Data Centers Highlight the Limits of Renewable Energy Scaling

Conor here:

worth it to clear cut 30% of the amazon https://t.co/YkrMvSEiKv

— Yasha Levine (@yashalevine) November 23, 2024

By Irina Slav, a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. Originally published Oil Price.

• Data centers are turning into an unexpected obstacle that may well compromise the whole transition offensive against hydrocarbons.
• Wind and solar could supply power to data centers for certain periods of a day, week, or month, but the bulk of the round-the-clock supply must come from baseload generation facilities.
• The part about the affordability of the energy system likely has to do with emissions rather than money.

Until about a year ago, no one paid much attention to data centers. Everyone used them, of course, but they didn’t think about them. Then, the AI rush began. It was followed by a rush for energy supply. One year in, and data centers are threatening the very energy transition on which so many governments have staked everything.

Power utilities, regulators, and climate activists appear to be experiencing growing concern about the immediate outlook for oil and gas demand, Reuters reported this week, saying the fast growth in demand for electricity caused by the mushrooming of data centers had come as a surprise to many. There may have been some frustration, too, because wind and solar have been unable to scale up fast enough to cover this additional demand, per some of the people Reuters spoke to—even though there is no scale that would have covered that demand, not for intermittents.

The worry is real, for sure. The Washington Post also published a worry-laden article this week about the increase in electricity demand due to data center proliferation and the risk this is posing to “decades of progress cutting greenhouse gas emissions, as utilities lay plans for scores of new gas power plants to meet soaring electricity demand.”

Data centers are turning into an unexpected obstacle that may well compromise the whole transition offensive against hydrocarbons. Data centers need reliable, uninterrupted electricity around the clock, and there is no way either wind or solar, even with battery backup, can guarantee this to the extent that data centers need. No wonder their operators are turning to gas and coal generators. They’re even planning to build new nuclear and revive old nuclear. The race for electricity supply is on.

Natural gas generators and natural gas producers are only too happy to oblige, of course. After years of depressed prices, natural gas drillers are due some respite. They see it in the surge in electricity demand driven by data centers and their new and much greater needs originating with AI development. Data centers have become more power hungry. Gas is the most easily available source of that power.

Last month, S&P Global estimated that growth in data centers could add between 3 billion cu ft and 6 billion cu ft in new daily gas demand to the U.S. total by 2030. “We believe that combination of data center demand and ongoing security concerns will underpin hydrocarbon revenues, and particularly natural gas demand, for at least the next decade,” S&P analysts said.

Indeed, the ratings agency expects electricity demand from data centers to grow at an annual rate of 12% over the next six years, which is certainly a healthy pace from natural gas producers’ perspective. And there is no realistic way this demand can be reliably met by wind and solar, the pillars of the energy transition. Yet this does not mean that pressure on data center operators to green-up is not growing.

“I think everyone agrees that we need more and more renewable energy to keep up with a growing demand,” Meta spokesman Jim Cullinan said recently, as quoted by Reuters. “I think it is up to the utilities to comment on how they will fill the supply.”

Passing the ball to the power utilities, however, is not going to change the situation. That situation is that wind and solar could supply power to data centers for certain periods of a day, week, or month, but the bulk of the round-the-clock supply must come from baseload generation facilities, emissions and all. With that, the data center situation gives us a taste of what the energy transition would actually look like—because the central idea of the transition is total electrification.

“Data centers are just a warm-up act compared to the amount of electrification we’re going to have going forward,” the chief executive of transition advocacy outlet RMI told Reuters. “And if our first instinct is to start building gas plants and nuclear plants in order to do that, we’re just going to create an energy system we cannot afford.”

The part about the affordability of the energy system likely has to do with emissions rather than money, but the first part about data centers being a warm-up is spot-on. The surge in electricity demand from these facilities is an excellent illustration of the insurmountable obstacles to the success of the energy transition as envisioned by its net-zero champions. It also exposes the shortcomings of wind and solar, and dispels the myth that they can replace, instead of complement, gas and coal generation.

Whatever Big Tech corporate spokespeople say, the fact is that their industry needs a reliable electricity supply, and the poster tech of the transition falls short on that very condition. One can either have green or reliable power supply. The sooner this gets acknowledged by the transition leaders, the better for everyone—including the planet.