The Line from AI to Clean Energy

AI ————————— Clean Energy

When it comes to the growing need for clean energy, we draw the line. Literally.

The line above follows the rise of artificial intelligence (AI) to the increasing demand for clean energy, representing the direct connection between the two.

The launch of Chat GPT in late 2022 ignited rapid AI competition globally. It takes a substantial amount of energy to run the data centres required to train and use AI. In fact, Mark Zuckerberg, whose company Meta is one of the hyperscalers in this race, recently said, “I actually think that, before we run into [capital/demand] constraints, we’re going to run into energy constraints.”

How much power do data centres actually use?

A lot.

One estimate suggests that data centres have a greater carbon footprint than aviation. And given the growth in AI-led demand, industry research forecasts that data centres will consume between 6.5% and 7.5% of U.S. electricity in 2030 (up from just 2.5% in 2022).¹

For cloud providers, including Amazon’s AWS, managing their electricity needs while achieving their climate change goals – including net zero by 2040 for Amazon – becomes increasingly challenging.

How will the likes of Amazon and Meta achieve these climate change goals?

During our in-person engagement with Amazon in March 2024, we discussed how AWS is innovating to secure reliable carbon-free power. Amazon talked about their recent acquisition of a site at Talen Energy’s Susquehanna nuclear power plant, the first deal of its kind, to provide carbon-free baseload power.

We also discussed Amazon’s status as the largest corporate purchaser of renewables PPAs (power purchase agreements), helping them towards their goal of securing 100% renewable energy by 2030.

Source: Bloomberg NEF February, 2024.

At Munro Partners, we expect and are positioned for other announcements about innovation in this burgeoning field, not just from Amazon, but also cloud-provider peers Google and Microsoft – all of which have ambitious climate change goals. For example, Microsoft recently secured over 10GW of Brookfield’s renewables pipeline and is working with Constellation Energy to restart Three Mile Island’s nuclear power station to match the energy its data centres use with carbon-free power.

What opportunities does this present?

Rapid expansion of data centres is just one of several structural tailwinds supporting higher energy demand in the U.S. Other trends where this straight line to the demand of clean energy can be drawn include the electrification of homes, buildings and transport, as well as ongoing reshoring to the U.S. from China.

This demand necessitates a clean response, including new investments in renewables, storage and carbon-free nuclear, in addition to expanding the grid. It needs to be clean not only to meet the climate change commitments of the U.S. and these large companies, but also because renewables are the cheapest source of power available today.

Source: Munro Partners and industry research.

Learn more about our investment strategies

For detailed case studies about climate change targets, policies and issues, explore the Munro Partners environmental, social and governance (ESG) page.

To find out more about our focus on decarbonization and climate change, check out CI Global Climate Leaders Fund.

¹ Source: Boston Consulting Group, 2022.