AI sparked a global arms race among tech giants for electric reserves—can we maintain energy independence?

The technological and business turmoil caused by artificial intelligence technologies, and particularly by generative AI applications over the past year, raises a global issue that the world has yet to consider: How will humanity cope with the increasing energy consumption required for such heavy processing? The existing electrical grids around the world were built in a previous era and were designed to supply electricity to households, factories, and businesses.

However, in the last decade, these networks have had to cope with two types of new, massively larger demands than their supply capabilities: first, charging electric vehicles, and second, supporting the electricity needs of data centers, including cloud infrastructures running heavy computations.

No wonder consulting firm Grid Strategies forecasts that the demand for electricity in the USA over the next five years will double compared to the forecast published last year. Moreover, the shortage of electricity is delaying the opening of new server farms for two to six years.

Tech giants have started an electric arms race—how will it affect all of our electricity?

The major tech companies (AWS, Microsoft, Google, and others) are very concerned about the electricity shortage threatening their computing power, which is their core business. Therefore, they have launched an aggressive arms race designed to equip them with electric reserves that will last them for the next 20-30 years and ensure their energy independence, just like countries.

It is a zero-sum game, and the victory of one in acquiring one kilowatt always comes at the expense of the other. In addition to the traditional energy they purchase in large volumes, they are trying to dominate reserves of green energy, primarily solar and wind energy.

For example, Amazon purchased 50% of the energy output of the Moray West wind farm in Scotland. In 2022, technology companies purchased about 48% of all green energy output in the USA, followed by the energy sector (9%), the telecom sector (8%), and the food and beverage sector (7%).

Technology giants are buying stocks of alternative energy not so much to protect the environment, but because the prices of these energies have fallen by tens of percentages in recent years and only these energies now have large available reserves.

It is commendable that these technology companies are involved in building alternative energy projects themselves. However, their aggressive takeover of these electricity reserves raises concerns that they could dominate the future electricity market and harm the welfare and rights of consumers and businesses that do not have purchasing power like theirs.

Regulators around the world have yet to address this potential threat that has slipped under the radar and must do so soon, in order to ensure energy justice for all. Moreover, clear priorities for electricity distribution must be established, considering ethical issues such as: who will set the priorities and according to which criteria? For example, should there be a priority for the TikTok application or for a diagnostic imaging center serving thousands of doctors and hundreds of thousands of patients?

For Israeli entrepreneurs, the limitless electricity consumption in the AI and GAI era is an exceptional business opportunity. Traditional electricity infrastructures, which have not changed in essence in decades, are expected to undergo complete digitization in the coming years, and the entire sector will transition to an Electricity Cloud, a process similar to what the telecom industry has undergone. This is a call for entrepreneurs to enter this competitive field where innovative solutions will be required in the areas of electricity production, transmission, supply, and customer interfaces, including billing, collection, and more.

The government should remember that green energy is not only cheap and environmentally friendly, but will also ensure the energy independence of the high-tech industry and the entire economy which requires increasingly growing processing power. Because without electricity, not a single bit will move from its place.

Yair Snir is Managing Partner at Dell Technologies Capital, Israel and Europe