In a world where technology is advancing by leaps and bounds, two innovation powerhouses are facing off in a race for the energy future: Artificial Intelligence and Bitcoin. This confrontation for supremacy in energy use could perhaps be a unique opportunity to create a more efficient and sustainable energy system.
The appetite of Big Tech for energy is rapidly increasing thanks to the new artificial intelligence approach of these companies. However, the artificial intelligence push in Big Tech is not the only big energy consumer: bitcoin got there first.
Now, both are locked in a race to get as much electricity for their data centers and mining operations as they can, including from each other.
The competition for electricity is shaking up the energy-intensive cryptocurrency mining sector. Some miners are making huge profits by renting or selling their grid-connected infrastructure and centers to technology companies, while others are losing access to the electricity needed to sustain their activity.
“The battle for AI dominance is being fought by the largest and best-capitalized companies in the world, and they worry as if their lives depend on winning,” the CEO of Stronghold Digital Mining, a bitcoin company, said this week for a story on the two new power-hungry industries.
Currently, data centers account for 1% to 1.3% of global electricity consumption, compared with 0.4% for cryptocurrency mining, according to the International Energy Agency. This disparity is expected to increase.
Big Tech needs energy for its data centers to power its artificial intelligence. Available energy is limited in volume. And these tech giants are not the only ones who want to use it. But it seems bitcoin miners are no strangers to a good deal, as the comments of Stronghold's Greg Beard suggest.
The problem for the bitcoin industry is that not all companies in the sector have their own source of electricity, and those that don't are losing their access to available electricity because the big tech companies can afford to pay more.
It is impressive how bitcoin mining and now AI have changed the electricity demand landscape. Over the past two decades, electricity demand in the U.S. has stagnated due to improved energy efficiency and the absence of new sources of demand, except bitcoin miners, which didn't seem big enough to move the balance significantly.
Then the big techs decided to get serious about AI and that's where the shift happened, now the big techs are outbidding bitcoin miners for power plants and supply contracts.
Data centers could consume up to 9% of the total electricity generated in the U.S. by the end of the decade, more than double their current consumption, as tech companies invest funds in expanding their computing centers.
According to the Reuters report on AI and bitcoin mining, analysts predict that one-fifth of bitcoin mining power capacity will go to power artificial intelligence data centers over the next three years. This capacity will be sold by cryptocurrency owners or acquired by large technology companies in the bidding wars that are already underway.
Analysts expect 20% of bitcoin miners' power capacity to go to AI by the end of 2027. In the past year, bitcoin miners and AI data center owners have increasingly competed for the same assets and energy contracts.
In fact, some bitcoin companies are already reorienting themselves as energy suppliers and subcontractors for AI data centers, according to the report, in recognition of the changing energy demand landscape and the profit opportunities inherent in that new landscape.
In essence, it all boils down to one issue: limited supply. Because of that limited supply, the AI revolution could be stifled in its infancy unless some abundant new supply becomes available soon.
That's pretty unlikely to happen, however, unless we're talking about solar power, which builds quickly and is unreliable as a primary source of power for a data center. But even solar power can't be built quickly enough and at the scale needed.
“We're not going to build 100 gigawatts of new renewables in a few years. We're stuck,” former Energy Secretary Ernest Moniz said earlier this year in remarks to the WSJ on the increasingly hot topic of data center energy demand.
There are only two types of generation capacity that offer the reliability of supply needed by data centers, whether operated by bitcoin miners or large technology companies.
These are hydrocarbons and nuclear power. With coal in disuse, it is gas and nuclear power that can fuel the AI revolution and keep the bitcoin industry afloat.
New regulations have made it quite difficult for new gas-fired power plants to make economic sense, as they impose such emissions control requirements on them that their costs skyrocket.
However, the insatiable thirst for energy of the big tech companies, which means that they will pay whatever it takes to secure supply, means that they could still start to make sense.
However, it takes time to build new gas-fired power plants, and new nuclear power plants as well. What bitcoin miners and big tech companies are going to do in the meantime is an interesting question.
The only obvious answer at this point is that the race between the two energy-hungry industries will intensify further, and electricity supply will become even more valuable in data center-dense geographies.
The tech giants will probably win the race, at least at first glance. But bitcoin miners could still make quite a bit of money if they were to shift from being bitcoin miners to becoming energy suppliers to Big Tech.
