The Politics of Powering AI

Ariana Salvatore · Morgan Stanley

US data center power shortfall grows to 57 GW through 2028, up from 38 GW previously estimated.

Her colleague Steven Byrd and team updated projections and now see a potential 57 GW gap in US data center power through 2028, before accounting for new solutions that could accelerate access to power. That is up from their previous estimate of 38 GW. She cites this scale of the energy challenge as the reason the permitting proposal matters.

“They now see a potential 57 gigawatt gap through 2028, and that's before accounting for new solutions that could accelerate access to power. That's up from their previous estimate of 38 gigawatts.”at 1:12

Ariana Salvatore · Morgan Stanley

Permitting reform should speed energy projects, but won't fix equipment, labor or grid-capacity constraints.

The bipartisan American Affordability and Jobs Act would reform federal environmental reviews and give greater certainty to projects that have already received approvals. She thinks this can reduce delays and uncertainty around new energy projects. She qualifies this by saying permitting reform alone will not resolve constraints involving equipment, labor, or grid capacity. She also says the eventual policy mix could influence the timing of new projects, and that faster approvals could make some investments more attractive.

“We think that can help reduce delays and uncertainty around new energy projects, although permitting reform alone won't resolve constraints involving equipment, labor, or grid capacity.”at 1:44

Ariana Salvatore · Morgan Stanley

Federal requirement for data centers to cover transmission costs could shift where projects are built and power sources chosen.

The permitting bill would require data centers to cover their associated transmission costs, moving beyond the voluntary ratepayer protection pledge that hyperscalers signed earlier this year. She sees bipartisan concern about electricity affordability behind this. She argues faster approvals could make some investments more attractive, but forcing developers to absorb extra transmission costs could change where projects are built and which power solutions they pursue. She also says legislation is not guaranteed and the final agreement could differ substantially.

“Faster approvals could make some investments more attractive, but requiring developers to absorb additional transmission costs could also change where projects are built and which power solutions they pursue.”at 3:11

Ariana Salvatore · Morgan Stanley

Power access and its cost, shaped by policy, may matter as much as AI capex in deciding AI buildout pace.

For much of the AI investment cycle the focus was on technological innovation and capital spending. She argues policy decisions on electricity infrastructure, permitting and affordability could become just as important in determining how quickly that investment becomes operational capacity. For investors, the key question may be how quickly and at what cost companies can secure the power needed, rather than how much they will spend on AI.

“Increasingly though, policy decisions around electricity infrastructure, permitting, and affordability could become just as important in determining how quickly that investment translates into operational capacity.”at 3:47