Goldman Sachs sees power consumption surge across US, Europe on AI boom

GOLDMAN SACHS SEES POWER CONSUMPTION SURGE ACROSS US, EUROPE ON AI BOOM

Goldman Sachs projected higher electricity consumption across Europe and the U.S. driven primarily by the rise of data centers to power advancements in AI.

By the end of the decade the brokerage projected power consumption to increase in the Europe by about 40%-50% from the current cumulative loss of 10% since 2008. The compound annual growth rate (CAGR) of electricity consumption in the U.S. is expected to be 2.4% in the same period, up from nearly 0% at the end of the previous decade.

Big technology companies have been racing over the past year to build data centers needed to power applications such as OpenAI's viral ChatGPT as they try to capitalize on what is expected to be the industry's next key growth driver.

"We forecast a 15% CAGR in data center power demand from 2023-2030, driving data centers to make up 8% of total US power demand by 2030 from about 3% currently," the brokerage said.

This was reflected in the current earnings cycle with nine out of 10 U.S. electric utilities mentioning data centers as a main source of customer growth, leading many to revise up capital expenditure plans and demand forecasts.

Florida-based NextEra Energy NEE, the world's largest renewable energy company, said it had data centers in its project queue that would use more than three gigawatts (GW), or nearly enough to power all homes in the state of Minnesota.

Surging electricity demand from data centers was evident in the most recent round of utility earnings calls with investors but the brokerage says there are still worries among investors on whether the issues around solar power could reemerge.

Goldman estimates about 47 GW of incremental power generation capacity to support U.S. data center power through 2030 with about $50 billion capital investment required for it.

In Europe, Goldman believes utilities from Germany, like EON EOAN, Ireland and UK would have the highest power demand as they are financial hubs and host to many tech companies and have the resources to offer tax incentives.

The brokerage also thinks that power demand will be strong in areas like Spain, France and the Nordics because they have cheap and abundant base load power (nuclear, hydro, wind, solar) which it says could help energy companies like Spain's Iberdrola IBE and Denmark's Orsted ORSTED.

(Gokul Pisharody)

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