The Energy Crisis and The AI Arms Race
Brownouts and Rotating Blackouts are Coming to North America
North America is heading towards a power crisis that could manifest in widespread power outages and an acute shortage of energy, all driven by the meteoric rise of artificial intelligence (AI). The rapid expansion of AI data centers, coupled with an already strained power grid, presents a dire forecast for the region's energy future. This crisis will not only drive up energy prices but could fundamentally disrupt daily life, particularly for residential consumers.
AI Data Centers: A Tidal Wave of Power Demand
AI technologies are advancing at a pace that demands ever-increasing computational power. To fuel this revolution, data centers—vast warehouses of servers running GPUs that train AI models—are being constructed at unprecedented rates. These centers require massive amounts of electricity, with estimates suggesting that AI data centers could consume up to 8% of the nation's electricity by 2030, a sharp rise from the current 3% in 2022 (Goldman Sachs).
The pace of construction is equally staggering. The most notable example is the recent, Musk-funded data center in Memphis, which broke records for speed of build and GPU capacity, designed to power some of the most advanced AI models. It is currently the world’s largest AI Supercluster.
To spell that out money wise, 1 NVidia H100 GPU costs around $30,000. So 100,000 of them cost $3 billion dollars. If you’re spending this just on hardware, imagine what you’re willing to spend to power it?
Unfortunately Memphis City Council didn’t know anything about this until after it was announced.
Cooper-Sutton wasn’t the only one who’d been kept in the dark. Community leaders and other City Council members told NPR they also didn’t find out until the night before or day of. Those who were in the loop include the chamber, Memphis Mayor Paul Young and representatives from the local and state utilities.
At first, details were scant. During the June press conference, when a reporter asked where the supercomputer would be located, Townsend said that “due to global security concerns, we are not at liberty to identify the location.”
Source: NPR
The implied national or global security concerns are essential to why projects like this will end up as priority users on our shared grid.
We’re in an escalating arms race, that some argue is already a semiconductor-centric cold war.
Reshoring Manufacturing: A Secondary Factor
Consequentially, North America is reshoring semiconductor and other advanced manufacturing sectors, which are also highly energy-intensive. The return of these industries places additional demands on an already stretched power infrastructure. These industries, when combined with the energy hunger of AI, create a perfect storm for the power grid.
Manufacturing, particularly in sectors like semiconductor fabrication, consumes vast amounts of energy. This, coupled with the explosive growth of AI technologies, will significantly increase total electricity demand, pushing existing power infrastructure to the breaking point.
A Grid At Capacity
The current power grid is ill-equipped to handle these surges in demand. The U.S. electric grid, which includes over 600,000 miles of transmission lines, is aging and fragile, with many of its components reaching the end of their operational life. A significant portion of this infrastructure was built decades ago, with little foresight into the modern demands posed by AI and industrial reshoring.
Moreover, the grid is already under strain from the transition to renewable energy sources, which, while crucial for reducing carbon emissions, are intermittent and require significant upgrades to storage and distribution systems. This means that new power generation infrastructure will take time to come online, but the need for energy is immediate and growing, driven by the data centers already under construction.
Climate Change: Amplifying the Energy Demand Crisis
Climate change is compounding this problem by increasing the volatility of weather patterns. Extreme heatwaves, wildfires, droughts, and storms are becoming more frequent and severe. These events not only disrupt power generation—especially for renewable energy sources like hydro, wind and solar—but also lead to spikes in electricity demand. When record-hot summers strike, the demand for cooling systems skyrockets, further straining the grid at the worst possible times.
For example, in Quebec, Canada’s largest producer of hydroelectricity, droughts have significantly reduced power generation to the extent that imports from the US have risen in recent years, at a significant cost to the province. The same is happening in British Colombia.
The combination of physical damage caused by extreme weather and the overall increased demand from a changing climate will push the grid to a breaking point, leading to widespread brownouts.
Residential Consumers: Left in the Dark
The most immediate and severe impact of this energy crisis will be felt by residential consumers, particularly those in lower-income households. In a market-based energy system, when demand exceeds supply, prices rise. This price surge will benefit those who can afford it, with large industrial consumers able to pass the cost increases down the supply chain.
But for many residential customers, especially those in low-income communities, this will result in the harsh reality of rolling blackouts or brownouts. Power, already a scarce commodity, will be rationed, and those unable to pay premium prices will be left without reliable electricity. This creates a two-tiered energy system, where access to reliable power becomes a privilege, not a right.
This is also another instance in which the growing cold war with China negatively impacts residential consumers. China’s solar industry has successfully mass produced cheap and affordable technology that allows for decentralized energy production. However already high and rising tariffs make this technology increasingly inaccessible. Meanwhile North America focuses on increasing domestic fossil fuel extraction and production.
The Inevitable Shortages
With the combination of AI's ravenous energy needs, the reshoring of energy-intensive industries, and the climate-induced volatility affecting the grid, an acute shortage of power in North America seems all but inevitable. The grid is simply not prepared to handle this surge in demand, and the construction of new infrastructure will take many years—time during which the demand will continue to rise.
This shortfall won’t just manifest in price hikes. It will translate into real-world disruptions for millions of people. Families will experience outages, businesses will face productivity losses, and the overall quality of life will diminish, especially for those who are already vulnerable.
The most troubling aspect of this crisis is that, while it is foreseeable, it is not being addressed with the urgency required. The expansion of AI is happening at breakneck speed, but the power infrastructure is not evolving quickly enough to keep up. The delay in responding to these trends could lead to catastrophic consequences for both the economy and the public.
In the coming years, the AI arms race and resulting Cold War will likely result in a power crunch that not only drives up prices but fundamentally alters the way energy is distributed. If this issue is not tackled now, millions of residential consumers may find themselves powerless—literally and figuratively.
Further Reading:
So much of our present circumstances, like what this article describes, feel overwhelming and not something we can influence. Feeling like this, can lead to the belief that there is nothing we can do. This unfortunately plays into a fascist agenda. Is there no way out of this scenario?
Honestly, I think we'll be fine. Remember the crypto wars threatening our electricity? Plus, with a bit of planning, you can just ration power to ai chips. And as time goes on, chips will squeeze more computational power out of less energy.