The Rise of Data Centers and AI’s Insatiable Appetite for Power
The global demand for electricity has been on a steady rise, driven by the rapid expansion of data centers and the increasing adoption of artificial intelligence (AI) technology. This surge in power consumption is having a significant impact on the natural gas industry, with pipeline builders like TC Energy seeing a major opportunity for growth.
The Data Center Boom and Its Energy Demands
According to industry experts, the electricity consumption of data centers, AI, and the cryptocurrency sector could more than double by 2026, reaching over 1,000 terawatt-hours (TWh) – roughly equivalent to the entire electricity consumption of Japan. This surge in demand is largely driven by the proliferation of data centers, as tech giants like Amazon, Google, Meta, and Microsoft build out an international network to support the vast computing power required for AI applications.
“We’re uniquely situated with our assets to support that power demand for these data centers,” said Tina Faraca, president of US Natural Gas Pipelines at TC Energy, referring to the company’s 37,000 miles of pipelines across North America.
The Impact on the Natural Gas Industry
TC Energy, the company behind the Coastal GasLink pipeline and the failed Keystone XL project, sees the growing demand for electricity from data centers as a significant growth opportunity for the fossil fuel industry. The company believes that AI is helping push gas demand to “record highs,” creating a booming market for their pipeline infrastructure.
“Never have I seen such strong prospects for North American natural gas demand growth,” said TC Energy CEO François Poirier. “We are seeing natural gas demand reach record highs and this is expected to grow by nearly 40 billion cubic feet per day by 2035.”
However, this surge in gas demand is not yet a foregone conclusion, as tech companies like Amazon, Google, Meta, and Microsoft have vowed to power their data centers with renewable energy. But if these data centers end up being powered by natural gas, then these tech giants “have enormous responsibility” for accelerating the climate crisis, according to Tyson Slocum, director of the energy program at Public Citizen.
The Renewable Energy Landscape
While the tech industry’s appetite for electricity is driving up gas demand, the renewable energy sector is also experiencing significant growth and transformation.
The Surge in Renewable Deployment
The Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) have provided a significant boost to renewable energy deployment in the United States. Over the past two years, these legislative initiatives have catalyzed $227 billion in announced public and private investments in utility-scale solar, storage, wind, and hydrogen projects.
“The tandem push of federal investments flowing into clean energy and pull of decarbonization demand from public and private entities have never been stronger,” said Marlene, Deloitte’s US Renewable Energy leader.
This influx of investment has led to record-breaking growth in the solar and storage sectors, with utility-scale solar capacity additions outpacing other generation sources in 2023. However, wind power has faced significant challenges, including project input, labor, and capital cost pressures, as well as interconnection and permitting delays.
Overcoming Renewable Energy Challenges
To address these challenges, the IRA and IIJA have provided a range of incentives and programs to support the domestic manufacturing of renewable energy components, such as solar modules, batteries, and electrolyzers. This is helping to create a more resilient and self-sufficient supply chain, reducing the industry’s reliance on imports.
“Announced projects could more than triple this year’s solar photovoltaic module capacity in 2024, grow it by an order of magnitude by 2026, and meet US demand before 2030 – a striking reversal from US import dependence for 85% of supply in 2022,” said Carolyn Amon, a research manager at Deloitte.
However, the renewable energy industry still faces significant hurdles, including transmission constraints, workforce shortages, and the integration of variable renewable sources into the grid. Addressing these challenges will be crucial to ensure the continued growth and success of the renewable energy sector.
The Role of AI in Renewable Energy
While AI has been a driving force behind the growth in data center electricity demand, it is also playing a role in advancing the renewable energy industry.
Optimizing Renewable Energy Projects
Generative AI is enabling renewable energy developers to better assess community sentiment towards projects, automate permitting and siting processes, and optimize the design of solar and wind installations. By using AI to select the most suitable locations, configure renewable energy systems, and engage with local communities, developers can accelerate project deployment and improve project economics.
“In 2024, more developers are expected to use generative AI tools to inform and accelerate renewable project decisions, processes, configurations, and community engagement,” said Kate Hardin, executive director at Deloitte.
Enhancing Grid Integration and Resilience
Renewable energy sources are also becoming increasingly important for grid stability and resilience, as they have demonstrated the ability to maintain power generation during extreme weather events that have disrupted traditional fossil fuel-based generation. AI-powered technologies, such as battery storage and frequency response services, are enabling the smooth integration of variable renewable sources into the grid, further enhancing the role of renewables in supporting a reliable and resilient power system.
“As a result, ERCOT included storage for the first time as a resource able to meet high net load in its fall Seasonal Assessment of Resource Adequacy for fall 2023,” according to the IEA report.
Navigating the Evolving Energy Landscape
The interplay between the growing demand for electricity from data centers and AI, the surge in renewable energy deployment, and the shifting dynamics of the natural gas industry presents both challenges and opportunities for the construction and energy sectors.
Pipeline builders like TC Energy are positioning themselves to capitalize on the rising gas demand, while renewable energy developers are working to overcome barriers to deployment and integrate their technologies into the grid. The success of both industries will depend on their ability to adapt to the rapidly evolving energy landscape and embrace innovative solutions, such as the use of AI, to drive sustainable growth and support the transition to a low-carbon future.
As the energy transition accelerates, Local Builder London will continue to monitor these developments and provide our readers with the latest insights and practical advice from seasoned professionals in the construction and design industries. Stay tuned for more updates on the changing energy landscape and its impact on the built environment.
