Where Our Demand For Power Will Surge

Our power use could be at a tipping point. Whereas U.S. power demand went up minimally during the last 10 years, Goldman Sachs predicts the numbers will surge.

Electricity Demand

One reason is an increase in AI data center power demand by 2030:

In three years, crypto mining and AI data centers could need a 3.5% share of the world’s electricity–the same amount that Japan currently uses. Together, their power hunger boosts CO2 emissions:

Correspondingly, Goldman cites a power grid concern by showing us the location of data center markets:

It all adds up to managing our power grids.

Through solar, nuclear, hydro, or wind, the Nordic countries, France, and Spain can produce cheap power. Meanwhile other countries like Germany and the UK with large financial services and tech companies might use tax breaks to attract data centers. Consequently, both the U.S. and Europe would need multiple hundreds of billions of dollars of power grid investments to keep up with extra demand.

But we can ask if we want the power that will feed Crypto mining and AI data centers.

Our Bottom Line: Pigovian Taxes

First described by British economist Arthur Pigou, a tax levied on a good or service that created pollution has a dual benefit. Pigovian taxes diminish the supply of the commodity that harms us while generating revenue that a community can use productively.

Supporting the approach, the IMF suggests two possible tax rates. If the goal is to curb crypto mining emissions, then a direct tax could be $0.047 per kilowatt hour. However, it would rise to $0.089 when local health enters the equation. Then the result could diminish emissions by an estimated 100 million tons and perhaps generate $5.2 billion annually.

Below, I’ve drawn the traditional response of supply to a tax:

So yes, we need to ask whether and how much to constrain Crypto and AI.

My sources and more: It’s always nice when two sources form a synergy. Today, it was the IMF and Goldman Sachs.