An Energy Epiphany?

A.I. is pushing Microsoft, Amazon, and even big banks to prioritize energy abundance. Will the EPA and SEC continue standing in their way?

Last Friday, Microsoft, in the middle of an historic race for artificial intelligence dominance, announced it would purchase more than $15 billion worth of electricity from Constellation Energy in a 20-year deal. Constellation will generate the power by reviving the 835-megawatt Unit One nuclear reactor at Three Mile Island, Pennsylvania, which had been shuttered just five years ago.

Then Monday, at the kick-off of the UN General Assembly meetings in New York City, 14 of the world’s largest banks and financial institutions said they will prioritize lending to support a tripling of global nuclear capacity by 2050.

Just 10 days ago, we wrote about Mario Draghi’s wake-up call for the European economy, where energy poverty depresses innovation, and also BlackRock CEO Larry Fink’s reversal on intermittent “renewable” power sources, which he now admits can’t power A.I. data centers.

Microsoft, BlackRock, and the United Arab Emirates also just launched the Global Artificial Intelligence Infrastructure Partnership (GAIIP) to invest $100 billion in U.S. data centers and energy infrastructure.

Many of these announcements are filigreed with net zero emissions goals and other climate language, but forgive us if we detect a shift in attitudes.

As the Biden-Harris White House clamps down on coal and even super-clean natural gas power generation with its Clean Power Plan 2.0, utilities and grid operators across the nation warn of growing shortages in coming months and years. The normally quiet grid operators are so alarmed that four of them just filed an amicus brief challenging the Administration’s climate rules.

PJM, which runs the Mid-Atlantic grid, estimates anti-hydrocarbon policies will by 2030 force retirement of more than 13% of its installed capacity. Around 30% of those policy-driven retirements will be natural gas plants, which makes little sense if you’re worried about carbon dioxide emissions. Over the last two decades, the U.S. natural gas boom replaced huge amounts of coal-fired power and thus reduced CO2 emissions more than any other factor.

(In a global context, however, the emissions superiority of natural gas over coal may not matter. As

Doomberg

recently noted, last year alone China added “22 New Zealand’s worth” of coal power.)

“For the first time in recent history,” the grid operator concludes, “PJM could face decreasing reserve margins.” Most of its new capacity will come from wind and solar, but it won’t be nearly enough to make up for the simultaneous demand-boost and forced supply-decline. In fact, under one scenario, its capacity reserve could fall from around 20% to just 3% by 2030, severely jeopardizing grid reliability.

Voracious A.I. tech companies are thus scrambling for reliable power, and paying large premiums, up to $115 per megawatt-hour, as Microsoft just did. Several months ago, Amazon Web Services bought a $650 million data center from Talen, situated at the 2.5-gigawatt Susquehanna, Pennsylvania, nuclear plant. Big Tech’s new rush for power will only exacerbate the coming grid disruptions.

Financial leaders are thus finally taking note and revising, if not reversing, the scarce energy mantras too many of them lazily broadcast over the last decade. Their pledge to help triple zero-CO2 nuclear power is of course consistent with emissions targets, as was always obvious. It’s notable nonetheless because the net zero crowd had inexplicably vilified nuclear for so long, and there seems to be a new attitude. We notice, for example, that Apple just revised its own guidelines to include nuclear as an approved source of “green” energy.

Will the welcome endorsement of nuclear in particular lead to a more robust embrace of energy abundance in general? There are only so many decommissioned nuclear plants to revive, and even with a radically pro-nuclear regulatory shift, new plants will take many years to plan and build. Whatever your politics, you can’t make American manufacturing great again or build back better, or contend with China on security or A.I., without abundant, affordable, reliable energy.

The A.I. revolution, among other crucial consumers of energy, is too important as an engine of productivity growth, budgetary healing, and general prosperity to subjugate it to the pure climate pretense of Washington’s out-of-date scarce-energy policies, which by the way are likely unconstitutional.