"Power" Struggle: The Battle Between AI, Crypto, and the Race to Keep the Lights On

The U.S. is not yet in the midst of an energy crunch, but the trends and data suggest that it is moving towards a more precarious energy landscape. The combination of growing demand, aging infrastructure, the transition to renewables, and potential supply chain disruptions all point to the need for significant investment in the nation's energy systems. Without proactive measures, including grid modernization, increased energy efficiency, and the development of new energy sources, the U.S. could indeed face an energy crunch in the near future. Many parts of the grid are over 50 years old, and the American Society of Civil Engineers (ASCE) gave the U.S. energy infrastructure a grade of C- in its 2021 report card. According to the EIA, renewables accounted for about 21% of U.S. electricity generation in 2021, and this figure is expected to rise to 44% by 2050.

As you pick your presidential candidate this election, watch closely what their policies are as it pertains to energy. The American policy for energy has to begin now, otherwise we will be unprepared.

In the high-stakes world of technology, the competition isn't just about who has the best algorithms or the most powerful hardware—it's increasingly about who has access to the most energy. As both cryptocurrency mining and artificial intelligence (AI) race to dominate their respective domains, they are also competing for the same limited power resources. This battle for energy is not only intensifying but is also poised to escalate further, creating both challenges and opportunities in the energy sector.

The Growing Energy Demand

Data centers, the backbone of AI and cloud computing, currently consume about 1%-1.3% of global electricity. This figure is expected to grow significantly, with some projections indicating that data centers could account for up to 9% of total electricity generated in the U.S. by the end of the decade, according to the Electric Power Research Institute. This would more than double their current consumption, underscoring the immense energy demands of the tech giants.

In comparison, cryptocurrency mining accounts for approximately 0.4% of global electricity consumption, according to the International Energy Agency. Although this may seem small, the disparity between crypto mining and AI's energy consumption is expected to widen as AI applications continue to expand. The AI industry is in a battle for dominance, with the largest and most well-capitalized companies in the world throwing enormous resources into their pursuit of supremacy. For these companies, the cost of power is often a secondary concern—what matters most is securing the energy needed to stay ahead.

EVs are the 3rd component of this "power struggle." The U.S. is seeing a surge in the adoption of electric vehicles. According to the U.S. Energy Information Administration (EIA), the number of EVs in the U.S. could reach 18 million by 2030. This would significantly increase electricity demand, as each EV typically requires about 30 kWh per 100 miles driven.

A Struggle for Resources

Over the past year, this competition has become increasingly apparent. Bitcoin miners and AI data center operators are vying for the same power assets and contracts, leading to a reshuffling of strategies in the crypto mining sector. Large miners that own land and power hookups are beginning to shift from exclusively mining cryptocurrencies to marketing their property and energy services to AI and cloud computing businesses.

This shift was epitomized in June when Core Scientific, a major crypto miner that had just emerged from bankruptcy, announced a significant agreement to lease its power-connected facilities to Nvidia-backed CoreWeave. This deal, estimated at over $6.7 billion over 12 years, marked the beginning of a trend that has seen several other miners follow suit, either leasing their facilities or acting as subcontractors to develop AI data centers.

These new data centers are no longer the modest 20 MW facilities of the past—they are now being built up to 1,000 MW. However, the demand for power has created bottlenecks. In the U.S., wait times to connect new power supplies can stretch several years, making energy access a critical factor in the expansion plans of both crypto miners and AI companies.

For crypto miners with large energy assets, this shift towards AI and cloud computing could make their facilities up to five times more valuable, according to Morgan Stanley research. Utility companies, too, are pivoting towards hosting AI companies, which often have larger budgets and a greater urgency to bring their projects to market.

The Startup Opportunity:

Energy Generation As the demand for energy continues to surge, there is a burgeoning opportunity for startups in the energy generation sector. With data centers and crypto mining operations consuming more and more electricity, the need for innovative energy solutions is more pressing than ever. Startups that can provide reliable, scalable, and sustainable energy solutions will find themselves in high demand.

One potential area for growth is in renewable energy sources, such as solar, wind, and geothermal. These sources offer the dual benefits of sustainability and the ability to scale up to meet the growing needs of data centers. Additionally, startups could explore the development of energy storage technologies, which are crucial for balancing supply and demand in an increasingly energy-hungry world.

A Shift Towards Nuclear?

Former President Donald Trump has advocated for harnessing nuclear power as a solution to the growing energy needs of the United States. Nuclear power offers a reliable and carbon-free source of energy that could help meet the demands of both crypto mining and AI data centers. However, the development of new nuclear facilities is a long-term endeavor, and the current energy crunch requires more immediate solutions.

As the tech industry continues to expand, the competition for energy between crypto mining and AI is only going to intensify. This competition presents both challenges and opportunities. On one hand, it could lead to higher energy costs and increased strain on the power grid. On the other, it opens up significant opportunities for innovation in the energy sector, particularly for startups that can offer new and sustainable solutions. Whether through the development of renewable energy sources, energy storage technologies, or even nuclear power, the race to meet the energy demands of the future is on—and the stakes have never been higher.

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