U.S. data centers issue warnings over potential damage to American competitiveness in AI race due to Donald Trump's adversity towards green energy.
Rewritten Article:
The US data center industry is facing a potential setback due to the Trump administration's tough stance on renewable energy, which might impede its growth and put Washington's ambition of winning the global artificial intelligence race at risk.
Since President Donald Trump's return to the White House, clean energy developments on federal land have taken a hit with a freeze on new projects, a pause in federal loans, and the cancellation of high-profile initiatives like Equinor's $5bn Empire Wind site. This could create an energy crunch, drive up costs, and push operators towards dirtier energy sources, experts warn.
Simon Ninan, Senior Vice-President at Hitachi Vantara, which constructs equipment and infrastructure for data centers, stated that the Trump administration's adversarial approach towards renewable energy could make it impossible to cater to the data growth happening in the industry. He further added that this could strategically weaken the US's current lead in the global AI race, with nations like China, which have adopted a proactive approach towards grid modernization and efficient power distribution, gaining an edge.
A power shortage could delay or cancel data center buildouts or infrastructure upgrades, Ninan said. The Trump administration has argued that losing the AI race to China is a greater threat to the world than global warming and has advocated for an increased use of fossil fuels to power data centers. However, experts believe it will be challenging to meet surging demand without adding significant renewable energy capacity, which is quicker and cheaper to deploy than building gas power plants.
The assault on renewables has caused concerns among Democratic leaders in northeastern states, which are counting on the expansion of wind energy to meet future electricity demands. On Monday, a coalition of Democratic attorneys general from 17 states sued the Trump administration in an attempt to block its plan to halt the development of wind energy.
Data centers are projected to demand 83.7 gigawatts of energy by 2030, equivalent to adding a new state the size of Texas to the grid, according to the Center for Strategic and International Studies think-tank. While many companies are investing in nuclear small modular reactor technologies, it may take years before they become operational.
"We've seen increased competition for green energy over the last couple of years," said Nick Hertlein, a managing director at Stonepeak, an alternative investment firm specializing in infrastructure and real assets. "If US AI development is a priority, policymakers need to find ways to accommodate the data center industry's growth."
While large-scale gas generation projects are being fast-tracked by major grid operators such as PJM, MISO, and ERCOT, this might come at the expense of cheaper sources like renewables. Gas turbine suppliers like Siemens and GE Vernova have warned that lead times for larger models could stretch to 2029.
"If we can't bring on new, lower-cost resources when demand is increasing, we'll have to rely more and more on higher-cost resources," said Rich Powell, CEO of the Clean Energy Buyers Association. "We just need to flood the zone with new electricity as quickly as we can."
Although large technology companies might be able to pressure the administration to relax restrictions on new power sources, smaller to medium-sized players are finding themselves in a holding pattern as they wait to see if permitting obstacles and tariffs on renewables equipment are lifted, said Ninan.
"On average, [operators] are most likely going to try to find ways of absorbing additional costs and going to dirtier sources," he said.
Amazon, the world's largest corporate purchaser of renewable energy, emphasized that carbon-free energy must remain a crucial part of the energy mix to meet soaring power demands, keep costs down, and meet climate targets. Kevin Miller, Vice-President of Global Data Centers at Amazon Web Services, said, "Renewable energy can often be less expensive than alternatives because there's no fuel to purchase. Some of the purchasing agreements we have signed historically were 'no brainers' because they reduced our power costs."
Efforts by state and local governments to slow down renewables could also harm the sector. In Texas -- the third-largest US data center market following Virginia, according to S&P Global Market Intelligence -- numerous bills are being debated that increase regulation on solar and wind projects.
"We have a huge opportunity in front of us with these data centers," said Doug Lewin, president of Stoic Energy. "Virginia can only take so many, and you can build faster here, but any of these bills passing would kill that in the crib."
The renewables crackdown will make it harder for hyperscale data centers operated by companies such as Equinix, Microsoft, Google, and Meta to offset their emissions and invest in renewable energy sources.
"Demand [for renewables] has reached an all-time high," said Christopher Wellise, Sustainability Vice-President at Equinix. "So when you couple that with the additional constraints, there could be some near to midterm challenges."
Additional reporting by Jamie Smyth
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Overall:
The Trump administration's crackdown on renewable energy could slow the growth of the US data center industry, put Washington's ambition of winning the global artificial intelligence race at risk, and hinder the US's carbon emission reduction goals.
Impact on US Data Center Industry Growth
1. Increased Energy Costs and Supply Uncertainty- Pullbacks in clean energy subsidies, federal tax credits for solar and wind projects, and expansions of fossil fuel drilling rights leave data center operators facing higher electricity prices and supply uncertainties due to their high energy dependency.- Approximately 300 clean energy projects, which are essential for supplying renewable energy to data centers, are under review or at risk of losing funding, potentially limiting the growth of renewable energy capacity for sustainable data center operations.
2. Slower Green Energy Infrastructure Expansion- The halting of all new offshore wind leasing, freezing federal permitting for onshore and offshore wind, and blocking construction of fully permitted renewable projects delay the growth of renewable energy infrastructure that's vital for powering new and existing data centers sustainably.- Federal budget shifts causing layoffs at key renewable energy research labs further reduce innovation and infrastructure expansion to support clean energy use in data centers.
Consequences for the Global AI Race
1. Slowed Decarbonization and Energy Transition Hinder AI Infrastructure Growth- The slowdown in the US clean energy transition slows the expansion of green-powered AI infrastructure, limiting the scalability of AI development that relies heavily on data centers.- Globally, the US is a significant player in AI development. The Trump administration's rollback on climate policies weakens US leadership in green tech innovation and energy efficiency, potentially ceding ground to other nations aggressively pursuing green AI infrastructure.
2. Increased Operational Costs and Reduced Competitiveness- Higher electricity prices from reliance on fossil fuels and instability in the energy market increase operational costs for AI firms in the US, potentially reducing margins or slowing investments in AI research and deployment compared with global competitors in regions with cheaper, cleaner energy.- The administrations stance could undermine corporate environmental, social, and governance (ESG) initiatives, which are important for attracting global AI investments and partnerships, potentially isolating US AI companies in the global market.
Summary
The Trump administration's aggressive rollback of renewable energy policies disrupts the US energy transition by cutting subsidies, freezing permitting, and encouraging fossil fuel expansion. This results in higher costs and delays for renewable energy infrastructure essential for powering data centers, thereby constraining the US data center industry's growth. These energy and regulatory shifts also risk slowing the US's ability to compete in the global AI race by increasing operational expenses and undermining sustainable growth strategies. Consequently, the US may lose ground to nations with more robust green energy commitments and AI infrastructure development.
- The Trump administration's stance on renewable energy could strain the US data center industry's growth, causing an increase in energy costs and supply uncertainties due to the industry's high energy dependency.
- The slowdown in the US clean energy transition might impede the growth of green-powered AI infrastructure, potentially limiting the scalability of AI development and ceding ground to other nations pursuing aggressive green AI infrastructure.
