AI and Electricity

According to a recent survey, a whopping 180.5 million people use the popular AI platform ChatGPT

The website had 1.6 billion visits in February 2024 alone! It set a record with one hundred million active users just two months after it launched. 

Analysts think the massive growth in the servers that run AI will have a dramatic impact on power demand. Here’s what I mean…

According to the U.S. Energy Information Administration (EIA), the U.S. consumed 3.9 million gigawatt (GW) hours of electricity in 2023. To put that into a better perspective, that’s equal to the power consumed by 357 million homes. 

And that really hasn’t changed in more than 20 years. In 2001, the U.S. consumed 3.4 million GW hours. That works out to about 0.6% growth per year. It’s flat.

That’s interesting because, according to the EIA, crypto “mining” added about 2.3% (on the high end) to the overall power demand. And that data also includes the nearly four million new electric vehicles added to the system in 2020.

According to a recent survey by the analysis group Grid Strategies, grid planners doubled the 5-year forecast for power demand. It forecasts the growth in power demand to more than 1.1% per year. Part of this growth will come from investments in conventional manufacturing and industry. However, a significant part will come from data centers used to generate AI.

In March 2024, Tesla founder Elon Musk made a bold prediction about AI and power demand:

Next year, you will see that they just can’t find enough electricity to run all the chips.

Here are some of the drivers of growth electricity demand:

• Federal legislation provides tax incentives to new industry and manufacturing in the U.S.
• Data center growth spurred by the rise of AI.
• Electrification of transportation and appliances.
• Extreme weather events drive peak demands.

According to a survey of eight power companies (including Texas’ ERCOT, Duke Energy, Georgia Power, etc.), seven see data centers and AI driving larger than expected increases in the five-year power demand growth. 

That’s a problem because we are coming from a period of underinvestment in the power sector. Capital expenditures dropped from $9.2 billion in 2021 to $8.8 billion in 2023. There were fewer miles of transmission lines built, at a time when we needed more. And these giant infrastructure projects take years to plan and build. 

And there is some concern that these forecasts are underestimating the demand. AI is growing far faster than expected. According to the Boston Consulting Group (BCG), generative AI will drive 2 GW of load in the next five years and 7 GW by 2030. BCG’s total data center demand growth forecast is 13 GW over the next five years. 

This could be a boom period for electric utilities. This is a period of higher demand and potentially higher rates. That will drive significant increases in revenue and earnings for these big utilities. 

For the Good,

The Mangrove Investor Team

P.S.: If you are interested in the Mangrove Investor’s favorite electric utility, sign up for our Mangrove Investor Spotlight. Our April issue is dedicated to this idea.

Numbers You Need to Know

5.7 Months

Before the deep learning era, the amount of compute used by AI models doubled in about 21.3 months; since deep learning as a paradigm took hold around 2010, the amount of compute used by models started doubling in only 5.7 months. (AI Now Institute)

20 petaflops

The worlds most powerful GPU, Nvidia says the new B200 GPU offers up to 20 petaflops of FP4 horsepower from its 208 billion transistors. (The Verge)

1 quintillion

The Frontier is the fastest supercomputer in the world, it can perform more than 1 quintillion (1018) floating-point operations per second. That’s a 1 followed by 18 zeros, also known as an exaflop. Essentially, Frontier can perform as many calculations in one second as 100,000 laptops. (MIT Technology Review)

What’s New in Sustainable Investing

The Next Generation of Sustainable Finance

Students from the David Eccles School of Business at the University of Utah won the 2024 Kellogg-Morgan Stanley Sustainable Investing Challenge with their idea to fund irrigation efficiency projects to help prevent the Great Salt Lake from drying up. (Morgan Stanley)

A brief history of sustainable investing

Over the last few decades, sustainable investing has taken off, driven by investors who are increasingly eager to put their money to work with purpose in addressing the world’s most pressing economic, ecological and social challenges.(Chase)

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