Is an AI spending plateau on the horizon?

{"text":[[{"start":null,"text":""}],[{"start":6.3,"text":"Hello from New York."}],[{"start":7.85,"text":"The International Energy Agency has warned global oil inventories are being depleted at a record pace, risking further price surges. Stockpiles of crude oil and refined fuel fell by nearly 4mn barrels a day in April — equivalent to more than the UK and Germany’s consumption combined."}],[{"start":24.799999999999997,"text":"The crisis caused by the Iran war is prompting producers to look for supplies beyond the Middle East, including in the US’s furthest reaches. My colleague Jamie Smyth reported this week that some of the world’s biggest oil companies including ExxonMobil, Shell and Repsol are returning to explore in the Alaskan Arctic."}],[{"start":43.55,"text":"Consumers are feeling the brunt too. My colleagues across our Washington and New York bureaus reported the closure of the Strait of Hormuz has pushed up US petrol prices by more than half to $4.55 a gallon, marking the most severe fuel shock of any G7 economy."}],[{"start":61.199999999999996,"text":"In today’s newsletter, investors say the AI capex boom will run out in a matter of years, and a new analysis by Wood Mackenzie argues carbon capture is the best option for decarbonising data centres. Thanks for reading, Martha"}],[{"start":74.85,"text":"When will the AI capex boom lose steam?"}],[{"start":78.6,"text":"The AI capital expenditure boom has three years or less to run, say senior infrastructure and private capital investors."}],[{"start":86.3,"text":"According to polling by Texas-based law firm Vinson & Elkins shared with Energy Source, 56 per cent of financiers fuelling massive spending on data centres and the power needed to support them say the current pace of capital expenditure will be sustainable for the next one to three years. Five per cent say it will only last for one more year."}],[{"start":null,"text":""}],[{"start":107.4,"text":"Companies spent $500bn on US data centre capex in 2025, according to private capital group KKR. McKinsey estimates companies will invest nearly $7tn on data centre capital expenditure globally by 2030."}],[{"start":123.95,"text":"The findings suggest investors are turning their minds to a time when the capex boom loses steam. If survey respondents are right, projects may need to be financed, built and contracted in a shrinking window of easy money."}],[{"start":138.55,"text":"“People are contemplating their own project pipelines and observing that a lot of things in the US tend to get overdone and overbuilt,” said Kaam Sahely, partner at Vinson & Elkins who deals with energy and digital infrastructure investments."}],[{"start":151.95000000000002,"text":"“I think people are probably worried about there being a flood of projects that get to a final investment decision, and then maybe there’s a bit of a pause as debt and capital markets and the offtakers digest everything and move on to whatever comes afterwards.”"}],[{"start":166.05,"text":"Taking a more bullish view, a third of respondents said the boom in AI-linked spending could last for three to five years, while 6 per cent predicted more than five."}],[{"start":177.3,"text":"Vinson & Elkins surveyed 100 investors and 100 developers driving the data centre ecosystem. Eighty-eight per cent of respondents said they were the primary energy development and investment decision makers at their organisations."}],[{"start":191.8,"text":"Surprisingly, 58 per cent of investors and 43 per cent of developers said their regions’ power grid is “very prepared” to support the next wave of AI-driven data centre demand, while 39 per cent of investors and 53 per cent of developers said it was somewhat prepared. "}],[{"start":209.3,"text":"This response cuts against concerns that the US’s ageing grid lacks the resiliency, as well as transmission and generation assets, needed to handle extraordinary electricity demand growth. S&P says that with about 85 gigawatts of new data centre capacity requests expected by 2030, US power markets face a generation capacity deficit of 15GW. "}],[{"start":232.15,"text":"According to the Department of Energy, the US needs 47,000 gigawatt-miles of new high-voltage lines by 2035, a 57 per cent expansion of current infrastructure."}],[{"start":243.1,"text":"Respondents seem to acknowledge this, with 48 per cent of developers and 57 per cent of investors saying AI development “significantly” risks outpacing available power infrastructure. Fifty-two per cent and 40 per cent said it would “somewhat” strip past."}],[{"start":null,"text":""}],[{"start":258.95,"text":"Respondents are “not worried about a scenario like in Puerto Rico, where we have insufficient grid stability today and going into summer”, said Sahely. “But as demand continues to ramp up, there might be constraints.”"}],[{"start":273.2,"text":"These constraints could send data centres elsewhere. Ninety-six per cent of developers and 87 per cent of investors said AI infrastructure could prompt development in untapped areas of the US and overseas. "}],[{"start":286.9,"text":"These “second- and third-tier markets” could include Latin America, Australia and Canada, Sahely added."}],[{"start":293.84999999999997,"text":"Decarbonising data centres"}],[{"start":296.09999999999997,"text":"Carbon capture is the most feasible way to decarbonise data centres, according to a new analysis by energy consultancy Wood Mackenzie shared with Energy Source."}],[{"start":305.79999999999995,"text":"While data centres only accounted for 200mn tonnes per annum of carbon dioxide in 2025 — compared to steel, chemicals and cement creating 3.5bn, 3.0bn and 2.3bn tonnes per annum respectively — their contribution is growing fast."}],[{"start":323.94999999999993,"text":"Data centres operate at 548 kilogrammes of carbon dioxide per megawatt-hour, 48 per cent above the US grid average. "}],[{"start":332.3499999999999,"text":"This is because data centres are largely being powered by natural gas, with 50GW in development in Texas alone. "}],[{"start":341.0999999999999,"text":"Report author Peter Findlay, director of carbon management at Wood Mackenzie, said there “hasn’t been much effort to date to decarbonise data centres”, which have instead relied on offsetting with renewable energy credits. "}],[{"start":354.0999999999999,"text":"While there are questions over carbon capture’s cost and reliability, it is best positioned to meet the immediate decarbonisation needs of data centres. "}],[{"start":362.8999999999999,"text":"“If you actually want to decarbonise the electrons going to the data centre, you ought to have a reasonable uptime for that. [Carbon capture] is the most available in the next five years.”"}],[{"start":373.94999999999993,"text":"Adding carbon capture to combined-cycle gas plants raises costs by $15 to $45 per megawatt hour, bringing total costs to $115 per megawatt hour. The technology captures as much as 98 per cent of flue gas emissions and is deployed in as little as three years. "}],[{"start":391.79999999999995,"text":"Compare this to geothermal, which could cost $61 per megawatt-hour, but only has 1.5GW under development."}],[{"start":400.15,"text":"Restarts of nuclear plants could offer power at $155 per megawatt hour. But only 11.5GW of shuttered capacity is available in the US, while small modular reactors could take five to eight years to commercialise. "}],[{"start":415.5,"text":"Renewables and battery storage play a role in decarbonising the grid, but to meet data centre needs they require gas firming — which can create higher emissions than combined-cycle gas with carbon capture."}],[{"start":427.6,"text":"Carbon capture takes about one to two years to design, and two to three to construct, although developers can run both in parallel for greenfield plants. It can be deployed anywhere, although it needs geological storage, enhanced oil recovery or carbon dioxide sink nearby lest it face very high pipeline or shipping costs. Pipelines can be hard to permit because of regulation and landowner opposition."}],[{"start":453.75,"text":"Power Points"}],[{"start":455.4,"text":"A green power producer previously backed by Donald Trump’s energy secretary has soared on its stock exchange debut."}],[{"start":462.15,"text":"Italian energy group Ludoil is set to buy the country’s largest refinery from a Cypriot company linked to convicted Israeli tycoon Beny Steinmetz."}],[{"start":471.59999999999997,"text":"A company linked to Trump’s sons has asked the US defence department for an additional $400mn to develop a tungsten mine in Kazakhstan."}],[{"start":null,"text":"

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"}],[{"start":482.59999999999997,"text":"Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Rachel Millard, Malcolm Moore, Ryohtaroh Satoh and Stephanie Findlay with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here."}],[{"start":null,"text":""}],[{"start":511.94999999999993,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778908702_3768.mp3"}