๐๐ฟ๐ผ๐บ ๐๐ต๐ถ๐ ๐ฃ๐ผ๐ถ๐ป๐ ๐๐ผ๐ฟ๐๐ฎ๐ฟ๐ฑ, ๐๐ ๐๐ถ๐น๐น ๐ฑ๐ผ ๐ ๐ผ๐ฟ๐ฒ ๐๐ผ ๐ ๐ผ๐๐ฒ ๐๐ต๐ฒ ๐๐น๐ถ๐บ๐ฎ๐๐ฒ ๐ก๐ฒ๐ฒ๐ฑ๐น๐ฒ ๐๐ต๐ฎ๐ป ๐๐ข๐ฃ
Aโ๏ธ335-wordโ๏ธ2-minuteโ๏ธread
The climate movement should be grateful for the advent of AI.
I know - AI will likely prompt an increase in the use of natural gas to satiate their power appetite.
But do you know what else AI is prompting?
Investments in upgrading the grid.
Regular readers know that I continually cite this as one of the major flaws in the climate strategy. Too much emphasis on building out renewables while ignoring the foundation responsible for maximizing the value of these new clean energy assets.
According to Morningstar, utilities are entering a five-year capital expenditure โsuper cycle.โ The firm expects spending to total $1.4 trillion through 2030. Thatโs double the level of investment in the previous decade.
The Morningstar estimate mirrors the Edison Electric Instituteโs analysis. It noted that investor-owned utilities increased cap ex 16% from 2023 to 2024, and projects spending of $1.1 trillion between 2025 and 2029.
Make no mistake, this isnโt nearly enough to upgrade the grid to where it needs to be, but it is nonetheless welcome news.
As we pointed out in a post earlier this week, the increase in cap ex will translate into higher electric rates for all of us.
The moral of that story is that there is no free lunch. Itโs the equivalent of putting off painting your house only to find that the worn paint led to additional damage and costlier repairs. Not to mention the impact of inflation on the price tag.
The cost of electricity has become a political issue, but it shouldnโt be. We are paying the price for decades of under-investing in the grid. Had we not under-invested, many of todayโs issues - including integrating clean energy and accommodating increased demand - wouldnโt exist.
The good news is that if the large-load tariffs are structured properly, Big Tech will subsidize at least a portion of the upgrades. The jury remains out on whether that will happen.
#datacenters #artificialintelligence #electricgrid #utilities