Rapidly increasing energy demand, driven mainly by the data center and artificial intelligence (AI) boom, as well as electrification and reshoring is creating a new power mix, reshaping the energy landscape.
The massive transformation of the energy sector is further underscored by the imperative to achieve Net Zero emissions, and the overarching need for sustainability. As we navigate these changes, the continuous supply of clean energy becomes paramount, ushering in a renewed focus on modernizing the grid and diversifying our power mix. This include the controversial yet potentially indispensable role of nuclear energy.
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The Impact of Data Centers and AI on Global Power Demand
As data centers multiply globally to handle the expanding volumes of data and the computational needs of AI, their energy consumption is skyrocketing. AI alone is escalating the power requirements of individual data centers by a factor of 10x, with projections suggesting it could reach 100 times in the future. This voracious appetite for electricity means that data centers dedicated to AI could eventually consume more power than entire cities, underscoring the critical need for a robust and sustainable energy infrastructure.
Electrification and Net Zero Goals
Achieving Net Zero emissions by 2050 requires a significant surge in electricity consumption. This transformation is fuelled by the electrification of transportation through electric vehicles, the use of heat pumps for heating in both residential and commercial settings, and the incorporation of hydrogen as a clean energy source. Forecasts suggest that electricity demand will grow by 25-30% annually by 2030 compared to 2021, with electricity's proportion of total energy consumption rising from around 20% today to over 50% by the time we achieve Net Zero.
Renewable Energy Surge
By 2030, over 60% of global electricity generation is expected to come from renewable sources, with this figure rising to more than 80% by 2050. This surge in sustainable energy adoption is crucial for meeting the escalating electricity demands while mitigating the environmental impact of traditional fossil fuel-based power generation.
Dealmaking in the Energy Space Heats Up
- Constellation Energy, the largest nuclear power operator in the US announced two major deals recently.
- In September 2024, it signed a 20-year power purchase agreement (PPA) with Microsoft to restart the Three Mile Island nuclear plant.
- In January 2025, it agreed to buy Calpine Corp, the largest generator of electricity from natural gas and geothermal resources in the US, for $26.6 billion (net purchase price). The deal will create the largest fleet of US power stations, reinforcing Constellation’s position as the largest clean energy producer with the lowest carbon emissions intensity in the US.
- Brookfield Renewable Partners partnered with Microsoft in May 2024 on a $10 billion clean power deal (solar and wind), equivalent to the output of 10 nuclear power plants.
- Amazon and Google signed several deals to deploy small modular reactors (SMRs) to power its data centers, highlighting Big Tech’s preference for nuclear energy which is both carbon-free and able to scale (Amazon partnered with X-energy, Energy Northwest, Dominion Energy, and Google signed with Kairos Power).
- Meta, in August 2024, struck a deal to buy geothermal power from Sage Geosystems to supply its US data centers. In December 2024 it signed four new PPAs with Invenergy contracting 760 megawatts of solar power through four solar energy projects.
Although the US energy regulator rejected some of the power deals, it still highlights Big Tech’s strong appetite to secure power sources for their energy-intensive data centers.
Risks and Challenges: The Role of Nuclear Energy
Despite the promise of renewable energy, the need for a reliable and continuous power supply cannot be overstated. Nuclear energy, with its capacity to provide steady, substantial power output with low carbon emission, remains a contentious yet critical component of the future energy mix. Historical incidents such as Chernobyl and Three Mile Island have left a lasting impact on public perception, making nuclear energy a polarizing topic. However, advancements in nuclear technology and enhanced safety measures could position it as a viable solution to bridge the gap between intermittent renewable sources and the constant energy demands of a technologically advanced society.
Conclusion
The journey towards powering the future is marked by significant challenges and opportunities. As we invest in modernizing the grid and diversifying our energy portfolio, the integration of AI, the push for electrification, and the rise of renewable energy will play central roles. Balancing these elements with the potential of nuclear energy and addressing the associated risks will be crucial in building a sustainable and resilient energy future in our view.
This article is brought to you by the Advisory Solutions Team.