AI, data center-boosted load growth prompts thermal power reconsiderations

Introduction

Two years into the generative AI revolution, the mismatch between data center power requirements and supply has reached a critical point. This has led to growing interest in thermal energy options as evolving federal policy reshapes the energy sector.

Momentum continues for the nuclear industry, gas turbine orders are at their highest levels in nearly 25 years and coal unit retirement plans are being delayed. The build-out of renewables also continues as the US attempts to keep pace with load growth. The

Take

Unrelenting load growth has led to a reconsideration of strategic energy priorities in the US. This shift is bringing nuclear, gas and, to a lesser extent, coal back to the forefront, pushing decarbonization objectives to the back burner.

The second Trump administration supports this reorientation, primarily through a rollback of federal tax incentives for solar and wind power and a push to minimize red tape for nuclear.

Legacy thermal power generation faces headwinds, including long permitting timelines in the case of nuclear, rapidly expanding turbine backlogs for gas power plants and tepid investment in coal due to its long-term prospects. Nevertheless, renewables are expected to surmount current setbacks and continue growing.

Sector at a crossroads

After years of emphasis on decarbonization, the strategic shift to firm legacy power generation sources puts the US power sector at a crossroads. This reorientation has been primarily dictated by the massive data center build-out needed to achieve global AI superiority. With economic competitiveness, military supremacy and global influence at stake, sustained momentum in nuclear and gas-fired power is likely. To a lesser extent, the prolonged life of coal power assets is also anticipated.

However, a revival in legacy power generation is not a renunciation of green energy objectives. It is a move to an all-of-the-above energy strategy that covers national security objectives and represents a new paradigm under which renewables will continue to play a critical role.

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