The Growth of Artificial Intelligence Will Require More Energy

Artificial Intelligence (AI), powered by massive data centers, is energy-intensive and may increase demand for fossil fuels as power companies scramble to accommodate its expected growth. This may present a compelling opportunity for those interested in contrarian investments.

It’s Like Powering an Entire New Country

AI and its related data centers consume vast amounts of energy. The energy necessary to power AI annually by 2027 is estimated to be equivalent to the annual usage of a medium-sized country, such as Argentina, the Netherlands, or Sweden.[1]

In 2022, data centers that powered the world’s computers used around 1%-1.3% of global electricity. By 2026, that could jump to 6% of global electricity production.[2]

Cooling Not Included

These estimates do not include the additional energy needed for data center infrastructure, such as cooling. Cooling may add an additional 10%-50% to AI energy demand.[3]

Utilities Are Turning to Fossil Fuel

Data centers tend to be clustered in areas with established networks and access to a plentiful energy supply. The growth of AI and data centers is causing utilities to scramble to meet demand. 

One example is in Northern Virginia, where nearly 70% of global internet traffic flows through the region’s hyperscale data centers, which are significantly larger than earlier generations. The largest data centers use almost as much power as the entire city of Seattle.[4]

Virginia’s energy utility expects power usage among data centers to quadruple over the next 15 years and represent 40% of all electricity demand in the state.[4] They estimate that they will need the equivalent of several nuclear plants to serve all the data centers planned and under construction.[5]

As a result, utilities in areas with large clusters of data centers are keeping coal-burning plants running for longer and adding natural gas power plants to balance the expansion of renewable energy sources.[4]

One utility estimates that AI could add 8% to natural gas demand in the US, with backup generators burning additional diesel. One utility CEO said they would need every little bit of renewables and natural gas that they could possibly get.[6]

All of this implies that fossil fuels will likely be around for a long time.

How May Investors Gain Exposure to Fossil Fuels?

Range ETFs aim to capitalize on the enduring importance of nuclear and fossil fuels in the energy sector. These ETFs look to offer investors an opportunity to navigate the evolving energy landscape.

Explore our Range ETFs today as you consider your position in the energy sector.

• Range Global Coal Index ETF (COAL): seeks to provide exposure to companies involved in the metallurgical and thermal coal industry
• Range Global LNG Ecosystem Index ETF (LNGZ): seeks to provide investors with exposure to companies involved in the Liquified Natural Gas (“LNG”) ecosystem
• Range Global Offshore Oil Services Index ETF (OFOS): looks to provide exposure to companies in the offshore oil services ecosystem
• Range Nuclear Renaissance Index ETF (NUKZ) looks to provide exposure to companies in the nuclear energy sector including utilities, construction, services, fuel, and advanced reactors

[1] Erdenesanna, Delger, A.I. Could Soon Need As Much Electricity As An Entire Country, New York Times, 10/10/23
[2] Halper, Evan, Amid Explosive Demand, America Is Running Out Of Power, Washington Post, 3/7/24
[3] Leffer, Lauren, The AI Boom Could Use a Shocking Amount of Electricity, Scientific American, 10/13/23
[4] Hiller, Jennifer & Patterson, Scott, How Big Data Centers Are Slowing the Shift to Clean Energy, Wall Street Journal, 4/29/24
[5] Halper, Evan, Amid Explosive Demand, America Is Running Out Of Power, Washington Post, 3/7/24
[6] Ballard, Ed, Air Conditioning and AI Are Demanding More of the World’s Power – Renewables Can’t Keep Up, Wall Street Journal, 4/26/24

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