AI is running into a power problem. Electricity demand from US data centers is expected to roughly double or more by the end of the decade, and hundreds of local measures now aim to pause new projects. Andrejka Bernatova, CEO and Chairman of the Board of Dynamix Corporation III and Managing Partner of Dynamix Capital Partners, explains how community pushback changes where developers can build and how investors think about risk. She also covers on site power and the energy mix, what it means for utilities, and whether the Gulf can win a bigger share of AI investment.
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Power bills and data centers came up in this year's midterms and more communities are pushing back. How does that change where developers can build and how investors think about risk?
About 70% of voters exiting the polls voted against local data center development, and about 50% were completely opposed to AI and saw it as a harm to society, so it is clearly polarising. Some communities are pro data center because of tax revenue and jobs, so it is important for end customers and developers to work closely with local communities. From the ground, a year ago the constraint was the supply chain. Then we needed contracts to support the financing. Then we needed support from federal, state and local communities. Elections are a symptom of that, and local communities are now critical. So the sequence changes: you start with local communities and permits, then contracts, then supply chain. For investing in the space, realistically we were always going to grow slower, because the constraint was always the growth of energy supply, and that is a robust value chain that is not easy to execute over the short term. It is a multi year exercise at this scale. We do not think the pace has changed dramatically. We are just seeing a bit more of the sausage making.
More developers are done waiting on the grid and are building their own power on site, a lot of it natural gas. Is that the future of AI data centers?
These are multi decade projects, so you need the right setup for energy, water and safety for the local community, and you have to think about where political support might be in two years. You need a diversified energy stack. Natural gas is the fastest and most resilient source. But in the past, some administrations stalled large pipelines, LNG permits and development in Alaska, so you can expect some of that pushback again. Having renewable sources alongside natural gas gives your project resilience and is likely to face less pushback.
If tech companies start making their own electricity, what does that mean for utilities and equipment makers?
Demand for electricity over the next five to ten years is so enormous that it will take everybody coming to the table. There is baseline demand from residential customers and the electrification of everything, and then data center demand, with a much more dramatic increase in the US than in the world as a whole. It will take utilities, which will keep playing a very important role, then behind the meter on site development by data centers themselves, and third, residential customers and the role we will play in interacting with the grid and sending power back during times of strain.
If projects in the US keep getting held up, could the Gulf, where power can come online faster, win a bigger share of AI investment?
US data center demand is about half of total world demand today. Projected growth in power demand for data centers by 2030 is about 15% a year for the world and over 20% for the US. States like Texas generally move faster and will continue to. I compare it to the shale boom. The pushback we saw then made the industry better, with better regulation, safety and environmental outcomes solved in a more orderly way. AI is so critical to economic development and national security that I think the US will keep playing a dominant role, just as it did in the energy revolution. The Middle East has a huge advantage because it is a more centralised, synchronised economy, so very large institutions and projects can move quickly with multi agency support in countries like the UAE, Qatar and Saudi Arabia. It may be constrained a little by the need to reinvest in its own economies and in oil and gas infrastructure that has been damaged in recent months. But the demand is there in the US, and independent of who is in power, the end customer will prevail.