Key Takeaways
- The increasing demand for energy to support artificial intelligence (AI) advancements in the United States and China will have significant implications for global markets, infrastructure, and supply chains.
- China’s dominance in clean energy technologies and manufacturing may provide an opportunity for the United States to alleviate energy bottlenecks in its AI data center buildout, but it also raises concerns about national security and industrial policy objectives.
- The United States and China are pursuing overseas energy partnerships to support AI expansion, with key regions such as the Middle East and Southeast Asia emerging as central to the AI race.
- The United States should carefully evaluate China’s global investments in energy infrastructure and consider the potential risks and benefits of allowing Chinese investment in American clean-energy technology and manufacturing.
- The energy-for-AI problem is complex and multifaceted, requiring a comprehensive approach that balances the need for energy security with the need to mitigate the risks associated with Chinese investment in critical infrastructure.
Introduction to the Energy-for-AI Problem
As artificial intelligence (AI) continues to drive a surge in energy demand in both the United States and China, each country faces critical choices about how to expand power generation to remain at the technological frontier. The decisions and trade-offs made by both countries in sourcing energy to support AI advances will have significant spillover effects, shaping global markets, infrastructure, and supply chains. To assess these dynamics, the Global China project convened a group of authors with diverse viewpoints to discuss the implications of rising energy demand on geopolitical competition between the two countries.
The Electron Gap and Energy Demand
The United States has an advantage in access to cutting-edge AI semiconductors, but China has a significant advantage in energy, which could potentially reshape the balance of compute for AI between the two countries. The United States is already facing an energy bottleneck for building new data centers, with some requiring over a gigawatt of electricity. In contrast, China’s electricity demand for data centers is expected to more than double over the next five years, but this growth is unlikely to be a constraint for China, given its historically rapid pace of overall energy expansion. China already generates more than twice as much electricity as the United States and has increased its total power generation by nearly 6% per year over the past decade.
The Speed of Infrastructure Development
The key variable for the AI industry is speed, with utilities used to long-term planning and projects that take years, while the AI industry is in a hurry. Competition for data center locations, within countries and among nations, will depend on the speed with which infrastructure, including capacity for electricity generation and transmission, can be delivered. China’s ability to build things quickly, without the pressures of public opposition, might be an advantage in this regard. However, the United States has its own strengths, including its ability to provide advanced AI chips and cloud computing services, which can shape the evolution of the global AI industry.
China’s Global Investments in Energy Infrastructure
As both countries pursue new overseas energy partnerships to support AI expansion, the United States should evaluate China’s global investments in energy infrastructure carefully. China is investing in energy infrastructure projects around the world, from solar plants in Saudi Arabia to offshore wind farms in Laos. The United States has secured deals to provide countries with advanced American AI chips to help build gigawatt-scale data centers, but it is unlikely to match China’s ability to build new energy projects globally. Instead, the United States can use global demand for American AI chips, cloud computing services, and AI models to shape the evolution of the global AI industry.
China’s Clean Energy Dominance
China’s dominance in clean energy technology and manufacturing may provide an opportunity for the United States to alleviate energy bottlenecks in its AI data center buildout. China has used industrial policy to become the global leader in a range of clean energy technologies, including solar, wind, batteries, and electric vehicles. Through decades of investment in R&D and scaling up production, China has dramatically lowered the costs of clean energy products and made them widely available around the world. However, this also raises concerns about national security and industrial policy objectives, as the United States may become reliant on Chinese supply of solar panels and batteries.
Chinese Investment in US Clean Energy Tech
The question of whether the United States should permit Chinese participation or investment in American clean-energy technology and manufacturing is complex and multifaceted. With proper safeguards and limitations, Chinese investment in American clean technology manufacturing could help alleviate energy bottlenecks in the United States’ AI data center buildout. However, this would require careful evaluation of the potential risks and benefits, including the need to protect national security and industrial policy objectives. Some argue that Chinese clean energy investment is not analogous to Japanese auto investment in the 1980s, as China harnesses "private" companies to advance the Chinese Communist Party’s goal of dominating every critical technology supply chain.
Conclusion
The energy-for-AI problem is a complex and multifaceted challenge that requires a comprehensive approach. The United States and China are pursuing overseas energy partnerships to support AI expansion, with key regions such as the Middle East and Southeast Asia emerging as central to the AI race. China’s dominance in clean energy technologies and manufacturing may provide an opportunity for the United States to alleviate energy bottlenecks in its AI data center buildout, but it also raises concerns about national security and industrial policy objectives. Ultimately, the United States should carefully evaluate China’s global investments in energy infrastructure and consider the potential risks and benefits of allowing Chinese investment in American clean-energy technology and manufacturing, while also pursuing its own strengths in AI chips, cloud computing services, and AI models to shape the evolution of the global AI industry.
