The world will spend $580 billion on data centers this year, $40 billion more than will be spent on securing new sources of oil, according to a new report from the International Energy Agency.
These numbers help explain some major changes in the global economy, and the comparison between data centers and oil seems particularly pertinent given concerns about how generative AI will accelerate climate change.
Kirsten Korosec, Rebecca Bellan, and I discussed the report’s findings on the latest episode of TechCrunch’s Equity podcast.
There’s no question that these new data centers will be power-hungry, potentially putting even more stress on an already strained power grid. But Karsten pointed to the potential upside that solar power is poised to power many of these new projects and could also create new opportunities for startups pursuing innovative approaches to renewable energy.
We also discussed how these projects will be financed, with OpenAI committing $1.4 trillion to building data centers, Meta committing $600 billion, and Anthropic recently announcing a $50 billion data center plan.
You can read a preview of the conversation below, edited for length and clarity.
Kirsten: Here are the potential improvements I see. So our climate technology reporter, Tim de Chant, has been doing a ton of reporting on how more data centers are actually switching to renewable energy, not just from a data center perspective, but from a regulatory perspective. [hurdles] It is a reliable product with a high cost. It’s much easier to get permission to install large amounts of solar panels next to a data center.
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So the upside for me is that it could be a real plus for all kinds of companies that are doing interesting work around renewable energy and data center design and technologies that reduce that global emissions component.
But of course, what really stands out to me is the sheer number of them. As a former energy reporter myself, I know how much money is spent finding new oil.
Rebecca: I mean, there are a lot of them. And I think a lot of that comes from the United States, but that report found that half of the electricity demand comes from the United States, and the rest is a mix of China and Europe.
Another thing that struck me is that most data centers are coming to cities, or near cities with a population of about 1 million people. This means there are even more challenges with grid connections and connectivity routes. To your point, I think renewable energy needs to do the following: [be a focus] — It’s just good business, not green policies.
Kirsten: This will make Redwood Energy, a new division of Redwood Materials, an interesting company to watch. A few months ago, I went to their big presentation. They are collecting old EV batteries that are not ready for recycling, building microgrids, and specifically targeting AI data centers. I think that would alleviate the problems and concerns you just mentioned.
The question is: Are other companies going to do this too? Are there other Redwood Energies trying to do the same? And how much of an impact can they have? Because I think that’s going to be a big concern, especially at certain times of the year like mid-summer, in places like Texas where we have rolling blackouts and power outages, as well as pressure on the power grid. And it could encourage a whole new kind of investment in companies that are doing what Redwood is doing.
Anthony: It also highlights this question of how does it impact the spaces we live in? Even if it’s not the city itself, I feel like construction of this scale will definitely change the landscape.
And, of course, there’s the question of how much to take. [the planned data centers are] There is no doubt that there are very ambitious plans that will require huge expenditures, so it will actually be built.
First, OpenAI, this is a company that a lot of people are talking about and how much return they’re actually making on the trillions of dollars of capital they’ve committed to over the next 10 years. A huge controversy erupted after the company’s chief financial officer (CFO) said, “The government should stop financing the construction of these data centers.” And she said, “No, no, no, no, I didn’t mean to say backstop. That was a bad choice of words,” but apparently they’re asking for an expansion of the CHIPS Act tax credit.
I think this will be an initiative that involves not only companies but also the government. I think it will at least be an issue that the government will consider over the next few years.
