Winners and losers across supply chains

Our South Asia Energy Analyst Mayank Maheshwari discusses how the unprecedented demand to power AI is set to transform the power industry for years to come.

Read more insights from Morgan Stanley.

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Mayank Maheshwari: Welcome to Thoughts on the Market. I’m Mayank Maheshwari, Morgan Stanley’s South Asia Energy Analyst. 

Today: how AI and electrification are rewriting the rules of global power. 

It’s Tuesday, December 2nd at 9 pm in Singapore. 

If you’ve noticed your electricity bills are climbing and headlines are buzzing with talk of AI, you’re not alone. The way we use – and need – power is changing fast, and it’s impacting everyone from homeowners to major tech companies. 

Global power consumption is surging at the fastest pace in over a decade. Annual demand is set to rise by more than one trillion kilowatt-hours every year through 2030, with AI-driven data centers contributing nearly a fifth of that growth. We estimate about [U.S.]$3 trillion investments in datacenters by 2028, with power consumption growth of nearly about 126GW in these three years till [20]28. This is almost as large as Canada’s total [annual] power consumption. 

And in this context, power prices are set to further rise. In 2024 – the latest full-year data available – global power sector investments hit a new high of $1.5 trillion, and consumer power prices have risen by about 15 percent. By 2030, U.S. power markets will account for half of the global data center power consumption. And Asia will also see about a 15 percent spillover of that U.S. hyperscaler demand, which will be also part of why some of the power markets in Asia will get a lot tighter. 

As power consumption rises, the difference between the price at which electricity is sold and the cost to generate it – also known as power spreads – are likely to rise by nearly 15 percent. This expansion in profit margins could lead to higher earnings forecasts for power generation companies and create $350 billion in value creation through the entire power supply chain. 

At the same time, years of under-investments in electric grids have led to bottlenecks, sparking a wave of new spending and pushing the industry to rely more on natural gas and energy storage and other new technologies – while also supporting that option of renewable power. In 2024, gas investments hit record highs, and starting in 2026 gas is set to become a new truly global source of new power generation. Looking ahead, natural gas is expected to meet about a fifth of [the] world’s new power needs, excluding China. And nuclear energy is well positioned for increased investments; while batteries – which is energy storage – is also getting to get a new set in terms of new investments across datacenters and in markets like China . 

Moving forward, the power industry faces a multi-decade transformation, marked by unexpected shifts and opportunities. We’ll see increased collaboration between fossil and non-fossil fuels, wider adoption of tiered pricing, and a surge in spot market and behind-the-meter sales all driving longer-lasting, elevated power spreads. Gas, nuclear, energy storage, and fuel cell supply chains – especially in Asia and the U.S. – stand to gain from stronger pricing power [and] new growth prospects, while grid operators benefit from higher investment and better returns. On the flip side, pure solar and wind producers may continue to see rising costs in Asia, something we have already seen in [the] U.S. and Europe, as [the] global grid leans more on batteries and steady fossil fuel supplies to balance the requirements of the rising needs of power across the supply chains – in AI as well as domestic utilization of manufacturing. 

Ultimately, as AI and electrification supercharge power demand, the real challenge isn’t just adding renewables. It’s about building a resilient, flexible grid and navigating the new economics of energy. 

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