If the United States wants to stay the global leader in artificial intelligence, it must solve its looming energy shortage.
Despite significant investments by multiple private equity firms in natural gas this year, energy experts and analysts fear it’s not enough to keep China from overtaking America in the AI arms race.
According to Caroline Wang, a climate and energy analyst with Climate Energy Finance, China connected 429 gigawatts of power to the grid in 2024. That’s 10 times more than the United States, based on numbers from the American Public Power Association. While 83 percent of China’s increased production was wind and solar, it still added 54 GW of coal and natural gas power.
“China hosts one-third of the world’s power generation,” said Trisha Curtis, the chief executive of the energy consultancy PetroNerds. “When it comes to power generation, they’ve got us beat. That’s a big problem.”
Or a simple one, says New Hampshire state Rep. Keith Ammon, who’s been on the front lines of crypto, data mining and new energy production for years.
“Computation requires energy. It’s a very simple thing: If you unplug your computer, it no longer thinks,” Ammon said during a recent energy roundtable hosted by Americans for Prosperity. “These advanced data centers doing the model training require a lot of energy and do a lot of computations.”
Ammon sees a future where the crypto/bitcoin industry and AI developers work in tandem, “but those types of companies are looking for firm, clean energy to run their data centers.”
Where is that power going to come from? It’s a problem America’s grid operators have been warning about for years.
In 2023, PJM Interconnection, the country’s largest regional transmission organization covering 13 states and the District of Columbia, warned it might not have enough power supply for the summer of 2026. The concern was driven by coal and natural gas power plant retirements under the Biden administration’s emissions rules.
Although those rules were reversed by President Trump earlier this year, PJM officials continue to worry about supply. They’ve said additional capacity must be brought online to meet projected demand.
Analysts at McKinsey & Company project that data center load on the U.S. grid could consume up to 40 percent of all new energy demand through the end of the decade — 400 terawatt-hours of power.
“The time required to get new power connections for data center sites in major hubs such as Northern Virginia, Santa Clara, California, and Phoenix has been increasing,” the analysts wrote. It could take up to three years for sufficient power to be available for data centers in larger markets.
This new energy demand is swamping the increased output expected from the administration’s pro-energy-production policies. That projected gap helps explain why Amazon and Microsoft struck deals with energy companies for nuclear power, including the restart of one reactor at Three Mile Island in Pennsylvania.
Their concerns have been echoed by the North American Electric Reliability Corp. (NERC), the nonprofit that monitors America’s power grid.
NERC officials project energy demand will rise 30 percent by 2050, meaning the power grid must be reliable and resilient.
The size of the effect from data centers is so large, it’s putting that reliability and resilience at risk, NERC warns. For example, when 1,500 megawatts of power were suddenly disconnected from the grid due to a transmission line fault in 2024, it caused a sharp imbalance in supply and put the grid at risk. NERC compared it to a large nuclear power plant suddenly switching on. “Such rapid changes in load are part of normal operations for these facilities, which raises concerns for balancing, frequency stability and voltage stability,” NERC advised.
While environmentalists and progressive politicians keep the focus on renewables, energy analysts raise questions about wind and solar’s ability to meet future demand. While wind and solar have been producing far more electricity in recent years, both are intermittent power sources. The grid will need power when the wind doesn’t blow and the sun doesn’t shine.
“The first thing to remember about our grid is that the electricity powering your light bulb had to be generated a split second ago,” Ammon said. The grid needs power that will be there when demand increases, without delay, and intermittent sources can’t provide that reliability.
“The idea of large, grid-scale batteries is still a ways off,” Ammon said.
Why, then, do elected officials continue to argue that expanding renewables will meet the new data-center-driven demand?
Curtis blames politicians listening to academics instead of people who work in the energy industry. “Traditional fuels are the cornerstone to everything,” she said.
This may explain why private equity and venture capitalist investment have recently shifted. S&P Global reported a 131 percent increase in fossil fuels investment versus 64 percent for renewables in the last year alone. One of the most significant purchases was the 484 MW Middletown Energy Center natural gas power plant in Ohio by private equity firm ArcLight Capital Partners. Another massive energy buy came from Silver Lake, which invested $400 million in powered land to sell to data center owners. Some of these new investments reflect the shift in American politics.
Curtis hopes the increased energy investment will allow the United States to remain ahead of China in AI development — that is, if regulators get out of the way.
“We produce more oil and gas than any country in the world by a wide margin, and we have more coal reserves than China. We have zero excuses to have high electricity prices, and we should have redundant, affordable, reliable energy everywhere,” she said.
