Goldman Finds Commercial Power Demand In Virginia Explodes Higher As 'Next AI Trade' Soars

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by Tyler Durden
Tuesday, May 14, 2024 - 10:40 PM

All eyes are on the powering-up America theme as the surge in artificial intelligence sparks a nationwide boom in data center building. The urgent need to overhaul the nation's power grid to meet the skyrocketing demand for electricity is now front and center. We pointed out earlier this month that data centers hiding in 'spy country' Northern Virginia will need a 'reactor's worth of power.' 

Continuing the focus on Virginia, a team of Goldman analysts led by Hongcen Wei revealed that commercial power demand across the state has exponentially surged, unlike anywhere else in the country. 

Wei explained to clients, citing data from GS' equity analysts, that "US power consumption growth will accelerate sharply to an annual average 2.4% pace in 2022-2030, boosted by data centers, AI, and EVs." 

As we noted in "The Next AI Trade," "Everyone Is Piling Into The Next AI Trade," and "The Next AI Trade Just Hit An All-Time High," power demand across the US is set to rise dramatically through 2030 because of the proliferation of data centers, electrification trends, and reshoring efforts. 

The analyst pointed out that an acceleration in power demand growth is set to eclipse GDP through the second half of the decade—this hasn't happened in three decades.

Wei's analysis then focuses on commercial power consumption in Virginia, which has skyrocketed in the last several years as new data centers are hooked up to the local grid. Meanwhile, commercial power demand in ex-Virginia (or the rest of the US) remains laggard but is expected to rise in the coming years. 

He noted, "The impact of data center developments is more difficult to observe directly within larger states, where more factors simultaneously impact power demand." 

In relation to all other forms of power demand in the state, commercial outstrips residential and industrial. 

Using the statistical "doppelganger" method, Wei's team found that data centers boosted Virginia's power consumption by 2.2 gigawatts in 2023. This number will only increase, resulting in the need for increased nuclear power in the state or the adoption of small reactors near data centers

The analyst concludes:

"First, AI and data centers are boosting US power demand as market participants expect, especially in regions like Virginia. But the overall magnitude of the boost remains modest, compared to both the current level of US total power demand and the expected level of data center power demand in later years of the decade." 

In a separate note, Goldman's Julia Masch shows the GS US Power Up America index (GSENEPOW) and GS Electrifcaion index (GSXEACDC) are powering higher but points out the GS Power Up Europe index (GSPIPOWR) has lagged behind. 

Why is so much power needed? Well...

For more clarity on where power demand surges are expected, Visual Capitalist's Julie Peasley uses data from Cushman & Wakefield to visualize the top data center markets worldwide

The 'Powering Up America' theme is red hot.