The demand for power from data centers is expected to triple by 2030, driven by the increasing use of artificial intelligence. This rapid growth will lead to an explosion in renewable energy and natural gas consumption, according to a report by Mizuho Securities. By the end of the decade, data centers will require 400 terawatt hours or 50 gigawatts annually, representing about 9% of total U.S. electricity demand.
Renewable energy sources are expected to experience significant growth to meet the demands of data centers. Solar demand is projected to increase by 7 gigawatts annually, while wind energy is expected to grow by 5 gigawatts per year through 2030. This represents a substantial upside of 21% and 39% for solar and wind, respectively, over Mizuho’s current forecast. Companies like Nextracker and Array, which specialize in solar trackers, are likely to benefit the most from this growth.
In addition to renewables, natural gas demand is also expected to increase significantly by up to 4 billion cubic feet per day by 2030. Gas will play a backup role, filling the gap when solar and wind power generation drops due to weather conditions. Gas producers like EQT Corp. and pipeline operators such as Williams Companies and Kinder Morgan are expected to benefit from this increased demand, particularly in regions where data centers are not located near renewable energy sources.
While the growth in power demand from data centers presents significant opportunities for the renewable energy and natural gas sectors, there are also challenges and bottlenecks that need to be addressed. Mizuho analysts caution that new power projects can take up to five years to get permitted and connected to the grid. Additionally, there is uncertainty surrounding whether new interstate pipelines will be built in the U.S., affecting the supply of natural gas to data centers.
The future growth of renewable energy investments could be impacted by changes in policy and regulations. A new administration canceling incentives under the Inflation Reduction Act (IRA) or imposing higher import tariffs could delay renewable energy projects. This uncertainty highlights the importance of a stable regulatory environment to support the continued growth of renewable energy and natural gas in meeting the power demands of data centers.
The increasing power demand from data centers driven by artificial intelligence presents both opportunities and challenges for the renewable energy and natural gas sectors. The growth in renewables and natural gas will be crucial in meeting the energy needs of data centers, but overcoming challenges such as regulatory uncertainty and bottlenecks in project development will be essential to realizing the full potential of these sectors in supporting the data center industry’s growth.