"No electricity, no AI." This stark declaration from Doug Kimmelman, founder and executive chairman of Energy Capital Partners (ECP), encapsulated the urgent message delivered during his recent appearance on CNBC's 'Power Lunch'. Kimmelman, a veteran with over four decades in the energy sector, illuminated a pivotal shift in the electricity landscape: power, once merely a utility, has now become arguably the world's most critical commodity, driven in large part by the burgeoning demands of artificial intelligence.
Kimmelman, whose firm is a leading investor in energy infrastructure, spoke with CNBC’s Frank Curzio about the profound implications of AI’s energy needs, the accelerating pace of electricity cost increases, and the broader challenges facing the U.S. power grid. His commentary painted a clear picture of a system under unprecedented strain, where new demands are not simply consuming existing excess but necessitating entirely new generation capacity at an alarming rate.
The core of Kimmelman’s argument centers on the concept of "additionality." The current electricity grid, he explained, does not possess a surplus of megawatts readily available to divert to the burgeoning AI sector. Instead, satisfying AI's voracious appetite for power will require the creation of entirely new generation capabilities. "Really, we're going to be talking about additionality, new megawatts rather than taking extra off of the grid to supply the AI," Kimmelman asserted. This shift underscores a fundamental change in how energy infrastructure must be planned and deployed, moving from optimizing existing resources to aggressively expanding them. The scale of this demand is staggering; Open AI alone, for example, is reportedly pursuing deals for 10-gigawatt and 5-gigawatt power supplies, which Kimmelman equated to the electricity needs of "millions of homes."
This demand surge comes at a time when the existing grid is already facing significant challenges. Kimmelman highlighted that a substantial portion of rising electricity costs for consumers stems not from power generation itself, but from massive investments in transmission and distribution infrastructure. Over the past 5-10 years, utilities have spent tens of billions to "harden the grid" against extreme weather events like Superstorm Sandy. This necessary but costly modernization is now being reflected in retail rates, representing the primary driver of higher consumer prices.
Electricity prices are indeed rising faster than inflation.
The problem is further compounded by the nature of renewable energy sources. While crucial for sustainability, renewables like wind and solar are often located in remote areas, necessitating thousands of miles of new, expensive transmission lines to bring power to population centers. These massive infrastructure costs, too, are passed on to consumers, creating a complex web of financial burdens that predate and are now exacerbated by AI's demands.
Related Reading
- Michael Dell: AI Demand is Solid, Energy is the Bottleneck
- Data Centers as One Giant AI Computer
- AI's Enduring Market Dominance and the Unseen Infrastructure Boom
Beyond AI, Kimmelman pointed to several other significant drivers of surging electricity demand that are collectively pushing the grid to its limits. He cited the energy-intensive process of liquefied natural gas (LNG) export, where natural gas must be super-cooled to be transported. Cryptocurrency mining, particularly in regions like Texas, represents another enormous load, with its electricity consumption surpassing that of entire major cities like Houston. Furthermore, the national push for onshoring manufacturing, while economically beneficial, also contributes to increased industrial power consumption.
These new demands are emerging as traditional, reliable sources of baseload power are shrinking. Nuclear and coal, which once accounted for 70% of U.S. power generation, have now fallen to 40% and continue to decline. The potential loss of an additional 150 gigawatts from these aging plants further exacerbates the supply crunch. This convergence of escalating demand from multiple sectors and a contracting traditional supply base creates a formidable challenge for energy planners and policymakers. The urgency is clear: the United States needs to significantly accelerate its investment in new, reliable power generation and robust transmission infrastructure to meet the demands of the future economy, particularly as AI becomes an increasingly integral part of it.
