For those who believe that news travels in real time these days, let’s look at the gap between the start of the new AI party over a year ago and the “news” that all those new GPU chips and servers would need a lot of power to automate our emails. An article that first appeared in July 2023 (“Musk Says a Power Shortage Is Coming”, Wall Street Journal, print edition, July 31, 2023) is now making the rounds of less staid media outlets like Reddit and “X” now. Are supporters of renewables starting to realize that we just can’t build “everything, everywhere, right now” to electrify the economy and eliminate fossil fuelling? Or are investors who just can’t bid up $NVDA’s stock price looking for other sectors that are part of the “all things AI” universe?
One of the places that’s worth a look now is the seemingly staid, conservative natural gas pipeline industry. Bloomberg notes in a March 11, 2024 article1 (“UK to Allow New Gas Plants, Backtracking On Clean Grid Plan”) that “The UK will allow new gas-fired power plants to be built into the 2030s, watering down a previous commitment to have a net zero grid by 2035. The government was aiming for totally clean power supply by the middle of the next decade, meaning that any gas stations would need to be fitted with carbon removal technology. Now, ministers say that new gas plants will be allowed to pollute because they will be crucial to keeping the lights on when it’s not sunny or windy.”
And it’s not just the UK. It seems that Germany too has decided that even though it won’t have CO2 free nuclear power, it can accept more natural gas after all. A February 2024 article2 (“Germany Paves Way for Major Expansion of Gas Power Plants”) notes that “Last month, the government agreed to set aside €7.55 billion for the gas power plan, which aims to stoke private investment in the new plants. Further subsidies should come from the country’s climate and transformation fund, which is already maxed out.”
In the US, natural gas already provides the fuel for 43.1% of our electricity. Low natural gas prices have contributed to the de-carbonization of the US power generation sector by taking market share from coal. And the US Energy Information Administration predicts that 20 more gas-fired power plants will be built in 2024-25.
These plants are needed, we’re now told, in order to handle the “intermittency” of solar and wind generators. They can definitely provided backup power longer than even the worldscale batteries that are being deployed in some installations.
And the gas transmission companies who already move natural gas from import terminals and producing regions across long distances could play a bigger role beyond just feeding generators. Since they are already set up to handle volatility (ie, “intermittency”) in both supply and demand via extensive interconnections to multiple supply sources as well as high capacity storage, they seem well suited to extending their reach further into the AI world - by running data centers. Or at least providing long term supply.
“Oldtech” companies like Microsoft and Amazon make a lot of money from one of the oldest tech businesses - leasing servers, rack space, bandwidth, and software to customers who want to outsource at least the physical assets of their backoffice IT to experts. They have net zero emissions targets, but with demand for power to run data centers estimated to grow by 5-6X in the not too distant future it’s very unlikely they’ll be able to install enough solar panels, windmills, and/or batteries to handle the expected boom in data services. Which leaves - “fossil fuels”.
These same companies are also investing in greentech - whose stated goal is to reduce the use of fossil fuels. Or, according to some of the folks featured recently in protests around the world, eliminating them.
Which poses an interesting dilemma going forward.
https://www.bloomberg.com/news/articles/2024-03-12/uk-to-allow-new-gas-plants-as-it-backtracks-on-clean-grid-plan
https://www.bloomberg.com/news/articles/2024-02-05/germany-paves-way-for-major-expansion-of-gas-fired-power-plants