Or can it be both?
I’m writing my next book about The Moment. In this fall’s installments of Both True I’m exploring the forces shaping The Moment and what it means for oil and gas leaders.
When you think about the projected power demand for AI and data centers, do you say, “That’s one big reason we’ll never see an energy transition”?
Or do you see what I see resulting from that demand—tech companies’ committing to nuclear power to meet their decarbonization goals while solving for more power? Because there continue to be directional decarbonization drivers, which do not seem to be relenting.
You see, while there are new forces creating The Moment, there are also and always directional decarbonization drivers that we must reckon with. Below, I unpack what the projected power needs tell us about the opportunity ahead in The Moment for forward-thinking oil and gas leaders. And I’ll look at why status quo leaders who bet on business as usual may not get left behind immediately—but are taking on an unnecessary risk.
Both of these things are true:
- Growing power demand could overwhelm public interest in decarbonization priorities.
- There are significant indicators that players who prioritize responsible decarbonization will be able to capitalize on these outsized opportunities (and therefore not get left behind).
Why power demand for data centers is a force
After decades of relatively stability, electricity demand is rapidly increasing, driven by the growth of data centers required for generative AI. According to McKinsey & Company, U.S. data center power needs are forecast to grow 10 percent per year until 2030. Each data center can require several gigawatts of electricity. (For reference, 1 gigawatt can power 750,000 homes.) And the scale of development is eye-popping! In Virginia alone, at least 75 data centers have opened since 2019. The Department of Energy’s (DOE) Office of Policy estimates that data centers could consume up to 9 percent of U.S. power generation by 2030, up from 4 percent in 2023.
What this means for The Moment
If we lived in a world unconcerned about decarbonization, utilities would reopen coal-fired power plants to meet this growing need for power. Oh, wait, that is happening! And further, utilities would expand natural-gas-fired generation development. Yes, that is happening too! There are more than 200 natural-gas-fired generation units under development in the United States.
You would be forgiven for thinking that perhaps this force of The Moment signals the end of the energy transition. But, in keeping with the theme of this newsletter, two seemingly opposed ideas can be true at the same time.
We see a lot of handwringing about how utilities will or will not meet the growing demand for power in keeping with their renewable and net-zero commitments. After all, net-zero commitments generally drive more electrification (of cars, buildings, and industrial processes)—which will just add to the demand growth caused by data centers. (The DOE anticipates that meeting economy-wide net-zero goals by 2050 would require doubling current electricity demand.)
Therefore, it’s not that surprising when utility executives, such as the CEO of Duke Energy, say that the rise in electricity demand is complicating their ability to reach net zero.
Decarbonization still has directional momentum
Does this mean that the energy transition is doomed and company leaders should return to pre-climate-concerns business as usual? Absolutely not. There are plenty of indications that decarbonization remains a directional driver, even in the face of the forces creating The Moment. For one thing, tech companies are going to great lengths to secure net-zero power. And these massive—and politically risky—commitments speak to the sustained momentum behind decarbonization. To highlight a few:
- Amazon has announced investment in three nuclear projects, in addition to its solar and wind investments.
- Google has committed to buy power from a fleet of nuclear small modular reactors.
- Microsoft made headlines with its 20-year deal to restart a nuclear reactor at Pennsylvania’s Three Mile Island.
- Google and Microsoft teamed up with steel producer Nucor to accelerate next-generation geothermal.
What this means for you
For oil and gas leaders, forces such as the increasing demand for power raise a question: Will The Moment slow the energy transition so much that oil and gas companies should just keep doing what they are doing? We will continue to explore this topic in the editions ahead. For now, the key questions I am working through with my clients:
- What do directional decarbonization drivers tell us about the changing landscape for building low-carbon oil-and-gas-adjacent infrastructure? If nuclear can gain traction, can direct air capture and carbon capture and sequestration, as well?
- Will The Moment encourage progress over perfection, creating outsized opportunities for lower-carbon solutions? (I’m looking at you, natural gas!)
- What will be the penalty for business as usual? Will companies with decarbonization trajectories get access to more capital, partners, and permits?
I want to hear your assessment! Hit reply and tell me what you’re seeing. Thank you to Morgan Gass for her research in support of this piece. Unsure what to think? Hit that heart button, and we’ll keep building out this analysis.
Directionally,
Tisha
