Jay Smith @jaynemesis: "𝗔𝗜 𝗜𝘀 𝗗𝗿𝗶𝘃𝗶𝗻𝗴 𝗥𝗲𝗻𝗲𝘄𝗮𝗯𝗹𝗲 𝗗𝗲𝗺𝗮𝗻𝗱 //𝘗𝘢𝘳𝘵..."

United Kingdom

𝗔𝗜 𝗜𝘀 𝗗𝗿𝗶𝘃𝗶𝗻𝗴 𝗥𝗲𝗻𝗲𝘄𝗮𝗯𝗹𝗲 𝗗𝗲𝗺𝗮𝗻𝗱 //𝘗𝘢𝘳𝘵 1 𝘰𝘧 2 //𝘌𝘹𝘱𝘢𝘯𝘥 𝘤𝘰𝘮𝘮𝘦𝘯𝘵𝘴 𝘧𝘰𝘳 𝘱𝘢𝘳𝘵 2 𝙄𝙣𝙩𝙧𝙤 I know what you’re thinking - "Jay, we’ve seen two of your favourite renewable companies decline more than 75% in the past 2 years while AI has boomed, what are you talking about!?" You’re right, both $SEDG (SolarEdge Technologies) and $ENPH (Enphase Energy Inc.) have had two utterly terrible years, but those are not the renewables I’m talking about. These companies are much more exposed to residential solar installations. I’m talking about much larger projects, and I believe some companies have already started to benefit from rising demand. 𝙒𝙝𝙮 𝙙𝙤𝙚𝙨 𝘼𝙄 𝙣𝙚𝙚𝙙 𝙧𝙚𝙣𝙚𝙬𝙖𝙗𝙡𝙚𝙨? There are three answers to this question. 𝟭. They don’t, but it’s becoming socially unacceptable for them not to use renewables. Data from Q1 of this year by Bloomberg NEF highlighted that globally, data centers now consume more energy than all but 16 countries, and will soon surpass India’s total electricity demand. The large companies who own most of these data centers - $MSFT (Microsoft) , $AMZN (Amazon.com Inc) , $GOOG (Alphabet), etc have already made pledges to reduce or completely eliminate their global emissions in the coming years to avoid backlash from governments and customers alike. To some extent this is also a defensive move to ensure the companies are not at risk if countries introduce carbon taxes in the future. 𝟮. It’s cheap. Really, it’s that simple, data centers are designed to be operational 24 hours a day, 365 days a year, and electricity is usually the biggest operational cost. It is estimated that US data centers consume upwards of 100,000,000,000 kWh of electricity annually - the same as around 10 million US homes. Just as home-owners are looking towards rooftop solar to meet their energy needs, with an understanding that eventually in most cases it will save them money long term, the same is true for data centers, except that due to their scale, the savings can be even greater. Iceland has long been a favoured location for data centers because of the access to cheap renewable electricity via geo-thermal, but as AI has grown, the trend of locating data centers near readily available, cheap electricity is accelerating. Scandinavian countries like Denmark and Finland have seen an influx of data centers to take advantage of their wind and hydro energy infrastructure. Amazon made a deal to buy 50% of the output from one of the largest wind farms in Europe. Completed just before 2024, Amazon will be using 380MW of power through a power purchase agreement, benefitting from predictable long-term pricing for their electricity. 𝟯. Speed is the final reason AI data centers are turning to renewable energy. Some of the busiest data center hubs in the world are now facing a wait of 5+ years before they can be connected to grid infrastructure. This has led to companies looking to integrate directly to the power generation facilities to skip the queue. In Pennsylvania, Amazon acquired a 1,200 acre site where they plan to develop data centers that will eventually consume almost 1 GW of energy. The site is located just a few hundred meters from the Susquehanna Steam Electric Station - the US’s 6th largest Nuclear power plant with a capacity of 2.5GW. Amazon has a long-term deal with Talen Energy to supply the energy through a direct connection to the facility. 𝙏𝙝𝙚 𝙗𝙞𝙙𝙙𝙞𝙣𝙜 𝙬𝙖𝙧 𝙛𝙤𝙧 𝙚𝙭𝙞𝙨𝙩𝙞𝙣𝙜 𝙘𝙖𝙥𝙖𝙘𝙞𝙩𝙮 𝙞𝙨 𝙡𝙚𝙖𝙙𝙞𝙣𝙜 𝙘𝙤𝙢𝙥𝙖𝙣𝙞𝙚𝙨 𝙩𝙤 𝙞𝙣𝙫𝙚𝙨𝙩 𝙞𝙣 𝙣𝙚𝙬 𝙧𝙚𝙣𝙚𝙬𝙖𝙗𝙡𝙚 𝙥𝙧𝙤𝙟𝙚𝙘𝙩𝙨 As you can imagine, deals similar to these examples are now being bid on by various tech giants around the world, in an effort to ramp up their AI infrastructure quickly, cheaply, and efficiently. The supply of sites like Amazon’s is now getting thin though, leading more tech companies to invest in upcoming renewable energy projects. In 2022 Microsoft joined Amazon in aggressively pursuing this approach to secure long-term renewable electricity. Their largest deal of that year was for 500MW of electricity through a PPA (Power Purchase Agreement) with Sol Systems who would fulfill the demand through a portfolio of solar farms across the US over the coming few years. In 2022 this brought the total value of PPAs by Microsoft to almost 9GW of capacity, and Amazon’s portfolio ranked them amongst the largest globally alongside energy giants. //𝘌𝘯𝘥 𝘰𝘧 𝘗𝘢𝘳𝘵 1 𝘰𝘧 2 //𝘌𝘹𝘱𝘢𝘯𝘥 𝘤𝘰𝘮𝘮𝘦𝘯𝘵𝘴 𝘧𝘰𝘳 𝘱𝘢𝘳𝘵 2

Not investment advice. The author may have financial interests in the mentioned instruments.