The AI Frenzy Could Unlock More Money for Clean Energy

Private-equity firms KKR and Energy Capital Partners recently agreed to invest a combined $50 billion in data-center and power-generation projects, topping a planned $30 billion AI infrastructure fund in the works from BlackRock, Microsoft and a United Arab Emirates state-backed investor.

Other investment titans like Blackstone and Apollo are channeling billions of dollars into data centers and related infrastructure. Blue Owl Capital recently became part of a $3.4 billion joint-venture developing a data center in Texas it hopes to run on wind and solar power.

The deals highlight the power industry’s sudden transformation into an attractive growth area for investors after decades of stagnant electricity-demand growth dulled excitement.

“We’re playing this need for compute power, AI and electrification on a broad base,” Blackstone President Jonathan Gray said on the firm’s recent earnings call. “It’s clearly the data centers, but it’s also the energy and power.”

This summer, Blackstone said it would acquire Trystar, a company focused on backup power equipment and solutions for data centers and other industries.

The new momentum in the sector could accelerate innovation in other areas like long-duration energy storage, geothermal power and small modular nuclear reactors.

Much of the activity from firms like KKR and ECP is expected to target natural-gas plants, pushing up emissions in the short term. Moving forward, those projects will be under pressure from investors and regulators to reduce emissions through technologies like carbon capture or pairing them with renewables.

The flood of capital into energy is a potential bright spot as AI, and the data centers that drive it, disrupts the power sector. Backers of AI say it can help boost energy efficiency and optimize how power is produced and consumed.

Investors are also eyeing startups such as Exowatt, a company backed by OpenAI Chief Executive Sam Altman that hopes to store energy as heat to generate electricity for data centers. Crusoe, a more-established company working with Blue Owl on the green data center in Texas, recently raised $500 million from Peter Thiel’s Founders Fund and another investment firm to build more data centers, according to PitchBook.

The company got its start operating data centers for bitcoin mining in places where natural gas would otherwise be flared and is now focusing on data centers for AI powered by renewable energy.

The key to minimizing AI’s climate impact will be businesses like Crusoe living up to their promises and surviving the valley of death that has derailed so many promising clean-energy technologies.

The money flowing into the industry is a reminder that regardless of shifting policy winds in Washington, investors will continue putting money into the energy transition.