Fueling the Future: Bridging the Energy Demand Gap in the AI Era

• Fifty-seven percent (57%) of all respondents agree or somewhat agree that the current pace of energy deployment in the U.S. is not enough to meet energy demand caused by AI. 
  
• Hyperscalers/data center developers are more skeptical of the current pace of energy deployment; 64% of hyperscalers/data center developers agree or somewhat agree that the current pace of energy deployment is not enough to meet energy demand caused by AI, compared to just 44% of electric producers/utilities.
  
• Seventy-six (76%) percent of all respondents see electricity usage in data centers increasing by at least 10% annually, with 30% indicating they think it will increase by at least 15%. Hyperscalers/data center developers are more likely to predict faster demand growth, with 43% predicting 15% or more.
  
• The top two challenges cited by electric producers/utilities to connecting data centers to the grid include lack of grid capacity (76%) and unreliable load projections (71%).

“Extreme weather events and the need for more resiliency; growing demand on the grid thanks to a boon in domestic manufacturing, increasing popularity of EVs, and transitions to the cloud – before all eyes were on AI, power and utility companies were already between a rock and a hard place for where to put their resources and capital first,” said KPMG U.S. Energy Leader Angie Gildea.

• Survey respondents cited inadequate access to renewable/low-carbon electricity sources as the no. 1 challenge to finding suitable sites for data centers, edging out regulatory hurdles.
  
  
• With these challenges and disconnects in mind, more than half of the hyperscalers/data center developers (55%) surveyed are willing to pay up to 50% more than their current expenditures on electricity costs.
  
  
• Further, even more of the hyperscalers/data center developers (62%) indicated their organizations are prepared to incur an additional cost of up to 50% more than their current electricity expenses for low-carbon electricity, with another 14% willing to pay between 51-100% more than their current electricity expenses for low-carbon electricity.

“Power and utilities companies plan over longer time horizons and operate with limited capital because they take both the regulatory environment and their consumers’ wallets into account. Working with tech, P&U companies have an opportunity to disrupt and not only power the AI future with lower carbon energy sources, but also secure a capital infusion for much-needed infrastructure upgrades,” continued Gildea.

• When it comes to reducing carbon footprints, both hyperscalers/data center developers and electric producers/utilities alike see opportunity for partnerships and investments with renewable and low-carbon energy companies. Half of the hyperscalers/data center developers surveyed indicated they are currently entering into partnerships and investments with renewables and low-carbon energy companies.
  
• For electric producers/utilities, that number is even higher, with 56% indicating they are currently entering into partnerships and investments with renewables and low-carbon energy companies.
  
• There is less consensus on how hyperscalers/data center developers will work with traditional electric producers and utilities. Sixty-two percent (62%) of electric producers/utilities are interested in entering joint ventures to ensure secure energy, compared to 36% of hyperscalers/data center developers.

“Without access to reliable energy, hyperscalers simply cannot scale the AI capabilities that will drive innovation and further economic growth,” said KPMG U.S. Technology, Media & Telecommunications Consulting Leader Chad Seiler. “This is not a problem that can wait – major tech players are ready and willing to put their capital behind solving this challenge head-on.”

• The top three ways the hyperscalers/data center developers are seeking to power their data centers include interconnection to the electric grid (79%), behind the meter self-generation via renewables (59%), and gas fire generation via interconnection to a natural gas pipeline (31%).
  
• Over the next 3-5 years, all respondents expect to majorly increase their usage of solar + storage (84%), wind + storage (63%), hydroelectric (54%), natural gas with carbon capture, utilization + storage (52%), and geothermal energy (46%).
  
• There is less consensus about the future of nuclear, even amid it gaining recognition as being a critical part of the future power supply. A little over a quarter of total respondents (27%) indicated they intend to majorly increase their usage of nuclear over the next 3-5 years.
  
• At the same time, 17% of respondents, including 19% of the hyperscalers/data center developers indicated plans to majorly decrease their usage of nuclear over that same time horizon.
  
• In fact, hyperscalers/data center developers seem the least bullish on nuclear, at least over the next 3-5 years, with only 16% indicating plans for a major increase in nuclear use over that timeframe. This could simply be the tech and data companies taking into account how long it takes for nuclear projects to come online.

“No single source fuels energy demand now, and no single source of energy will fuel the demand of the future, said Reid Tucker, KPMG U.S. Strategy and Technology Leader for Infrastructure, Capital Projects. “The increased complexity of energy sources and the infrastructure needed to deliver it will require significantly greater collaboration among energy suppliers, government agencies, and data center developers. Those attempting to go at this alone will likely experience increased challenges and find themselves with unachievable plans, stranded assets, and skyrocketing costs.”

• A majority of respondents are increasingly integrating sustainable energy technologies to meet the growing demands of data centers. The top three technologies currently being utilized are Solar + Storage (84%), natural gas (80%), and Wind + Storage (50%).
  
•  Looking ahead to the next 3-5 years however, 40% of respondents intend to significantly decrease their use of natural gas without carbon capture. More than half (53%) however indicated they will increase their use of natural gas + carbon capture, utilization and storage over that same time horizon. 

• The top three actions hyperscalers/data center developers are taking now to reduce the carbon footprint of their data centers include entering PPAs to secure low-carbon energy (60%), entering partnerships and investments with renewable and low-carbon energy companies (50%), and purchasing carbon offsets (48%).
  
• The top three actions the electric producers/utilities are taking to reduce their carbon footprints include strategic energy management, also known as retrofits, to reduce consumption (58%), entering partnerships and investments with renewable and low-carbon energy companies (56%) and entering into PPAs to secure low-carbon energy (51%).

“Putting the toothpaste back in the tube on AI is not an option. Carbon mitigation strategies are,” said Maura Hodge, KPMG U.S. Sustainability Leader. “As long-term solutions come online, there are still steps that can be taken. In the short-term, a piecemeal, all the above approach to reducing emissions can still move the needle.”