Powering Data

Today’s Energy Shots deep-dive expands upon our recent analyses of AI and data-driven power demand growth, taking a closer look at the resources used to meet this new load.

Our research indicates a steadily shifting trend towards Vertically Integrated Compute — i.e., vertical integration of generation fuels, generation capacity, and hyperscale data centers.

In line with this theme, two announcements regarding leading AI players hit the newswire this week.

• Meta Platforms inked a deal with Sage Geosystems for 150 MW of geothermal generation capacity to supply Meta-operated data centers by 2027.

• xAI, Elon Musk’s AI contender, was accused of installing and operating 20 gas turbines with a combined generation capacity of approximately 100 MW at its Tenessee data center without necessary air permits.

The latter development mirrors reports fielded by Mobius earlier this year, reinforcing our expectations that AI-related power demand growth will require abundant, reliable generation capacity beyond the scope or timescale supported by exclusively non-fossil resources.

Furthermore, the AI industry competition increasingly recognizes the limitations of intermittent (wind, solar) power supplies for 24/7 steady-state load applications like hyperscale data centers.

Non-Fossil Reliable Power

Steady-state reliability requirements have narrowed the industry’s investment focus to three primary fuel choices: nuclear (fission/fusion), geothermal, and natural gas.

xAI’s use of gas-fired generation indicates easing political headwinds for Big Tech’s natural gas adoption. Still, this trend remains in its early days.

Conversely, the low carbon-emitting properties of geothermal and nuclear power are notable attributes for sustained investor interest. However, whether this interest can accelerate technological advancement and overcome these fuels’ limitations to meet data center demand on a relevant timeline remains unclear.

The following analysis dissects this uncertainty from three angles:

• The share of the U.S.’ electricity generating capacity by non-fossil thermal fuels in 2023.

• The rate of nuclear and geothermal installations since 1960

• The geographical distribution and geological constraints of nuclear and geothermal installations

Powering the United States in 2023

The U.S. utility-scale power fleet produced over 4.17 MM GWh in 2023, with natural gas responsible for more than two times the power of any other fuel (43%).

The U.S.’ aging nuclear fleet remains a considerable source of reliable baseload power, supplying approximately 19% of total electricity generation last year.

The 21% share of U.S. electricity supplied by renewable sources stems from a diverse fuel mix.

Wind, hydro, and solar facilities generated approximately 93% of the 893,517 GWh produced by all renewables in 2023. Meanwhile, Big Tech’s emerging resource of choice, geothermal, supplied just 1.8% of this total.

Nuclear: Overshadowed Attributes

Despite remarkable reliability and low carbon-emitting attributes, the U.S. nuclear fleet reflects outdated and misplaced political and social headwinds from disasters like Chernobyl (1986) and Fukushima (2011).

As shown below, U.S. nuclear capacity installations peaked in 1986, when over 9 GW of nuclear generation capacity was connected to the grid.

Since 2000, the U.S. has added only 3.7 GW of new nuclear capacity, making the average age of the U.S.’ 102.5 GW nuclear fleet approximately 43 years.

As shown below, operational nuclear plants are concentrated in the eastern half of the lower 48.

The 3.72 GW of nuclear installations since 2000 stem from just three reactors: the 1.2 GW Watts Bar unit from 2016 and the two 1.25 GW Vogtle units added in 2023 and early 2024.

This year’s Vogtle Unit 4 connection left the U.S. with zero nuclear facilities under construction. As of May 2024, approximately 3.83 GW of nuclear capacity is in pre-construction.

A closer look at the two Vogtle units shows that initial construction to final connection required approximately 11 years. Considering this timeline, nuclear’s role in meeting near-term data center demand is likely limited to deals like Amazon’s nuclear-powered 960 MW data center acquisition from Talen Energy in March.

Geothermal: Overcoming Geological Constraints

Like the U.S. nuclear fleet, geothermal capacity additions peaked in the 1980s before collapsing in the late 1990s and early 2000s.

Unlike nuclear, geothermal’s ‘state of the art’ in the 1980s-2000s limited installations to isolated regions with suitable geological conditions.

As a result, the U.S. geothermal fleet remains comparably insignificant at 3.63 GW of total capacity — just 2.8 GW of which is attributed to facilities larger than 30 MW.

While headlines regarding geothermal technological advancements abound, geothermal capacity in development pipelines remains relatively nominal and regionally constrained.

Still, readers should consider the levers that could significantly alter geothermal installation rates.

Monitoring Technological Advancement

Geothermal

While geothermal generation was historically confined to easily accessible thermal reservoirs like California’s 350-well facility at The Geysers, the industry has increasingly adopted drilling technologies and strategies pioneered by oil and gas exploration.

Early indications show that adopting horizontal drilling with enhanced geothermal systems enables faster and more economical discoveries of commercially viable heat reservoirs, potentially expanding geothermal’s utility beyond existing geological limitations.

Google, Meta, and Microsoft have inked deals for enhanced geothermal-powered data centers.

Nuclear

Helion Energy, one of ~30 developers of fusion technology, announced its first power purchasing agreement with Microsoft in May 2023, aiming to generate power by 2028.

Claims that fusion technology will reach commercial viability by 2028 are questionable. Lawrence Livermore National Laboratory remains the only group that has achieved a fusion reaction with net positive power output — i.e., fusion ignition.

Helion has not accomplished this milestone, indicating that its 4-year timeline to reach commercial viability remains dubious.

Fading Unsubstantiated Claims

Should unsubstantiated claims (nuclear or geothermal) succumb to delays and uneconomical costs, demand for reliable power will shift to existing resources that meet steady-state requirements.

Natural gas emerges as the leading generation fuel to satisfy these conditions in the current state-of-the-art. Still, power reliability and supply risks from underinvestment in natural gas storage and transmission infrastructure remain.

WWMD: What Would Mobius Do?

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This commentary contains our views and opinions and is based on information from sources we believe are reliable. This commentary is for informational purposes, should not be considered investment advice, and is not intended as an offer or solicitation with respect to the purchase and sale of commodity interests or to serve as the basis for one to decide to execute derivatives or other transactions. This commentary is intended for Mobius clients only and is not considered promotional material.