AI, Bitcoin Face Off in Energy Race

Big Tech’s appetite for energy is rising fast thanks to these companies’ new artificial intelligence focus. Yet Big Tech’s AI push is not the only significant energy guzzler in town: bitcoin was here first.

Now, the two are locked in a tight race to secure as much electricity for their data centers and mining operations as they can—including from each other.

“The AI battle for dominance is a battle being had by the biggest and best-capitalized companies in the world and they care like their lives depend on it that they win,” the chief executive of Stronghold Digital Mining, a bitcoin company, told Reuters this week for a story looking into the two new power-hungry industries. “Do they care about what they pay for power? Probably not.”

Big Tech needs energy for its data centers to power its artificial intelligence. The energy that is available is in limited volume. And Big Tech is not the only one that wants to use it. But it appears that bitcoin miners are no strangers to a good deal, as Stronghold’s Greg Beard’s comments suggest. The problem for the Bitcoin industry is that not every company in the space has its own source of electricity—and those that don’t have their own source are losing their access to available electricity because Big Tech can afford to pay more.

It is quite impressive how bitcoin mining and now AI have changed the electricity demand landscape. In the past couple of decades, electricity demand in the United States essentially flattened due to energy efficiency gains and no big new sources of demand—except bitcoin miners, which did not seem big enough to move the needle meaningfully. And then Big Tech decided to get really serious about AI. The needle jumped. And now Big Tech is outbidding Bitcoin miners for power plants and supply contracts because it is Big Tech.

According to the Reuters report on AI and bitcoin mining, analysts forecast that a fifth of bitcoin mining energy capacity will be switched to powering artificial intelligence data centers over the next three years. This capacity will either be sold by its crypto company owners or won by Big Tech in bidding wars that are already going on, Reuters quotes unnamed sources from the bitcoin industry as saying.

Indeed, some Bitcoin companies are already reorienting themselves as energy suppliers and subcontractors for AI data centers, the report also said, in recognition of the changes in the energy demand landscape and the profit opportunities inherent in that changed landscape.

Reuters quoted one crypto firm as saying it was seeing interest in its power plant from companies the caliber of Amazon, Google, and other sector players, and announced that they would start offering services as subcontractors for AI data centers—which require a capacity of as much as 1,000 MW as opposed to the data centers of the past that did fine with supply capacity of 20 MW.

Essentially, it comes down to one single issue: limited supply. Because of that limited supply, the AI revolution might get stifled in its infancy unless some new supply—a lot of new supply—becomes available soon. That, however, is quite unlikely to happen, unless we’re talking about solar, which is fast to build—and unreliable as a main source of power for a data center. But even solar cannot be built fast enough and at the scale necessary.

“We’re not going to build 100 gigawatts of new renewables in a few years. You’re kind of stuck,” former Energy Secretary Ernest Moniz said earlier this year in comments made to the WSJ on the increasingly hot topic of data centers’ energy demand.

There are only two kinds of generation capacity that offer the kind of reliability of supply that data centers—whether they are operated by bitcoin miners or Big Tech—need. These are hydrocarbons and nuclear. With coal out of favor, it’s gas and nuclear that can feed the AI revolution and keep the bitcoin industry chugging along.

New regulations have made it quite difficult for new gas power plants to make economic sense as they place such emission control requirements on them that their costs skyrocket. Yet Big Tech’s insatiable thirst for energy that makes those companies pay whatever they need to secure supply means they might yet start making such sense.

Yet it takes time to build new gas power plants—and new nuclear, too. What bitcoin miners and Big Tech 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 power-hungry industries will intensify even more—and electricity supply will become even more precious in data center-heavy geographies. Big Tech will probably win the race, at least on the face of it. But bitcoin miners could yet make quite a bit of money by no longer being bitcoin miners but energy suppliers to Big Tech.