Generally, big tech has been very supportive of climate change initiatives around the world.  Many tech companies have increasingly sought to utilize renewable energy sources, some even co-locating near the ultimate source (even Niagara Falls!), to power their growing energy needs.  But is that loyalty about to be tested?  Two important themes—blockchain/crypto and AI–are increasingly changing the equation.

As a recent article from Bloomberg (Bitcoin Miners in US Consume Up to 2.3% of Nation’s Electricity, EIA Report Says) indicates, the EIA (US Energy Information Administration) suggests that US Bitcoin miners “use as much electricity as everyone in Utah.”  Global energy usage from this cohort is equivalent to that of Greece or Australia.  Keep in mind, this is the EIA’s first study in this space and it acknowledges that better data collection and analysis methods may enhance findings in the future.  In other words, it’s probably worse than we think.  The contradiction has not been lost on market participants, who have made it a priority to demonstrate to the world that this increased energy demand is increasingly being fueled by green production.  For instance, two crypto miners, Blockfusion and U.S. Bitcoin, have opened facilities near Niagara Falls’ abundant hydropower.

Another article from Bloomberg, (AI Needs So Much Power That Old Coal Plants Are Sticking Around), discusses how the power demands from “data center alley”, a 30-square-mile corridor in Virginia, chock full of data centers, drove the power company that supplies this energy demand to pause new connections in 2022 and to consider running diesel generators during power shortages.  Even Sam Altman, of OpenAI fame, suggested at Davos that “we do need way more energy in the world than we thought we needed before.”  Possibly, up to 3x 2022 demand, or 7.5% of projected energy demand by 2030.  According to AI Now Institute, large language model-based “search” has almost five times the environmental impact of traditional search.

So far, it seems that these efforts are mostly about securing their share of energy from existing sources rather than bringing on new energy supply.  And, as we know, there is only so much electricity production capacity to go around.  Many utility operators are considering bringing back mothballed fossil-fuel burning plants — which kind of defeats the whole purpose of a renewable energy revolution.  According to America’s Power, across the US, almost two dozen coal plants that were set to be retired over the next five years have been delayed.  Around the world, countries like Germany that have closed nuclear facilities and embraced solar energy, are facing a future where they will have to burn lignite coal to meet their energy needs according to Peter Zeihan, which is possibly the worst outcome that climate advocates could imagine.

Could nuclear power provide part of the answer?  Both through public discussion and private investment, Big Tech has been increasingly turning to nuclear energy as the answer to their conundrum.  It was reported earlier this month that Amazon Web Services is paying up to $650 million for a data center campus adjacent to a nuclear plant in Pennsylvania that will have direct access to nuclear power.  Microsoft signed a deal last year with Helion Energy, which is focused on delivering energy through nuclear fusion within the next five years.  Perhaps as a result of Big Tech’s support for nuclear energy, the price of Cameco stock, the largest publicly-traded producer of uranium, has skyrocketed – up 85.5% since the start of 2023 vs. 37.4% for the S&P 500 Index over the same period.

However, so far, regulators aren’t playing along.  Remember, as a country, we are not yet convinced that nuclear power falls into the “green” category when it comes to power production.  It clearly should, in our opinion.  Call it, in part, PTSD from the Three Mile Island incident, the Chernobyl and Fukushima disasters, and recent scares in Ukraine.  In any case, as a result, regulators have been slow to approve new facilities and modular nuclear reactors that have held promise for years, have yet to reach even small-scale acceptance.  Can we really imagine having a plethora of small nuclear reactors in office or industrial parks near large suburban communities?  Clearly not yet.  So far, new nuclear facilities have been located in rural locales far from population centers, which requires sufficient transmission assets to efficiently deliver the energy to tech customers.

While it’s encouraging that Big Tech is pursuing multiple paths and investing in greener solutions, the reality of slow-moving and increasingly active regulatory regimes may prove too costly for blind adherence.  A corollary might be found in JP Morgan’s and State Street Global’s recent exit from the world’s largest investor group formed to combat climate change, Climate Action 100+.  Some climate activists call this “greenhushing”–increasing right-wing push back on ESG.  We say it’s business, not personal.

It’s looking like energy supply could be the real limiting factor in terms of how quickly Blockchain and AI are fully adopted and utilized.

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