How big of a boom will AI data centers be powered by renewable energy?

according to New report from the International Energy AgencyThe world is expected to spend $580 billion on data centers this year, $40 billion more than the amount that will be spent searching for new oil supplies.

These numbers help illustrate some of the big shifts in the global economy, and the comparison of data centers and oil seems particularly apt given concerns about how this will play out. Generative AI may accelerate climate change.

Kirsten Korosek, Rebecca Bellan, and I discussed the report’s findings in a recent episode of the podcast TechCrunch’s Stocks Podcast.

There’s no doubt that these new data centers will be power-hungry, and that they could put more strain on already taxed electrical grids. But Kirsten pointed to the potential upside Solar is poised to power many of these new projectswhich could also create new opportunities for startups pursuing innovative approaches to renewable energy.

We also discussed how these projects will be funded, as OpenAI has stated Pledged $1.4 trillion To build data centers, Meta commits $600 billionAnd Anthropy more recently Announcing a $50 billion data center plan.

You can read a preview of our conversation, which has been edited for length and clarity, below.

Kirsten: Here’s what I think is the potential upside. So, Tim De Chant, our climate technology reporter, has been reporting a lot not just about data centers, but actually how More data centers are turning to renewable energy sources Because in terms of regulatory (obstacles) and cost, it is the ideal solution. It is much easier to obtain a permit to install an array of solar panels next to a data center.

For me, the only upside is that it could really mean something positive for any kind of company that is doing interesting things around renewables or designing data centers and some technologies to reduce the global emissions component of it.

But of course, the sheer number for me is what really stood out. As a former energy correspondent, I know how much money is spent trying to find new oil.

Rebecca: I mean it’s a lot. And a lot of that comes from the United States, and I think this report found that half of the electricity demand will come from the United States, and the rest is a mix from China and Europe.

The other thing that struck me about this is that most of the data centers are coming into cities, or near cities, like a population of about a million people. This means there is a much greater challenge with network connectivity and communication paths. I think that, from your point of view, renewables should be (a focus) – it’s just good business, not because of any green policies.

Kirsten: Redwood Materials’ new business unit, Redwood Energy, will be an interesting company to watch from here. A few months ago, I went to their big revealand they take old electric car batteries that aren’t quite ready for recycling, and then they create these microgrids, and then they specifically target AI data centers. This, to me, would alleviate the problem or concern I just mentioned.

The question is: Will other companies do this? Are there other Redwood energies trying to do the same thing? How much impact can they have? Because I think that like stress on the electrical grid, especially during certain times of the year, like in the middle of the summer, for example, in places like Texas that have blackouts and power outages, that would be a real concern. It could spur a whole new kind of investment in companies that do what Redwood does.

Anthony: It also underscores this question of what will this do to the spaces we live in? Even if they weren’t in the cities themselves, I feel like the landscape would definitely be changed by building on this scale.

And then, of course, there’s also this question of how much (planned data centers) will actually be built because there are certainly very ambitious plans that require huge amounts of spending.

Let’s start with OpenAI, this is a company that a lot of people have been talking about, How much money do they actually earn? Versus the trillions of dollars of capital commitments they have for the next decade. Then there was this whole controversy about the company’s CFO saying, “The government should back our loans to build these data centers.” Then she said, “No, no, no, no, no, I didn’t mean to be supportive, that was a poor choice of words,” but it seemed like they were asking for it. Expanding tax credits from the CHIPS Act.

I believe that this effort will fall not only on companies, but also on the government – or at least this will be a question that the government considers over the next few years.