Power cut ⚡

Electricity has become the world’s most in-demand commodity. From AI and cloud to EVs and crypto, the world is trying to scale everything on the same finite, ageing grid.

In past industrial revolutions, energy supply expanded roughly in step with innovation. Coal, oil, and gas could be transported and burned almost anywhere. Electricity doesn’t work that way. It depends on infrastructure – lines, substations, transformers – and those take years to build.

Demand shock

Data centres already use a meaningful slice of the world’s power and are set to grow fast. The International Energy Agency (IEA) estimates global data centre electricity consumption at roughly 1-2% of all power today, likely rising toward 3-4% by 2030 as AI loads increase. Its latest analysis puts global data centre demand on a path to roughly 900-950 TWh by 2030 (up from ~400 TWh mid-decade). 

For comparison, that’s roughly equivalent to the total annual electricity consumption of Japan. The IEA warns if AI adoption accelerates faster than expected data centres could add another country’s worth of demand every few years.

Goldman Sachs (GS) suggests data centre power demand could rise 165% by 2030. Power prices can jump sharply in heatwaves or low-wind periods. Every extra degree of ambient temperature pushes cooling loads up, which shows up directly in a data centre’s bill.

Cloud computing, streaming, and crypto mining all add to the load. A single Bitcoin transaction now consumes more than 700 kWh on average, enough to power a typical US household for almost a month. Generative AI is trending in the same direction. OpenAI’s ChatGPT reportedly consumes around 3 Wh per query, or around ten times a typical Google (GOOG) search. Multiply that by hundreds of millions of daily users and the numbers begin to add up.

In the US, projects awaiting interconnection now total roughly twice the country’s installed capacity. The Lawrence Berkeley National Lab’s long-running Queued Up series shows the backlog near the 1.6-2.0+ TW mark at the end of 2024, with typical projects spending five years or more waiting for approval. In practical terms, there are more clean energy projects waiting for grid access than currently exist on the entire American system.

Europe has many of the same structural issues. The European Commission’s Action Plan for Grids (2023) and follow-up guidance in 2025 are designed to shorten the process from 10 years to three years for new transmission lines. But progress is uneven. In Ireland, new data centre connections are on hold. In Germany, the SuedLink line connecting northern wind to southern demand has been delayed nearly a decade.

India is racing to build new capacity, planning 500 GW of renewables by 2030, but its transmission network remains thin. The IEA reports that at least 3,000 GW (3 TW) of renewable power projects are in grid connection queues globally, of which around 1,500 GW are in advanced stages. The IEA also highlights that grids risk becoming the weak link of clean energy transitions.

Power agreements

Telecoms market intel firm Dell’Oro pegs global data centre capex at $455 billion in 2024, up 51% year-on-year, driven by AI-oriented servers, chip racks, and build-outs. The biggest single item is energy infrastructure – the power, cooling, and backup systems required to run hundreds of megawatts continuously.

As AI usage scales, inference becomes the dominant, ongoing power draw. That’s why the industry is racing to lock in long-term power through physical supply and price certainty. 

Corporate Power Purchase Agreements (PPAs), a long-term contract between a power generator and a buyer, hit new highs in 2023. Big Tech sits at the top of the buyer table and deals continue to be made. Amazon (AMZN) alone has contracted nearly 35 GW of renewable power under PPAs, and together with Microsoft (MSFT) and Google these firms are among the world’s largest corporate clean energy buyers.

AI inference loads are also changing geography. Companies are scouting cooler regions, from Sweden to Quebec, to take advantage of cheap hydropower and natural cooling. Microsoft recently broke ground on a hyperscale campus in Finland, designed to recycle waste heat into the municipal heating grid.

Meanwhile, some US cities are quietly pushing back. In Northern Virginia’s Data Centre Alley local residents have protested new facilities over noise, land use, and rising electricity prices. Fairfax County alone hosts more than 300 data centres. State officials there warn that without new transmission, the grid will hit its thermal limit before the end of the decade.

This is why nuclear power is back on the table. The pitch is reliability, a 24/7 carbon-free ‘baseload’ that pairs with intermittent renewables. The UK has approved its first small modular reactor design from Rolls Royce (RR). France plans to build up to 14 new reactors by 2050. Even Japan has restarted several plants, mothballed since Fukushima.

China spent a decade building out ultra-high-voltage (UHV) transmission to move bulk power across provinces, gigawatt-scale lines that shift hydro, wind and coal output thousands of kilometres. The US and Europe, by contrast, are heavier on permits and local constraints, hence the interconnection queues and EU grid action plan.

China’s electricity generation topped 9,400 TWh in 2023, nearly one-third of global output. It continues to expand both fossil and renewable capacity, often simultaneously, while its UHV lines link western solar and hydro resources to eastern demand centres. That coordination means its AI industry, while smaller in dollar terms, faces fewer grid constraints than the West.

The grid will set you free

A power-hungry firm now needs three things: a substation, a contract, and a timeline. The contract is likely a multi-year PPA, often matched with new renewables and some form of firming (storage, gas, nuclear). The substation and line upgrades are the rate-limiter. That’s where projects sit for years. In the US, LBNL finds the project journey has stretched from <2 years a decade ago to ~5 years for 2023 builds.

If you can’t add megawatts, you re-site (secondary markets, colder climates), re-time (shift compute to off-peak), or re-architect (more efficient models, hardware, cooling). If you can add them, you become a power trader: balancing PPAs, demand response, onsite generation and storage. This is why you now see infrastructure disclosures creeping into tech communications such as megawatts contracted, average cost per MWh, contract tenor.

The power of seven

The Magnificent Seven still dominate global equity benchmarks. A concentrated set of firms is spending heavily on data centre capex and long-dated power, while the supply side (utilities, grid equipment, storage, nuclear) begins to re-rate.

Energy and grid equipment manufacturers have quietly become some of the best-performing stocks in the past two years. At the same time, the limits are showing up in policy. The US Department of Energy has begun to refer to ‘grid adequacy’ in the same terms once reserved for oil supply. In Europe, national regulators are debating whether hyperscale data centres should pay higher grid fees during peak hours. The EU Electricity Market Design reform of 2024 empowers member states to use tariffs and capacity mechanisms to manage peak loads and incentivise flexibility.

Everything meaningful in the modern economy uses the same power system at the same time. The fix is not mysterious: build lines, add firm low-carbon power, upgrade substations, streamline permits, and keep squeezing efficiency. And that’s what the world is trying to do, from different angles. But it takes years, not quarters.

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