Meta Ventures into Power Trading to Fuel AI Ambitions

Meta to trade electricity to support AI systems in the US.

Meta is set to engage in electricity trading to expedite the construction of new power stations in the United States, a crucial step for its AI ambitions, reported Urvi Parekh, the company’s head of global energy.

According to her, there are too few electricity buyers willing to commit to the long-term obligations necessary to attract investment. Energy trading will enable Meta to enter into more such agreements.

“Power plant developers want to know that consumers are ready to invest. Without a more active stance from Meta on increasing the energy supply, this doesn’t happen as quickly as we would like,” Parekh said.

More Energy Needed

Stable energy supply is becoming an increasingly pressing issue for tech giants like Meta, Microsoft, and Google. As AI systems evolve, electricity consumption rises, prompting corporations to seek new solutions.

For instance, to build a Meta data center in Louisiana, Entergy needs to construct at least three new gas power plants.

The electricity shortage issue also affects retail users. They face rising utility costs and power outages:

• 80% of consumers are concerned about the impact of data centers on their bills;
• 81% have experienced at least one blackout in the past year.

Most energy companies cannot bear the costs of building new generating capacities without long-term commitments from buyers.

Meta’s approach involves signing such agreements and insuring part of the risks. For example, it might promise to purchase large volumes of electricity from a new station and resell excess when there is a surplus.

“We see a gap between supply and demand in the market, with major players acting on both sides. Coordinating growth requires active support for supply development from large buyers,” noted Hertz-Shargel from the energy consulting firm Wood Mackenzie.

Bubble Not a Barrier

According to BloombergNEF, demand for electricity from data centers will quadruple over the next decade, despite widespread opinions about a potential bubble in the artificial intelligence sector.

Meta believes that electricity trading will enhance the company’s flexibility in securing and managing energy and capacity contracts.

For example, if the corporation commits to long-term purchases from power plants under construction, it will allow them to complete all necessary stages for the facility’s erection.

“This is a natural extension of activities for tech companies. Think of the shift in value like this: their contribution to production is electricity, just as for Coca-Cola it’s cane sugar, corn syrup, and aluminum,” said Mike Kirschner, managing director of the American company Habitat Energy.

Risks

Hedging has some pitfalls. Ford Motor traded metals to fix the cost of palladium during the early 2000s price surge. However, the market later collapsed, and the automaker recorded a loss of about $1 billion.

Tech companies may face similar risks after starting electricity trading.

Nonetheless, this does not deter firms seeking federal approval for such activities, writes Bloomberg. Trading not only allows for the sale of excess electricity but also opens access to more favorable clean energy supply deals.

“The ability to manage this risk creates enormous value. But it requires traders, models, technologies,” said Kirschner.

Microsoft has signed long-term agreements with developers of clean energy projects, a company representative said. The corporation noted that it intends to trade electricity, as there may be a need to sell excess volumes in certain regions.

Apple has also received permission to trade electricity to supply its own facilities.

In October, analysts called energy the world’s most valuable resource due to the AI boom.

In November, Google planned to create a satellite system in low Earth orbit to power data centers.