(April 22): The rush to meet 106 gigawatts of new data center-driven demand in the US by 2035 is running into a supply crunch caused by political, bureaucratic and financial roadblocks, according to BloombergNEF.
“It won’t be smooth sailing,” Katrina White, a clean energy analyst, said during a presentation Tuesday at the BNEF Summit New York.
BNEF is forecasting more than 100 gigawatts of new demand in the next decade for data centers, with many of those turning to natural gas — a fuel that can provide round-the-clock power. That option is running into rising costs for turbines and supply chain bottlenecks. Meanwhile, White said wind, solar and batteries are faster to build, but the cutting of key financial incentives, tariffs, permitting red tape and long waits to connect to the grid are holding projects back.
Earlier in the day, Toby Rice, the chief executive officer of natural gas producer EQT Corp, also said as much as 100 gigawatts of additional power may be required for artificial intelligence computing facilities and other large power users.
“That’s the energy equivalent of adding over 20 New York Cities,” Rice said during a panel discussion Tuesday. “And we need to add it quickly.”
Power has become one of the critical hurdles for US technology companies racing to build out the infrastructure needed to support artificial intelligence systems. One gigawatt is equivalent to a traditional nuclear reactor.
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Data center developers are pouring billions of dollars into projects across the US, but the electricity industry is struggling to scale to meet their massive demand needs. Limited transmission capacity, long waits for grid connections, labor shortages and slow permitting process are all threatening to delay new power projects.
“That’s really the bottleneck,” Karen Fang, global head of infrastructure and sustainable finance at Bank of America Securities Inc, said during the morning panel. “It’s really the physical aspect of the system-level execution.”
For power-hungry assets, renewables can be the fastest to deliver electricity. But the Trump administration’s rollback of policy support for green energy and introduction of regulatory red tape has thrown up additional roadblocks, White of BNEF said.
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“In many cases, this red tape can actually be deemed illegal, but it still provides so much disruption to the industry that it delays project timelines,” White said.
While there remains plenty of capital available for power infrastructure projects, deploying it remains another challenge for the industry, including finding enough bankers to do deals.
“The banks that are financing our projects are also financing the data centers and the LNG terminals, so I think human capital constraints is definitely a concern,” said Matthew Ransweiler, senior vice president of finance at Invenergy, a power producer and developer.
In addition, some banks are hesitant to make tax equity investments into clean energy projects until new federal rules on foreign entity ownership are clarified, Ransweiler added. However, the sheer demand for electricity will likely mean there should be plenty of funding for power projects, even those that will lose tax breaks, said Eugene Kasozi, managing director for project finance at BBVA CIB.
“Demand is driven by the need for power, which then drives the need for infrastructure, which then drives the need for capital,” Kasozi said. “That’s a very healthy pull versus push situation.”
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