Generative AI requires massive amounts of power and water, and the aging U.S. grid can't handle the load

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In this article QCOM AAPL Follow your favorite stocks CREATE FREE ACCOUNT Hundreds of ethernet cables connect server racks at a Vantage data center in Santa Clara, California, on July 8, 2024. Katie Tarasov Chasing power There are more than 8,000 data centers globally, with the highest concentration in the U.S. And, thanks to AI, there will be far more by the end of the decade. Boston Consulting Group estimates demand for data centers will rise 15%-20% every year through 2030, when they're expected to comprise 16% of total U.S. power consumption. That's up from just 2.5% before OpenAI's ChatGPT was released in 2022, and it's equivalent to the power used by about two-thirds of the total homes in the U.S. CNBC visited a data center in Silicon Valley to find out how the industry can handle this rapid growth, and where it will find enough power to make it possible. "We suspect that the amount of demand that we'll see from AI-specific applications will be as much or more than we've seen historically from cloud computing," said Jeff Tench, Vantage Data Center's executive vice president of North America and APAC. Many big tech companies contract with firms like Vantage to house their servers. Tench said Vantage's data centers typically have the capacity to use upward of 64 megawatts of power, or as much power as tens of thousands of homes. "Many of those are being taken up by single customers, where they'll have the entirety of the space leased to them. And as we think about AI applications, those numbers can grow quite significantly beyond that into hundreds of megawatts," Tench said . Santa Clara, California, where CNBC visited Vantage, has long been one of the nation's hot spots for clusters of data centers near data-hungry clients. Nvidia's headquarters was visible from the roof. Tench said there's a "slowdown" in Northern California due to a "lack of availability of power from the utilities here in this area." Vantage is building new campuses in Ohio, Texas and Georgia. "The industry itself is looking for places where there is either proximate access to renewables, either wind or solar, and other infrastructure that can be leveraged, whether it be part of an incentive program to convert what would have been a coal-fired plant into natural gas, or increasingly looking at ways in which to offtake power from nuclear facilities," Tench said. Vantage Data Centers is expanding a campus outside Phoenix, Arizona, to offer 176 megawatts of capacity Vantage Data Centers Hardening the grid The aging grid is often ill-equipped to handle the load even where enough power can be generated. The bottleneck occurs in getting power from the generation site to where it's consumed. One solution is to add hundreds or thousands of miles of transmission lines. "That's very costly and very time-consuming, and sometimes the cost is just passed down to residents in a utility bill increase," said Shaolei Ren, associate professor of electrical and computer engineering at the University of California, Riverside. One $5.2 billion effort to expand lines to an area of ​​​​Virginia known as "data center alley" was met with opposition from local ratepayers who don't want to see their bills increase to fund the project. Another solution is to use predictive software to reduce failures at one of the grid's weakest points: the transformer. "All electricity generated must go through a transformer," said VIE Technologies CEO Rahul Chaturvedi, adding that there are 60 million-80 million of them in the U.S. The average transformer is also 38 years old, so they're a common cause for power outages. Replacing them is expensive and slow. VIE makes a small sensor that attaches to transformers to predict failures and determine which ones can handle more load so it can be shifted away from those at risk of failure. Chaturvedi said business has tripled since ChatGPT was released in 2022, and is poised to double or triple again next year. VIE Technologies CEO Rahul Chaturvedi holds up a sensor on June 25, 2024, in San Diego. VIE installs these on aging transformers to help predict and reduce grid failures. VIE Technologies Cooling servers down