How much of the AI data center boom will be powered by renewable energy?

According to a new report from the International Energy Agency, the world will spend $580 billion on data centers this year – $40 billion more than will be spent on finding new oil supplies.

These numbers help illustrate some major shifts in the global economy, and comparing data centers and oil seems particularly appropriate given concerns about how generative AI could accelerate climate change.

Kirsten Korosec, Rebecca Bellan and I discussed the report’s findings on the latest episode of TechCrunch’s Equity podcast.

There’s no doubt that these new data centers will be hungry for power, and they could put even more strain on already taxed electricity grids. But Kirsten pointed out a potential upside, as solar energy is poised to power many of these new projects, which could also create new opportunities for startups pursuing innovative approaches to renewable energy.

We also discussed how these projects will be funded: OpenAI says it has committed $1.4 trillion to building data centers, Meta has committed $600 billion, and Anthropic recently announced a $50 billion data center plan.

Below you can read a sample of our conversation, edited for length and clarity.

Kirsten: This is what I think the potential benefit is. So Tim De Chant, our climate tech reporter, has been reporting quite a bit about not just data centers, but also how many data centers are transitioning to renewable energy sources, because in terms of regulations [hurdles] and costs, they are the go-to. It’s a lot easier to get a permit to put up some solar panels next to a data center.

So to me the only upside is that it could really mean something positive for any kind of company that’s doing interesting things around renewables or data center design and some of the technology to reduce the global emissions component of that.

But for me it is of course the number that really stands out. As a former energy reporter, I know how much is spent finding new oil.

Rebecca: I mean, it’s a lot. And a large part of that comes from the US. I think the report shows that half of the electricity demand will come from the US, and the rest will be a mix of China and Europe.

And another thing I noticed was that most data centers are coming to cities, or near cities, roughly like populations of a million people. This means that there is much more challenge with the grid connection and connection paths. I think, to your point, renewables will have to do that [be a focus] — it’s just a good thing, not because of any environmentally friendly policies.

Kirsten: Redwood Materials’ new business unit, Redwood Energy, will be an interesting company to keep an eye on. A few months ago I went to their big reveal, and they took the old EV batteries that aren’t quite ready to be recycled, and then they create these microgrids, and then specifically go after AI data centers. And that, to me, would alleviate the problem or concern you just mentioned.

The question is: Will other companies do this? Are there other Redwood Energies trying to do the same? And how much impact can they make? Because I think that just like the strain on the power grid, especially during certain times of the year, like the middle of the summer for example, places like Texas with rolling blackouts and blackouts, that’s going to be a real concern. And it could spur a whole new kind of investment in companies that do what Redwood does.

Anthony: It also underlines the question of what will this do to the spaces we live in? Even though they are not in the cities themselves, I feel that the landscape will certainly be transformed by construction on this scale.

And then of course there is the question of how much [the planned data centers are] it will actually be built, because there are definitely very ambitious plans that require enormous amounts of money.

Starting with OpenAI, that’s a company that a lot of people have been talking about: how much money are they actually making versus the trillions of dollars in capital commitments that they have for the next decade. And then there was that whole controversy about their CFO saying, “The government should cancel our loans to build these data centers.” And then she says, “No, no, no, no, no, I didn’t mean the backstop, that was a bad choice of words,” but it looks like they asked for an expansion of CHIPS Act tax benefits.

I think this will be an effort that will fall not only on the companies, but also on the government – ​​or at least that will be a question that the government will consider in the coming years.