NextEra CEO: Renewables Offer Cheaper Way to Meet AI Power Demand

Artificial intelligence (AI) is powering more applications than one might think, and the surge in demand is pushing energy companies to step up to meet the challenge.

From the auto-completes on emails and shopping-related internet searches to translating languages and the crunching of massive amounts of data to seek out patterns that detect diseases early, AI is playing a growing role in society today, as Ruth Porat, president and chief investment officer for Alphabet and its subsidiary Google, pointed out March 10 during a session at CERAWeek by S&P Global.

NextEra Energy expects to see a 55% increase in power demand during the next 20 years compared to the past two decades, NextEra Energy CEO John Ketchum said during the CERAWeek session. Of that demand growth, 17% is expected to come from the surge in AI, which is driving power demand of data centers.

“If you’re not engaging with the AI now but your competitor is, you get behind the curve,” Porat said. “And it’s really important for each of us to get on that curve as early as possible.”

Unlocking the capabilities of AI could lead to a $4 trillion growth in GDP for the U.S. and $20 trillion globally, she said, assuming the public and private sectors radically rethink logistics optimization, aggregation of data for decision making and operating efficiency, among an array of other areas.

Energy companies are gearing up to meet what is expected to be unprecedented energy demand to support AI advancements.

Many say all forms of generation sources will be needed, as well as early commitments from corporate energy buyers seeking reliable baseload power with lower carbon emissions.

“We’re going to have to be really smart in terms of how we adopt our energy policy to meet that demand,” Ketchum said. “We firmly believe in order to do it, we’re going to have to be able to come up with all of the above energy solutions.”

But some forms of energy are better positioned to meet needs today—both in timing and in costs, he said.

Ready renewables

Unless a company has a turbine on order that has already been permitted, renewables are a cheaper alternative to meet rising electricity needs today, according to Ketchum.

“Renewables are ready to go right now because they’ve been up and running. … Over the last five years, we’ve installed in this country 175 gigawatts (GW) of renewables, 13 gigawatts of gas, 3 gigawatts of nuclear,” he said. “To get your hands on a gas turbine and to actually get it built and brought to market, you’re really looking at 2030 or later.”

Another issue with gas as a technology are rising costs, he added, noting the cost of gas-fired generation has jumped more than threefold in the last few years. NextEra built its last gas-fired commercial facility in Fort Lauderdale, Florida in 2022 at $785/ kilowatt (kW). If that same gas-fired combined cycle unit was built today, he said, the cost would be $2,400/ kW.

He attributed the increase to greater demand for gas turbines. Labor is also a factor. Much of the labor force that once built gas-fired turbines have either retired or moved on to other things, Ketchum said.

“That labor that we would use to build gas-fired generation in this country [is] competing with data center buildout, LNG terminals, chemical companies, oil and gas refineries, electrification of energy. We have a real shortage of labor supply in this country,” Ketchum said. “And then you got to find a way to get the gas there. It’s easier in some states than it is in others. We can speak from experience with Mountain Valley pipeline, which we had to permit three times with the federal government.”

The 303-mile natural gas transmission pipeline took about 10 years to build. Overtime, that drives up cost, making gas more of a longer-term solution, Ketchum said. He, however, added that all forms of generation will be needed. The company, which grew its renewables backlog to more than 25 GW, is considering recommissioning the Duane Arnold nuclear facility in Iowa.

“The demand is here right now. We have to have the generation available to meet that demand at the lowest cost possible,” Ketchum said. “Otherwise, we’re going to have a huge power affordability crisis in this country with utility bills going through the roof.”

NextEra recently partnered with gas turbine maker GE Vernova to develop power generation projects during the next four years utilizing natural gas power plants, renewable energy sources and storage. The target is large electricity users.

Catalyzing development

For Alphabet and Google, making commitments early on helps to catalyze development, Porat added. She used geothermal and Google’s relationship with next-generation geothermal developer Fervo Energy as an example. Fervo, which uses drilling techniques used in the oil and gas industry, is powering Google’s Cloud region in Las Vegas with geothermal energy.

“What we did there was not only catalyze development with a forward market commitment, but create something called a transition tariff, where we’re actually working to get it onto the grid on an accelerated basis that doesn’t put any added burden onto ratepayers,” Porat said. Google also sealed a corporate agreement with Kairos Power to purchase nuclear energy produced by small module reactors (SMR). The company aims to bring the first SMR online by 2030.

Efficiency is another part of the equation.

Porat recalled how data center energy consumption rose by about 6% from 2010 to 2018 while workloads jumped by 550% amid efforts to improve efficiency. At the time, focus was more on classic compute, she said. “But really driving down the efficiency curve is what we've continued to do and are very assiduously focused on with respect to AI.”

Porat said about 64% of the company’s data centers are running on carbon-free energy, working off the grid.

“I think that, importantly, …. if I'm talking about $20 trillion of GDP upside over a decade, we need to be building near term for that longer-term opportunity, so it’s not missed,” she said.