As the demand for datacenters surges, an unexpected boom in the U.S. clean energy sector has emerged. This growth, fueled by the rise of artificial intelligence, paradoxically benefits the clean energy industry while simultaneously presenting substantial environmental challenges. Experts warn that while datacenters are boosting wind, solar, and other clean energy sources, they also pose significant climate concerns.
Utilities across the United States are grappling with the immense electricity demands of datacenters, prompting the construction of new fossil-fuel plants or the continued use of aging gas and coal facilities. This has disrupted plans in states like Michigan to transition to renewable energy on their grids.
The natural gas industry, including fracking and pipeline companies, is integral to the datacenter expansion. Some firms are constructing new plants dedicated to powering these facilities, aided by support from the Trump administration.
Despite these developments, challenges such as supply chain disruptions, regulatory hurdles, and energy generation shortages are delaying datacenters’ connections to the electric grid by up to 12 years. This has led tech giants to invest heavily in rapid power solutions like battery storage, solar, wind, and fuel cells.
Douglas Jester, a clean energy consultant with 5 Lakes Energy, remarked, “It is unquestionable that the increase in electricity sales is driving an increase in renewables. It’s right to think about it as a paradox.”
The clean energy industry initially thrived in 2020 due to low interest rates and investments from Joe Biden’s administration aimed at decarbonizing the nation. However, it faced setbacks with inflation, rising project costs, and stagnant energy demand. The subsequent Trump administration, which opposed Biden’s initiatives, canceled programs supporting wind, solar, and electric vehicles.
Clean energy companies saw their stock values decline from early 2021 peaks until early 2025. However, as datacenter demand surged, many stocks rebounded. The IShares Global Clean Energy ETF, which comprises about 100 clean energy stocks, plummeted by approximately 80% between late 2021 and early 2025 but has risen by about 52% over the past year.
Lucas Davis, an energy economist from UC Berkeley, noted that global electricity demand from other sectors, such as oil and gas exploration, along with decreasing costs for solar panels and renewable infrastructure, is also driving growth. However, not all clean energy segments are equally benefiting. Datacenters are primarily boosting battery and solar developments for onsite power, with minimal impact on residential rooftop solar.
Nextpower, a leader in utility-scale solar infrastructure, reported 20% year-over-year growth and recently acquired datacenter battery producer Prevalon (source). Google has also made strides in renewable energy by developing the world’s largest grid-scale battery for a datacenter in Minnesota and expanding renewable projects in Texas (source, source).
Jester commented, “It looks to me like they’re setting up to be vertically integrated to supply their own electricity, and they’ll drive a lot of development.” In Wisconsin, despite the absence of a renewable energy standard, regulators are constructing around 15 wind or solar facilities to serve Microsoft and Oracle datacenters, though these projects also involve natural gas.
The urgency for power and datacenters’ preference for clean energy have made renewables a sensible choice. In Michigan, DTE Energy is opting for a 330 MW battery system instead of a new gas plant to support a 1.4GW Oracle datacenter, with Oracle funding the batteries.
Davis emphasized that the soaring electricity demand is primarily driven by tech companies rather than a commitment to combating climate change with clean energy. “I would say tech is desperate for electricity and oftentimes it’s going to whatever is the quickest – it could be the fuel cell, it could be natural gas turbines, or it could be solar and batteries, but the underlying demand is electricity,” Davis explained.
Bloom Energy, known for its relatively cleaner energy production, provides an example of this demand. Its solid oxide fuel-cell systems, while not entirely renewable, offer a more efficient process than traditional natural gas turbines. The company’s rapid deployment capability, within 90 days, has attracted datacenter interest. Bloom Energy recently announced a power supply deal with Oracle and is doubling its manufacturing capacity by 2026, with its stock surging 1,338% over the past year (source).
Despite this growth, the clean energy sector faces uncertainties. Energy demand forecasts remain unpredictable, and the industry could be vulnerable to an AI bubble burst. However, a portfolio manager from Black Rock’s sustainability funds told Bloomberg that the sector is well-positioned to endure potential downturns (source). “We don’t correlate any potential ‘AI bust’ as an existential risk to sustainable energy equities,” the manager stated. “Sustainable energy equities could stand to even further benefit as US rates come down and we see a broadening out of the market.”
Original Story at www.theguardian.com