During the Bosch Connected World conference in Berlin in February, Tesla CEO Elon Musk said that by 2025, there wouldn't be enough electricity to run power-hungry AI chips.
“The simultaneous growth of electric cars and AI, both of which need electricity, both of which need voltage transformers, is creating a tremendous demand for electrical equipment and for electrical power generation,” he said.
Musk is not the only one to raise concerns over the link between power shortage and growth in AI.
Demand picking up
According to the International Energy Agency, emerging economies India and China are expected to continue to lead global power demand for domestic and industrial usage.
While demand has declined in advanced economies such as the US and the UK, data centres and the growth of tech could be a new source of power consumption, experts said, making demand for power and energy not just an Indian theme.
In advanced economies and China, electricity demand will be supported by the ongoing electrification of the residential and transport sectors, as well as a notable expansion of the data centres, the International Energy Agency said in a report in January.
Data centre expansion
Google said in January it plans to invest "billions" to set up data centres in the US and other global locations. The latest investment of about $3 billion is to expand centres in Virginia and Iowa in the US. Microsoft plans to invest $150 billion in data centres over the next 15 years.
The IEA estimates there are more than 8,000 data centres globally, with 33 percent of them in the US, 16 percent in Europe and 10 percent in China.
The agency expects US data centre electricity consumption to grow from around 200 terawatt-hours (TWh) in 2022 to almost 260 TWh in 2026. This demand, it said, will be driven by increased adoption of 5G networks and cloud-based services.
AI tech is power heavy and needs electricity to run servers, storage facilities and networking equipment 24x7. They also emit heat, making cooling systems necessary.
Push for renewables
Tech companies are identifying the need for power and have started looking at renewable energy to meet demand in the coming years. In February, Google said it would buy more than 700 megawatts of clean energy from the Netherlands as part of its goal to operate 24x7 carbon-free energy centres in Europe. Meta claimed it reached net zero carbon emissions back in 2020 due to its focus on 100 percent renewable energy.
The major tech companies are also investing in "nuclear and fusion energy." In September 2023, Microsoft hired a nuclear technology expert to "integrate small modular nuclear reactors and microreactors to power the data centres that the Microsoft Cloud and AI reside on," media reports noted, citing a LinkedIn post.
Helion Energy, a US fusion research company, signed a power purchase agreement with Microsoft to supply its campus and data centres in Washington by the beginning of 2028.
India demand
In January, the IEA estimated that electricity demand in India would grow an average of 6 percent a year through 2026, at a faster pace than the 3.4 percent annual rise in global demand. Analysts said as economic activity in the country grows, the need for power will increase, benefitting companies producing and distributing power.
India's AI market has also expanded steadily, at a compound annual growth rate of 25-35 percent, and is expected to reach about $17 billion by 2027, according to estimates by BCG and Nasscom. Investments in data centres in India are expected to reach about $5 billion per annum by 2025.
The country's data centres currently account for 2 percent of the total power consumption. Demand growth has boosted power transmission and distribution companies in India, especially in the listed space.
Power company stocks have rallied over the past year. NTPC, JSW Energy, NHPC and Power Grid have surged by 100 to 300 percent, outperforming the benchmark BSE Power Index, which has gained 86 percent in the same period.
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