dependent industries. Their focus on delivering consistent and sustainable energy is not only meeting current demands but also attracting significant investor interest.
Energy storage innovators, such as Tesla with its Megapack batteries, are stepping in to stabilize grids overwhelmed by AI’s 24/7 power needs. These grid-scale solutions ensure that intermittent renewable energy sources like wind and solar can meet the continuous demand generated by AI applications.
At the same time, traditional energy companies are under pressure to adapt. Utilities that embrace AI-driven grid management solutions are positioning themselves for long-term success. For instance, partnerships with AI startups to predict energy demand and optimize grid operations are becoming increasingly common. Schneider Electric’s acquisition of AVEVA underscores the growing importance of energy optimization technologies in this new era.
The search for stable, clean energy sources to power AI is driving renewed interest in nuclear power and accelerating investments in renewables. Nuclear startups like Oklo, backed by Sam Altman, are developing small modular reactors (SMRs) designed to meet the energy demands of data centers. These reactors offer a reliable, carbon-free energy source that aligns with the sustainability goals of major AI-driven corporations. Meanwhile, Microsoft’s exploration of nuclear power, including the potential reopening of the Three Mile Island plant, signals growing corporate interest in this technology.
Renewable energy providers continue to play a critical role. Companies like Ørsted, a leader in offshore wind, are working on large-scale projects to provide clean energy to AI-driven industries. At the same time, emerging renewable technologies like enhanced geothermal systems (EGS) are being explored as potential solutions for meeting base-load energy demands. These advancements position the renewable energy sector as a cornerstone of AI’s future.
The interplay between AI and energy is reshaping the energy industry in profound ways. Renewable-rich nations like Norway, with its hydropower, and Chile, with its vast solar resources, are emerging as global leaders in AI energy provisioning. Meanwhile, energy companies that invest in sustainable, scalable solutions are attracting attention from both investors and corporations reliant on AI.
The surge in AI-driven energy demand is also transforming financial markets. Companies at the intersection of AI and energy, like NextEra Energy and Tesla, have seen their valuations soar as investors recognize their critical role in powering the future. Similarly, firms that develop energy-efficient infrastructure, from battery storage to smart grids, are poised to grow alongside AI’s expansion.
The future of AI depends on our ability to meet its energy needs sustainably. This requires collaboration between companies, governments, and energy innovators. By investing in renewable energy, exploring alternative energy sources like nuclear, and building advanced storage solutions, we can ensure the AI revolution drives progress without compromising the planet.
AI’s promise is immense—from transforming industries to solving global challenges—but its future hinges on energy systems that are up to the task. As this ecosystem accelerates, here are the energy companies I will want to watch:
NextEra Energy: A leader in renewable energy production, focusing on scaling wind and solar projects to meet the demands of AI-driven industries sustainably.
Tesla: Pioneering grid-scale battery storage solutions with its Megapack systems, crucial for stabilizing renewable energy supply as AI operates around the clock.
Oklo: Innovating in small modular nuclear reactors designed to power energy-intensive data centers and AI ecosystems reliably.
Enphase Energy: Delivering advanced solar energy solutions, including microinverters and storage systems, to align with AI’s increasing energy demands.
Ormat Technologies: Developing enhanced geothermal systems (EGS) as a sustainable and consistent energy source for AI-driven economies.
Ørsted: Driving offshore wind energy projects to scale renewable power generation for data centers and industrial AI applications.
Schneider Electric: Expanding its suite of energy management technologies to optimize and automate energy use for AI-intensive infrastructure.
These companies are reshaping the energy landscape to align with the rapid growth of AI, positioning themselves as key players in a future defined by both innovation and sustainability.