Crypto, AI to Drive Surge in Energy Use After Decade of Flat Demand

• Crypto and AI will drive exorbitant energy use after decades of flat demand, an energy expert said.
• Data centers are expected to triple their power consumption in the US over the next seven years.
• “The power sector is facing a new normal,” ClearView Energy’s Tim Fox said. 

Artificial intelligence and crypto euphoria have not only rippled across the markets. They’re shaking up the power sector, too.

AI and crypto industries are served by data centers — essentially warehouses full of massive computers that run complex code 27/7 — which, unsurprisingly, require a lot of electricity, and it’s pushing the grid to its limits.

“The power sector is facing a new normal,” Tim Fox, managing director of ClearView Energy said in a CNBC interview. “Annual power demand has been flat for the past decade. It still currently is. Americans consumed less power last year than they did in 2022. However, annual consumption and peak demand forecasts — those are now higher than at any point in the last decade.”

The nationwide forecast of the next five years of electricity demand has gone up from 2.6% growth last year to 4.7%, power sector consulting firm Grid Strategies said in a report. Data centers are a main driver of the boom, they added.

Last year in the US, crypto mining accounted for 0.6%-2.3% of the country’s electricity demand, the Energy Information Administration found. Miners alone used the same amount of electricity as all of Australia in 2023, and the energy the crypto industry uses is expected to grow “considerably,” ClearView’s Fox said.

AI, too, is expected to consume huge amounts of electricity. Driving the data center boom is generative AI, which will help triple the electricity consumption of those centers from 2.5% to 7.5% by 2030 in the US, the Boston Consulting Group has estimated.

The worry among power industry experts is that the US electric grid is not ready to handle that surge, and new power plants take a long time to build and any expansion or update to America’s aging grid system would be a prolonged process. 

“It may take only one or two years to connect new load to the grid, while it may take over four years to bring new generation online and even longer to build new transmission connections between regions to enable power sharing during peak periods,” the Grid Strategies report said.

Complicating that calculus is that the world is facing a climate crisis that will only adds to the power sector’s concerns.

“There’s also a policy problem,” Fox said. “The Biden administration wants to decarbonize the grid. About 20 states have targets that mandate decarbonizing the grid. And these states, they set these targets at a time of flat to even declining load demand. So we would suggest these targets just got harder to hit.”