AI power demand might actually be good for climate

Big energy companies are making the case that skyrocketing electricity demand from data centres - and the need to build more power sources to meet it -- will end up being good for the climate.

Several company executives have plugged the counterintuitive claim over the past month: Cam Hosie, senior vice president of new energy at SLB, the world's biggest oilfield service provider, called the rapid increase in electricity demand the "greatest blessing" the energy transition could hope for. The sentiment was echoed by Scott Strazik, chief executive officer of GE Vernova. Strazik said the phenomenon would be "net-decarbonizing."

But when companies that profit off fossil fuels tout the virtues of the transition to clean energy, skepticism typically follows. "We see it as a big threat to decarbonization," said Laurie Williams, director of the Beyond Coal Campaign at the Sierra Club.

At the heart of the debate is the massive new demand for electricity in the US that's expected to accelerate in the coming years. Demand growth is expected to jump by as much as 15% in some regions over the next five years, according to energy consultancy Wood Mackenzie. The increase is being driven by the electrification of the economy along with new factories and the rise of power-hungry data centers that support artificial intelligence.

Rising power demand has already delayed some coal-plant retirements and sparked a huge plan for the buildout of natural gas-fired plants, which usually have at least a 40-year lifespan.

"If they just say they need power as quickly as possible, it's going to lead to further entrenchment of a fossil-fuel grid," Williams said. But energy company executives argue that demand gains will actually provide both the pressure and financial incentive necessary to reform the US electric grid.

"It takes it away from being a zero-sum game to being a growth story," SLB's Hosie said at a BloombergNEF event in New York in late September during Climate Week NYC. "Growth equals investment."

Indeed, while BloombergNEF data show natural gas remains the biggest source of electricity generation in the US, much more new solar and wind power are added each year than gas.

Rising power demand will create the opportunity to restructure our entire energy system, said GE Vernova's Strazik. His company is spending money to develop small modular nuclear reactors, carbon capture and hydrogen-burning gas turbines that would be hard to justify without demand growth. "It gives us an opportunity at scale to accelerate new technology," he said in an interview. "In a flat market you'd have a hard time making those investments."

Utility executives have made the same point. "We can have load growth that enables the clean-energy transition," PG&E Corp. Chief Executive Officer Patti Poppe said in an interview at the RE+ Conference in Anaheim in September. She added that if the California utility spent up to $1.5 billion to meet an additional gigawatt of data center power demand, the revenue from that new load would cut all customer bills between 1%-2% and free up funds to make the grid more reliable.

And at the same time, tech companies have climate goals to reach net-zero carbon emissions and prefer clean energy for data centers. Amazon, Google and Microsoft have each announced nuclear deals recently that aim to power operations with carbon-free generation.