The demand for power driven by datacenter expansion is a global challenge and European markets are responding with some interesting aspects. With there has been a strong renewable component to energy supply, the complexity of the energy grid has meant that unified approaches were elusive. At the same time energy markets have faced three crises – demand reduction from the COVID pandemic, strong renewable investment and market disruption from the Russian-Ukraine war. Into this congested environment, Power Purchase Agreements (PPA) offer a way to channel investment in new generation capacity. The EU has just announced guarantees for non-investment grade PPA’s, creating the possibility for expanded markets and extending the ability to treat them as an addition to commodity markets for energy. 

Energy generation projects have become increasingly hybrid, bringing together multiple renewable sources with energy storage. Smoothing out renewable peaks can help it better address base load demand. Nuclear remains an expensive option, with approaches like Small Modular Reactors (SMR) still being a long ways off. There is the potential to have AI improve grid efficiency, by balancing demand and generation, an almost circular relationship, given that it is driving so much of demand. That will require more decentralization of the grid to increase flexibility and the acceptance of cryptographic protections for data sovereignty could allow workload placement near sources of power generation. There is a lot of potential for what has become an urgent issue.

More S&P Global Content:

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• AI, datacenters and power: The European landscape heading into 2025
• The role of nuclear in AI's future
• Datacenters and energy 101 — Powering through renewable intermittency
• 2025 US datacenters and nuclear energy report

Credits:

• Host/Author: Eric Hanselman
• Guests: Ayça Taşlı, Pedro Schweizer
• Producer/Editor: Amaan Zafar, Donovan Menard and Odesha Chan
• Published With Assistance From: Sophie Carr, Feranmi Adeoshun, Kyra Smith