S&P Global — 6 December 2024
Daily Update: December 6, 2024
No One Knows How Much Energy AI Will Require
By Nathan Hunt
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Projections around datacenters’ energy usage should be taken with a grain of salt. No one really knows anything when it comes to such projections, but that doesn’t stop people from making them. Energy providers have a vested interest in projecting massive energy demand as datacenters are built to meet AI needs. Technology companies have a vested interest in projecting massive energy savings in the future, naturally powered by AI. In his latest article, “AI and energy: The big picture,” Ben Levitt, an expert in energy demand and usage with S&P Global Commodity Insights, introduces some hard facts into this flurry of questionable projections.
It's a reasonable guess that power demand is going to increase globally — power demand always increases. Beyond that, secular trends such as the evolution of AI demand and datacenters; the construction of new manufacturing and industrial facilities; the activities of cryptocurrency mining operations; the electrification of vehicles, buildings and industrial processes; and the increased need for heating and cooling due to extreme temperatures will all drive up energy demand. Our infrastructure is already operating beyond its designed capacity: The energy grid was built to supply household toasters, not 5-6 GW of additional datacenter capacity. Increasing demand is forcing an “all of the above” approach to energy generation, including recommissioning coal and nuclear plants, building out solar and wind, and investigating new options such as small modular reactors behind the meter.
Utilities and energy grid operators have overprojected electricity demand for decades. Every company likes to believe that demand will trend upward to the right. But a recent survey of technology stakeholders suggests that datacenter-driven demand growth through 2030, expressed in terms of equivalent state-level electricity demand, could range from “Maryland” to “Texas.”
Datacenter operators are closely examining utility power and energy costs when making site selections. Recently, hyperscalers have been building datacenters in Tennessee and Mississippi. Others are aiming to reduce reliance on the grid, either through colocating with existing power plants or by building out their own power capabilities using wind, solar and nuclear. Google, Amazon and Oracle have announced plans to use small modular reactors and enhanced geothermal systems.
In the near term, emissions from increased energy demand will increase, especially in regions that rely on coal- or gas-powered energy plants. However, over time, there will be a strong incentive for all industry players to innovate around renewable energy, more efficient algorithms and load balancing to reduce the costs and energy requirements of datacenters.
Today is Friday, December 6, 2024, and here is today’s essential intelligence.
Listen: Decoding COP29 – Key Outcomes on Carbon Markets and Climate Finance
The UN Climate Change Conference took place against a backdrop of escalating geopolitical tensions and political divisions, yet it marked a significant step forward for carbon markets. For the first time in nearly a decade, nations reached a consensus on the rules for international carbon trading under Article 6 of the Paris Agreement. In this episode, Eklavya Gupte, Roman Kramarchuk, Jonty Rushforth and Ivy Yin analyze key developments and explore their implications for climate policy, carbon markets and the wider energy transition.
—Listen and subscribe to the podcast from S&P Global Commodity Insights
UK Economic Outlook 2025: Monetary Policy and Trade to Offset Fiscal Impetus
After a slower second half this year, the UK economy looks set to gather steam on looser fiscal policy, with GDP rising by 1.5% in 2025 versus the September forecast of 1.2%, and maintaining a similar pace through 2027. But S&P Global Ratings now expects the Bank of England (BOE) to cut its rate only four times over the next quarters to 3.75% by the end of 2025, as a result of stronger jobs growth and inflation stemming from higher government spending.
—Read the article from S&P Global Ratings
Private Markets: How Will Private Credit Respond to Declining Yields?
Recent and upcoming rate cuts will provide relief for private credit borrowers through lower funding costs in 2025, even as many have already benefitted from repricing and improving financing conditions. Repricing will continue to change market dynamics. Repricings have defined recent broadly syndicated loan (BSL) activity, with spreads narrowing on more than 40% of loans in 2024. To a smaller degree, this is affecting private credit as well, reducing the overall cost of funding for many issuers.
—Read the article from S&P Global Ratings
For Indian Oil Products Exporters, Europe Offers an Opportunity Like No Other
Europe is increasingly turning out to be the brightest market for Indian oil products exporters that have capitalized on the shortages of diesel and other fuels due to geopolitical tensions and are shipping plentiful cargoes, a trend that is set to spill over to next year. Analysts, refiners and trade sources told S&P Global Commodity Insights that Indian refiners have been reaping dual gains — buying copious amounts of crude oil from Russia at hefty discounts, as well as supplying products to the EU, which has extended the scope of its ban on Russian oil to diesel, in addition to crude.
—Read the article from S&P Global Commodity Insights
Fujairah Data: Oil Product Stocks Rebound on Fuel Oil Refill
Oil product inventories at the UAE's Port of Fujairah climbed almost 23% in the week ended Dec. 2, rebounding from a record low a week earlier, led by a surge in heavy distillates, according to Fujairah Oil Industry Zone data published Dec. 4. Total stockpiles rose to 17.487 million barrels, the highest since Sept. 16, according to FOIZ data compiled by S&P Global Commodity Insights since 2017. The rebound was led by a 37% advance in heavy distillates used as fuel oils for power generation and ship fuel after dropping 31% in the week prior.
—Read the article from S&P Global Commodity Insights
AI & DeFi: Can Crypto Innovations Offset Artificial Intelligence Concentration Risks?
The rapid expansion of generative AI exacerbates existing dependencies on big technology firms. Advancements in decentralization, such as crypto and edge AI, could offset some of the associated centralization risks if they are adopted rapidly. Accelerating AI implementation will introduce new operational challenges. Much of the past two years was spent assessing the potential of generative AI (genAI) — until the first quarter of 2024, only 18% of companies had adopted and fully integrated genAI tools within their operations, according to the S&P Market Intelligence "Voice of the Enterprise" survey.
—Read the article from S&P Global Ratings
Webinar: Beyond ESG with the Outlook for Climate-Related Policies Post-US Election (Dec. 11, 2024)
Under the forthcoming US administration, S&P Global Commodity Insights expects that climate-related energy policy within the United States is likely to continue along the seesawing path it has followed over the past eight years, seeing rapid swings in the federal regulatory landscape and approach to international climate policy.
Join S&P Global Sustainable1 in our upcoming Beyond ESG webinar as we bring you specialist perspectives digging into the details of climate-related policies, reflecting on COP29 and looking ahead to the outlook post-US election.
—Register for the upcoming webinar from S&P Global Sustainable1