As artificial intelligence (AI) continues to revolutionize industries, a critical question arises: How much power will this technology require?
In a recent research note, Goldman Sachs delves into the potential impact of artificial intelligence on global demand for power. The bank’s Global Investment Research (GIR) team has released a cross-industry report discussing how global data center power demand could more than double by 2030, which should accelerate the average annual growth rate of US power demand to 2.4 %.
Analysts project that data center electricity demand will grow at a CAGR of 15% from 2023-2030, leading to data centers accounting for 8% of total US electricity demand by 2030, up from approximately 3% currently.
“Analysts expect this to generate about $50 billion in capital investment in U.S. energy capacity cumulatively through 2030, assuming a 60/40 split between gas and renewables,” Goldman wrote.
According to the bank, long interconnection queues remain a challenge when new projects come online. They believe that speeding up the permitting/approval process for transmission projects will be key to easing this situation.
“The most important constraint for natural gas is the construction and permitting timeline, with analysts seeing an average lag of approximately 4 years from the project announcement date to the start-up date, meaning the earliest capacity increase if announced today would not be will be in operation until approximately 2028,” the bank says.
“Next-generation AI servers consume more power and provide faster computing speeds, even with significant reductions in power consumption,” adds Goldman. “Analysts’ base case could have significant upside if appetite for server purchases and usage is not constrained.”
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Based on energy demand forecasts, the Goldman Sachs research team sees two areas of beneficiaries: “1) beneficiaries of demand growth – companies that are dependent on energy needs/prices, including deregulated power producers, gas companies, energy storage players, and those that provide energy solutions for data centers and 2) supply chain/infrastructure beneficiaries – the companies that are them.”
First Solar (NASDAQ:), a major domestic panel maker, is benefiting from a projected increase in utility-scale projects needed to support rising demand.
Meanwhile, Kinder Morgan (NYSE:) is considered “particularly well positioned” to benefit from rising demand for natural gas.
“Electricity requirements for data centers should lead to an increase in natural gas demand of approximately 3.3 billion cubic meters. feet per day by 2030; this is approximately 10% more than the current amount of gas consumed in the electricity market. KMI, as the largest gas transporter in the United States with significant market share in key regions such as Texas, should account for a significant portion of this growth,” Goldman Sachs concluded.