Data Center and Other AI Related Power Demand Poses Challenges for Industry

C-MACC Weekly Sustainability and Energy Transition Report

Data Center and Other AI Related Power Demand Poses Challenges for Industry

• 1^st Topic of the Week: Our expectations around renewable power availability for industry is getting more challenging as power demand expectations rise and the purchasing power of the data centers looks much higher than industry. Industry cannot find many customers willing to pay for green/clean and cheap power is needed.
• 2^nd Topic of the Week: We use a lithium example to discuss the risk of “peak” investing – building something that only makes sense with high prices. The investment process in the US and Europe is slow enough to last through some pricing peaks and avoid mistakes – China moves much faster and can build based on a peak market view.
• Otherwise: We look at some recycling price opportunities in food packaging, highlight another reason why we believe carbon credit values will rise steeply, note some of the battery initiatives are stalling – bad for lithium demand, good for EV makers, and we take a quick first look at the new BP net-zero global model.

First: Will the Tech industry drive tailored power development

We note the Amazon headlines below and the Microsoft/Oxy headline from earlier in the week and see a pattern developing as the data-heavy IT, and AI industries look to solve their emission profiles in any way they can. Short-to-medium-term may involve credit purchases given the challenges of looking for quick physical solutions. Still, in the longer term, we see these companies solving their problems either with tight PPA arrangements with developers or through power generation themselves. The data-based industries need hundreds of gigawatts of new power over the next decade, and from a branding perspective, it is important to them for this to be green/clean power. Microsoft is signaling that with its credit purchases, and all want to avoid headlines about rising scope 1 and 2 emissions, such as the story last week around Google and a 50% emissions increase. In several meetings this week in Europe, we have been engaged in discussions around clean power supply that have drifted away from the challenges of absolute clean power supply, to whether, when there is the power available, the chemical industry can outbid the data center industry for that power. The overwhelming conclusion of course is that the chemical industry cannot compete for most of the power, and one company noted the irony of being asked to take a price increase from Microsoft for business-related services to allow Microsoft to bid power away from their industrial customer base. Unlike the Bitcoin miners who are willing to take intermittent power – and move to the locations where the power is lowest cost, the data centers need the same 24/7 power that industry needs. However, as they are mostly greenfield investments, they can also move to power. Industry can move to where the power is available for growth investments, but they need the power to come to existing facilities.