AI Boom Disaster: Can The World's Power Grid Handle The Technology's Meteoric Rise?

With the US continuously dealing with a deteriorating power grids, the country's electric grid is subject to a new challenge: the rise of artificial intelligence (AI). AI utilizes more electricity to power storage compared to other new products and services in the 21st century, according to the latest data from AI research company Hugging Face.

According to the company, generative AI search queries can use 30 times as much energy as a traditional Google search. AI technologies are the new trend contributing to increased power usage in the US, the previous being electric vehicles (EVs) and cryptocurrencies.

Eye-Opening Stats On Power Usage Of AI In The US

The Bank of America has recently put into perspective the challenges faced by the power grid as it grapples with surging demand from AI data centres. It shared that power demand rose just 0.4% per year over the past ten years. Moreover, the company stated that the growth rate is recorded from 2.1% to 2.8% over the next decade.

"Manufacturing, data centres, artificial intelligence, and the push for electrification are expected to add massive demand to an already-tight electrical grid. Intermittent wind and solar cannot provide the needed power, and tight supplies could lead to higher prices, bottlenecks, and outages," Bank of America said in a recent press statement.

Meanwhile, Ted Mortonson–Baird's managing director and tech strategist–recently told Business Insider how Oracle also announced plans to invest US$10 billion to expand its data centre capacity to serve the company's massive demand for generative AI.

"The cost of that Gen AI architecture is freaking out of control. On their conference call, Oracle said they are now constructing 70 megawatt data centres, going to 200 megawatts. That's the size of a city. So, they're so power hungry," Mortenson said.

How The AI Boom Could Lead to Utility Stock Renaissance

As many technology companies increase investment in data centres and other facilities for AI–including generative AI–many industry, experts are now also seeing a surge in utility stocks. Goldman Sachs believes the gains will continue, with the sector surging 8% this year.

"While investor interest in the AI revolution theme is not new, we believe downstream investment opportunities in utilities, renewable generation, and industrials whose investment and products will be needed to support this growth are underappreciated," Goldman Sachs stated.

For the firm, the top four utility stocks to buy are Xcel Energy, NextEra Energy, Southern Co., and Sempra.

"US power demand [is] likely to experience growth not seen in a generation. Not since the start of the century has US electricity demand grown 2.4% over eight years, with US annual power generation over the last 20 years averaging less than 0.5% growth," the firm further added.

How At Risk Is the US Power Grid?

To better understand how the US power grid is at risk, one must first understand how the country's power grid works. For context, the country has three power grid sections: the Eastern Interconnection, which operates in states east of the Rocky Mountains; the Western Interconnection, which covers the Pacific Ocean to the Rocky Mountain states; and the Texas Interconnected System.

With many of the systems put into these grids dating back decades and with increased consumer/corporate usage, there is more demand than ever for improving the country's electrical systems.

Data released by North American Electric Reliability Corporation (NERC) back in 2023 estimated that most regions in the US and Canada will have insufficient electricity supply due to extreme weather conditions they may experience this year. This is on top of increased power usage across the nation, more specifically by companies.

Despite the country's best efforts to secure the power grids, including desired moves for renewable energy, industry experts have also noted that premature retirements or power plant shutdowns before replacement power is brought online are significant factors in predicting future dependability concerns.

"The electric power industry continues to face challenges in the future. A rapidly changing resource mix, a threat landscape, extreme weather, and inverter-based resources. But focusing on reliability, managing the pace of a rapidly-changing resource mix, which includes not only making sure you don't retire prematurely but also that we're building enough resources and making sure they're dispatchable, continues to be our greatest reliability risk in the future," John Moura, NERC's director of reliability assessment and performance analysis stated.

To combat this issue, the US Department of Energy has allotted budgets to secure the country's power grid. The funding includes a US$4.8 million Funding Opportunity Announcement (FOA) to solicit applications for innovative distribution system communications technologies and a US$18 million funding opportunity for Flexible Innovative Transformer Technologies (FITT).