The demand for power from data centers is projected to triple by 2030, largely due to the scaling up of artificial intelligence technology. This growth will lead to an explosion in renewable energy and natural gas consumption. According to a report by Mizuho Securities, data centers will require 400 terawatt hours, or 50 gigawatts annually, accounting for approximately 9% of total U.S. electricity demand by the end of the decade. The Mid-Atlantic region currently holds the highest percentage of data center demand at 30%, followed by Texas at 13%.
Renewable energy sources, particularly solar and wind, are expected to experience significant growth in response to the technology sector’s climate commitments. Mizuho’s report forecasts an increase of 7 gigawatts annually for solar energy and 5 gigawatts for wind energy through 2030. This represents a 21% and 39% upside for solar and wind, respectively, over the current forecast. Companies like Nextracker and Array, which specialize in solar tracking technology, are likely to benefit the most from this growth due to their ability to scale up production capacity efficiently.
While solar tracker companies are expected to flourish, solar module manufacturing stocks such as First Solar may not see significant movement until the outcome of the November presidential election is determined. The future of the Inflation Reduction Act will play a critical role in the performance of these stocks. Should the IRA remain intact, companies like First Solar could see a potential $17 upside to their current price target.
Natural Gas Demand
In addition to renewable energy sources, natural gas consumption is also expected to rise by up to 4 billion cubic feet per day by 2030, representing 4% of current U.S. production. Gas will primarily serve as a backup energy source, filling in gaps when solar and wind power output drops due to weather conditions. Gas producers like EQT Corp. are positioned to benefit from this increased demand, particularly in key data center markets in the Mid-Atlantic and Southeast regions.
Challenges and Bottlenecks
Despite the promising growth opportunities in the power sector driven by artificial intelligence, there are several challenges and bottlenecks that the industry must address. Mizuho analysts caution that new power projects can take up to five years to be permitted and connected to the grid, potentially delaying the expansion of renewable energy sources. Additionally, investments in renewables could be at risk if a new administration decides to cancel incentives under the Inflation Reduction Act or impose higher import tariffs.
The rapid advancement of artificial intelligence technology is set to have a profound impact on power demand in data centers. While renewable energy sources like solar and wind are poised for significant growth, challenges such as regulatory uncertainties and project delays must be addressed to ensure a sustainable and efficient energy infrastructure for the future.
Leave a Reply