As the information economy continues to grow, companies are rethinking the energy landscape and exploring new ways to generate and distribute electricity. The rise of artificial intelligence-driven electricity consumption is projected to have a significant impact on the energy sector, but beneficially applying A.I. to the electric grid could help reduce both demand and costs.
Amid mounting concerns about artificial intelligence (A.I.) breaking the grid, industry giants are not just stockpiling power; they’re fundamentally reshaping the energy landscape. One off-grid solar field and refurbished reactor at a time, companies are rethinking electricity from solar and wind to small nuclear reactors.
The International Energy Agency (IEA) has released a major report on the relationship between artificial intelligence and the energy sector. The report projects a dramatic rise in electricity consumption by A.I. and other constituents of the information economy, particularly in the United States. This is occurring at a time when electricity prices in the U.S. are rising at rates well in excess of inflation.
The International Energy Agency (IEA) is an intergovernmental organization that promotes rational energy policies and improves the world's energy supply and demand structure.
Founded in 1974, the IEA has 30 member countries and plays a crucial role in shaping global energy policies.
The agency provides data, analysis, and policy recommendations on various energy topics, including oil, gas, coal, nuclear, and renewable energy.
Its key objectives include improving energy security, reducing greenhouse gas emissions, and promoting sustainable development.
The prospect of even faster growth in the information economy is stoking fears that ever-higher electricity prices are on their way. However, there are reasons to believe that A.I.’s net impact on the economics of the grid may not be negative. In fact, beneficially applying A.I. itself to the electric grid could help reduce both demand and costs.
In business-as-usual commercial development, architects and engineers design buildings to meet their clients’ needs, with electric hook-ups sized to anticipated electricity demand. Data center developers, by contrast, consider electricity supply from an early stage of a project. This non-traditional approach involves green electricity, but also considers money and time as primary considerations.
Data centers are specialized facilities designed to house large amounts of computer servers and data storage equipment.
They provide a secure, climate-controlled environment for data processing, storage, and backup.
With the increasing demand for cloud computing and big data analytics, data centers have become essential infrastructure for modern businesses.
According to a report by Uptime Institute, there are over 8 million square feet of data center space in the United States alone.
This growth is driven by the need for scalable and reliable IT infrastructure.
Three main types of considerations drive industry thinking in this regard:
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Renewable Energy Costs: Renewables-based generation yields a lower levelized cost of electricity (LCOE) than fossil-based generation. A Lazard report showed that on-shore wind and solar generation beat the least expensive fossil options at the lower end of their respective LCOE ranges.
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Electricity Price Volatility: Electricity prices in deregulated markets are extremely volatile, from day to day and year to year. Long-term power purchase agreements or owning generating assets can help mitigate this risk.
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Transmission and Distribution Costs: Transmission and distribution (T&D) represent a significant proportion of the price of electricity. Avoiding grid sourcing can significantly reduce these costs.
Renewable energy costs have decreased significantly over the past decade.
The cost of solar photovoltaic (PV) modules has fallen by 70%, while wind turbines have become 50% cheaper.
This decline is attributed to technological advancements, economies of scale, and increased competition in the market.
As a result, renewable energy sources are becoming increasingly competitive with fossil fuels.
In fact, wind and solar power now generate electricity at prices lower than coal-fired power plants in many regions.
Data center proprietors are expressing interest in next-generation nuclear energy referred to as ‘small module reactors.’ The IEA report notes that 14 of the 20 largest data center operators have clean energy usage exceeding 50 percent of their total power consumption, with seven at 100 percent.
Industry leaders like Amazon and Microsoft are taking proactive steps to address electricity supply concerns. Amazon has over 600 renewable energy projects underway in 28 countries, while Microsoft is restarting the Three Mile Island nuclear plant as part of a long-term electricity-sourcing arrangement.
While there is certainly a risk that the ongoing increase in information economy electricity demand may cause electricity prices to rise, this appears to be one potential crisis that may never arrive due to the crisis-averting tendencies embedded within it.
