 "A battle unnoticed: White House vs energy firms amid America's power deficit, AI race with China")
Some of the largest US power corporations disagree with senior Trump administration officials on how to address the country’s growing electricity deficit while beating China in the AI race.
Interior Secretary Doug Burgum stated at Semafor’s World Economy Summit last week that Washington’s drive to expedite permission for the development of new energy resources will not apply to “intermittent” power sources.
The prolonged use of government tax subsidies to replace fossil fuels in the electric grid with renewables “would be catastrophic for our country,” he said.
Fuels that can operate inexpensively around the clock, such as coal, gas, and nuclear, are critical to US AI competitiveness, according to Burgum, who also chairs the National Energy Dominance Council.
However, executives at firms that manage the transmission of electricity to new data centres have a more nuanced perspective.
Even while growing trade barriers with China make some technologies more expensive, renewables and batteries remain the cheapest and fastest option to add additional electrons to the grid.
“Before, I always argued that you need some gas in the [power] mix to make it cheaper,” said Andrés Gluski, CEO of the international energy giant AES, one of the leading data centre power providers in the United States, at WES.
“Now, I would argue that you need renewables in the mix to make it cheaper. Over the next five years, the bulk of new energy in the US is going to be renewables.
Impact Shorts
View AllBurgum stated last week that the Trump administration had “no hostility towards renewables.”
One may expect the urgency of the AI race to break down ideological barriers for policymakers on both sides of the fossil fuels vs. renewables debate.
However, for a politician like Burgum, whose home state of North Dakota is a major oil and gas producer, the attachment to hydrocarbons runs deep, which can lead to some ignorance regarding the true costs and timescales for other data centre energy solutions.
“Any state in this country that is saying ‘We’re not going to allow natural gas pipelines, we’re going to bank on wind and solar,’ they’re not going to have any AI data centers,” Burgum said. “There’s not some magical solution that’s appeared yet where we can have cheap and affordable load-shifting by using batteries in conjunction with intermittent [power sources].”
According to Bob Frenzel, CEO of the midwestern utility Xcel Energy, some utilities may decide to gradually prolong the life of current coal plants rather than rush to shut them down in response to Trump’s recent executive order that supports coal mining and coal-fired power generation.
Batteries will be among the technologies whose costs are disproportionately increased by trade barriers with China.
However, whether it comes down to supplying new data centre clients with utility-scale batteries or a new $50 million substation, batteries still win, according to Calvin Butler, CEO of Exelon, the largest regulated utility company in the United States.
If the Trump administration is serious about assisting power companies in the AI race, it may need to explore establishing tariff exemptions for utility-scale batteries.
The more the United States tries to distance itself from renewables and batteries, whether through trade barriers, reduced tax incentives, or pushing them to the back of the permitting reform queue, the greater the “bifurcation” between their prices in the United States and elsewhere, according to Gluski. That risks undermining the United States’ AI objectives.
Renewables are advancing quickly, but natural gas still plays an important part in the future US power grid, and although a turnaround in coal demand is doubtful, gas consumption is expected to increase.
Gas is already the dominant energy source for data centres, accounting for around 40% of consumption. And as data centre demand rises, IT businesses will face increased competition from US LNG producers, who may have less fuel to sell overseas.
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