How Artificial Intelligence went from chip story to power story — and who is being asked to pay for it
Three years the real limitation of an AI has been silicon. If they could get the accelerators they built, if they couldn’t they waited. That era is over. The constraint has shifted downstream, to a place where types of institutions are older, clocks are slower, and the tolerance of disruption is much less. The days of who can afford the chips is over. It is who can energise them.
It’s not a trick, and isn’t going anywhere. With power now a constraint, Gartner’s analysts now conclude that the capabilities of AI are constrained by power and that power security is the playing field for the AI race.[1] An incredible prediction for a technology forecast. It welcomes the increase in the sector has not been driven by its internal value chain.
The aggregate is unsure and awareness is not
With the numbers worldwide, complacency goes hand in hand. The power usage of data centres rose to around 415 terawatt-hours in 2024 and is around 1.5 per cent of the world’s power usage, up about 12 per cent annually over the last five years.[2] The IEA’s base case projects demand of about 945 terawatt-hours by 2030 – just over Japan’s current total demand. Even so, data centres would only use up less than three per cent of world electricity usage, and less than around eight per cent of IEA’s total electricity demand growth for the period.[2]
3% is not a crisis. Those who say that AI is going to “take over the world” with respect to energy use are simply doing the math wrong.
Global statistics are not the best tool for averages! It’s not pleasant and not equal, you know electricity is a local commodity! The power usage in Virginia’s data centres is already around 26 per cent of the state’s total.[3] The reported rate in Dublin is 79 per cent, from the Oeko-Institut. The IEA has been forecasting that in the United States and Japan – where electricity demand had been level or declining for a decade, data centres will generate more than half of the growth in electricity demand in the next five years.[4]
There isn’t a national average for a grid. It experiences a substation.
The bill arrives sideways
The best example is PJM Interconnection, the wholesale market for PJM, which serves some 65 million customers in thirteen states and the District of Columbia.[5] PJM also provides a forward auction of capacity, whereby they actually pay generators for capacity in advance. That rate trickles down to the retailer, but is not a line item on a consumer’s bill.
The path is terrible. The price of the 2024-25 delivery year unwrapped at 28.92 dollars per megawatt-day. The 2025-26 auction cleared at 269.92 dollars. The price it would have paid had there not been a cap, PJM said, is 388.57 dollars. Had there been no cap the price would have been 388.57 dollars, PJM said.[6][7] The total capacity cost peaked at an all-time high of 16.4 billion dollars in the 2027-28 auction. This was the highest total capacity cost ever seen in the final auction (2027-28) at 16.4 billion dollars.[8]
All customers brought back the PJM value of $9.3 billion, with 63 per cent of the auction’s jump coming from data centre demand, independent market monitor Monitoring Analytics reported.[9][10] It’s been unambiguous and persistent that large new loads have to go hand-in-hand with the generation of their own.
There are two points which may need more emphasis. The first is the fact that PJM’s market was unable to offer sufficient capacity to meet the 2027-28 (PJM was 6,625MW short).[8] Record price paid by customers. The second issue is political. The price of electricity and other utilities has been a burning economic issue in the 2025 American gubernatorial races, and the changes in the legislation have been swift. Oregon established a new rate classification for data centres.[11] The Virginia General Assembly responded by making strides to lower distribution/capacity costs at the household level. The Virginia General Assembly acted by making progress in lowering distribution/capacity costs at the household level. In New York, some permits for plants larger than 50 megawatts have been deferred as the state develops water and community benefit guidelines and grid-cost guidelines.[12] Texas took the first steps to an audit of ERCOT projects planned in the interconnection queue that will include data centres. Texas is conducting an audit on data centre projects in the ERCOT interconnection queue.[13] The repeal of the sector exemption to the sales tax for electricity in North Carolina.[14]
This is for negotiations in 2024 with legislatures, which the industry engaged in negotiations with utilities in 2024. It’s a different line of work, and a different pace.
Gas: sold out until the end of decade
Indeed, the universal response to a firm load is a gas turbine, and as of now the market have hit a physical wall. There are three big frame turbine manufacturers that build at scale, all of whom are officially “full up.”
GE Vernova’s gas power equipment backlog and slot reservation agreements increased to 116 gigawatts at the end of the second quarter of 2026 from 100 gigawatts a month earlier and 83 gigawatts at the end of 2025. The company has stated that it expects to have a minimum of 125 gigawatts contracted by the end of this year with it saying that it is booking up deliveries for the year 2031.[15] At the end of June, Siemens Energy had a 69 gigawatt gas turbine backlog and lead times of three years or longer.[16] In August, Mitsubishi Heavy Industries (MHI) announced a order book backlog of 35 gigawatt (GW) for large framed structures, which will be delivered from 2028 to 2030.[17]
The pricing reflects the same thing. GE Vernova’s first-half 2026 orders were over twenty per cent higher than the total orders in the fourth-quarter of 2025. The technology-producing companies aren’t putting out as much as the technology demands, they are just scaling up; GE Vernova’s targets are around 20 GW per year by the third quarter of 2026, up to 24 GW by 2028, and then to 30 GW by 2030.[15]
What these figures fail to convey is a warning that is implicit in them. Only 53 out of GE Vernova’s total gigawatts of firm equipment in its backlog. The remaining 63 gigawatts are slots that have been paid but weren’t converted into orders. Siemens has 69 GW of firm backlog, excluding reserve orders. Mitsubishi’s figure is for large-frame machines only. The three numbers added together and come up to 220 gigawatts, but that figure really doesn’t mean anything much because none of the three companies is measuring the same number.
A reservation is NOT a turbine. A turbine is not a means of generating power. A power plant is not a “connections point”. Every conversion has a loss of “volume”, and the losses accumulate.
Nuclear: the right answer on the wrong timetable
The most eye-catching corporate energy story since 2024 is the nuclear turn. In May 2026, over 13 gigawatts of announced nuclear projects, representing a nuclear power capacity of more than 9.8 gigawatts, had been signed by all major hyperscalers (Large Cloud Service Providers).[18]
The anchor transaction continues to be with Microsoft, the company’s 20year, 837-megawatt agreement to back the restarts of the Crane Clean Energy Center (CCEC), the old Three Mile Island Unit 1. The US Nuclear Regulatory Commission (NRC) has granted a fuel license amendment to the site and restart is expected in 2027.[19] Amazon increased its offtake to Talen Energy to 1,920 megawatts for the Susquehanna station until 2042.[20] Meta inked a 20-year deal for 1.1 GW of power from the Clinton plant in Illinois with Constellation, and made commitments in January 2026 in relation to existing nuclear power plants in the PJM region, including one small modular reactor option that could be as large as 300MW.[21][22] Google has reached an agreement with NextEra to resume operations of the shuttered Duane Arnold facility in Iowa.[23]
Here I saw two structural observations:
Most of this is not new electricity, the first is that. A power purchase agreement for an operating reactor will shift clean output from the general pool to a named purchaser. It helps improve the buyer’s carbon accounting, improve plant economics and potentially can avoid early closure – which is important. However, there were already megawatts in the system. The additions are the actual restarts and uprates, which are but a fraction of the announced ones.
The second is timing. Most commitments deliver in the first half of the 2030s. Meta’s portfolio, the largest at up to 6.6 gigawatts including TerraPower and Oklo, carries the longest timelines, running to 2032 and beyond. As the Carnegie Endowment observed in June, hyperscaler interest has so far produced offtake contracts rather than an order book for a fleet of new reactors.[18] The financial commitment required to industrialise construction has not yet been made.
The second one is the timing. The vast majority of pledges are for the first half of the 2030s. Meta’s portfolio, which includes the largest of up to 6.6 gigawatts from TerraPower and Oklo, has the longest time horizon, of up to 2032 and beyond. According to the Carnegie Endowment in June, there has been no order book for a new fleet of reactors, just offtake contracts to date driven by the interest of hyperscalers. There has not yet been a financial commitment to industrialise construction.
This load will be hugely dependent on nuclear and it will not matter in 2027.
The gap between announced and built values
The most important number in this entire story is the one that measures failure.
About 50% of the planned US data centre capacity in 2026 is anticipated to be postponed or cancelled.According to industry tracking, 21.5 gigawatts have been announced through 2027, while 6.3 gigawatts have broken ground[24], with a more bleak picture put by industry analysts in an August 2026 analysis, which landed around sixty per cent of installed capacity in 2027 still to be ground broken.[25] In the total timeframe from 2028-2032, a total of 37 gigawatts has no clear completion dates. The backlog of pipe construction is for more than fifty gigawatts of announced but yet to be constructed capacity.[24]
These explanations are deceptively simple, and as such make good sense. And increasingly, opposition. A quarter alone in 2026 saw 75 projects with 130 billion dollars of proposed construction blocked or delayed by local resistance, a figure on par with the number of projects from 2025.[26]
So put that side by the capacity auctions. We adopted load forecasts which incorporated speculative demand for data centres to lock in PJM’s clearing price for 2027-28. This was done using load forecasts that included speculative data centre demand. In thirteen states, households are paying today for capacity set aside for facilities that won’t be energized in many instances. The money will not be refunded if the projects do not appear.
This is what should be called a mech. It is not a subsidy at all. It’s a bet on risk, transferring it from the best capitalised companies in the world to the least from customers on the system, and this was done with a market design that was never designed to price speculation.
The Gulf: Coordination as comparative advantage
This is different with the Gulf and the difference is instructive.
Developed by G42’s Khazna Data Centers in collaboration with OpenAI, Oracle, Nvidia, Cisco and SoftBank, the Stargate UAE is a one-gigawatt compute cluster being built in an 26-square kilometre planned campus in Abu Dhabi.[27] The UAE AI minister has set the cost of the campus at over AED 30 billion.[28] With the help of the approximately 100,000 Nvidia Grace Blackwell GB300 chips, the first 200 megawatts is scheduled for the third quarter in 2026. The campus will be designed to be nuclear, solar and gas driven. Saudi Arabia’s HUMAIN backed by the Public Investment Fund (PIF) is chasing approximately 1.9 GW by 2030 and 6.6 GW by 2034, with the initial plants, around 100 MW each, in Riyadh and Dammam.[29]
The region’s third-party data centre capacity in April 2026 was approximately 500MW, expected to grow to approximately 1.5 GW by 2030.[30] All the numbers are correct. They provide the description of other categories. New capacity comes in 100 to 200MWs or more – depending on grid connection and generation and not land and capital.
The Gulf’s passion is sequencing authority, a charisma which liberalised markets lack. A sovereign developer would have the option to request (and pay for) generation, transmission and compute as a single programme as opposed to finding out a few months or years post hoc that the interconnection queue has an eight year wait list. The Arab world’s first operational nuclear plant, Barakah, is already associated with the ambitions of Abu Dhabi in the realm of digital and the nuclear programme in Saudi Arabia is going from a prospectus to a procurement process.[31]
Physics does not get in the way of the Gulf. Unusually forthright words from a serving minister, the UAE energy minister stated at the World Utilities Congress that the overall growth in AI infrastructure was truly too fast to be met by the grid.[32] A gigawatt of accelerated compute running as a result of a hot Gulf summer will create a parasitic load that northern facilities will not experience, and it will be combined with the heat that already spells the worst times of the year for a residential air-conditioning system. When water-cooled designs hit a point where fresh water is a “product,” they come to a place where energy costs for fresh water are added to their own energy bill. The advantage in terms of efficiency is genuine. It’s by coordination and capital, not thermodynamics. The comparative advantage is real. It is an advantage in coordination and capital, not in thermodynamics.
So what should be asked
In each jurisdiction that is impacted by this buildout, there are four questions that would improve the quality of decisions made now.
Who is responsible for paying for the interconnection? Most markets default to socialisation across the base of the ratepayers. A true cost causation system is already being legislated in some of the US states and presents no reason to end there.
Does the load come with its own generation? The independent overseer of the biggest power market in North America has called for just this. It replaces the need to allocate shared capacity resources in the data centre with a system that is complete in itself, and matches the party that is creating the requirement with the party that pays for it.
Is the load flexible? Traditionally it’s been assumed, not proven, that data centres are inflexible. Though industry procurement practices may suggest otherwise, inference workloads are more forgiving of cuts than training runs. The one instrument used the least is firm-with-conditions interconnections, which are interconnections of a firm power plant that is willing to accept curtailment during periods of peak system loading in exchange for a quick connection.
Can the forecasts be traced back? Interconnection requests are submitted by the developer to multiple points for a given project. These requests are then combined by grid planners to form forecasts which decide how much each should pay. Texas has requested an audit of its queue for just this reason. All serious grid operators should do so as well and make it available for publication.
The point
So my point is that, now, it’s an energy project that produces software. It will be designed by turbine Lead Time and transformer availability, interconnection queues, and political acceptance of the idea of paying more in electricity bills. The firms which have been responsible for its development have realised this and are doing something about it, entering into 20-year deals for electricity which will not be delivered until after 2030.
It is not the question of whether electrons can be found or not. A large portion of the announced demand will simply be lost and some of them will come at a higher cost and take a longer time than advertised. The issue is who should pay for the gap between what was promised and what is actually built. The answer at the moment, in the world’s biggest power market, is the customer who has never been asked, who’s never going to use the compute, and who is already paying.
References
[1] Gartner, “Gartner Says Data Center Electricity Consumption to Grow 26% in 2026,” press release, 10 June 2026. https://www.gartner.com/en/newsroom/press-releases/2026-06-10-gartner-says-data-center-electricity-demand-to-grow-26-percent-in-2026
[2] International Energy Agency, “Energy demand from AI,” Energy and AI (World Energy Outlook Special Report), April 2025. https://www.iea.org/reports/energy-and-ai/energy-demand-from-ai
[3] Carbon Brief, “AI: Five charts that put data-centre energy use – and emissions – into context” (citing Oeko-Institut, Environmental impacts of AI, May 2025). https://www.carbonbrief.org/ai-five-charts-that-put-data-centre-energy-use-and-emissions-into-context
[4] International Energy Agency, “Executive summary,” Energy and AI, April 2025. https://www.iea.org/reports/energy-and-ai/executive-summary
[5] PJM Interconnection, “Who We Are.” https://www.pjm.com/about-pjm/who-we-are
[6] S&P Global Commodity Insights, “PJM power capacity auction clears at record high price of $269.92/MW-day for most of footprint,” 30 July 2024. https://www.spglobal.com/energy/en/news-research/latest-news/electric-power/073024-pjm-power-capacity-auction-clears-at-record-high-price-of-26992mw-day-for-most-of-footprint
[7] PJM Interconnection, 2026/2027 Base Residual Auction Report, 22 July 2025. https://www.pjm.com/-/media/DotCom/markets-ops/rpm/rpm-auction-info/2026-2027/2026-2027-bra-report.pdf
[8] PJM Interconnection, 2027/2028 Base Residual Auction Report, 17 December 2025. https://www.pjm.com/-/media/DotCom/markets-ops/rpm/rpm-auction-info/2027-2028/2027-2028-bra-report.pdf
[9] Institute for Energy Economics and Financial Analysis (IEEFA), “Projected data center growth spurs PJM capacity prices by factor of 10.” https://ieefa.org/resources/projected-data-center-growth-spurs-pjm-capacity-prices-factor-10
[10] Utility Dive, “Data centers drove $6.3B in PJM capacity auction costs: market monitor,” 2026. https://www.utilitydive.com/news/pjm-data-centers-capacity-auction-imm-bowring/825626/
[11] Clean Energy Group, “States are stepping up to protect households from rising energy bills due to data centers.” https://www.cleanegroup.org/states-are-stepping-up-to-protect-households-from-rising-energy-bills-due-to-data-centers/
[12] Office of Governor Kathy Hochul, Executive Order No. 62: “Establishing a Temporary Moratorium on Data Centers in New York While the State Develops Higher Standards for Data Center Development,” 2026. https://www.governor.ny.gov/executive-order/no-62-establishing-temporary-moratorium-data-centers-new-york-while-state-develops
[13] Utility Dive, “ERCOT aims to complete Texas governor’s data center audit by December,” August 2026. https://www.utilitydive.com/news/ercot-texas-puc-data-center-audit/828472/
[14] Data Center Knowledge, “NC Ends Data Center Power Tax Break, Keeps Capital Incentives,” 2026. https://www.datacenterknowledge.com/regulations/nc-ends-data-center-power-tax-break-keeps-capital-incentives
[15] Utility Dive, “GE Vernova gas turbine backlog climbs to 116 GW,” July 2026. https://www.utilitydive.com/news/ge-vernova-gas-turbine-backlog-climbs-to-116-gw/826039/
[16] Utility Dive, “Siemens Energy’s gas turbine backlog nears 70 GW as company expands manufacturing,” August 2026. https://www.utilitydive.com/news/siemens-gas-turbine-backlog-nears-70-gw-as-company-expands-manufacturing/827390/
[17] Utility Dive, “Mitsubishi’s large-frame gas turbine backlog reaches 35 GW,” August 2026. https://www.utilitydive.com/news/mitsubishi-gas-turbine-backlog-earnings/827761/
[18] Carnegie Endowment for International Peace, “Beyond the Hype: Assessing Hyperscaler Nuclear Commitments Against U.S. Energy Realities,” June 2026. https://carnegieendowment.org/research/2026/06/beyond-the-hype-assessing-hyperscaler-nuclear-commitments-against-us-energy-realities
[19] Constellation Energy, “Crane Clean Energy Center” (835 MW restart of Three Mile Island Unit 1 under a 20-year PPA with Microsoft). https://www.constellationenergy.com/about/locations/crane-clean-energy-center.html
[20] Talen Energy, “Talen Energy Expands Nuclear Energy Relationship with Amazon,” 11 June 2025. https://ir.talenenergy.com/news-releases/news-release-details/talen-energy-expands-nuclear-energy-relationship-amazon
[21] Constellation Energy, “Constellation, Meta Sign 20-Year Deal for Clean, Reliable Nuclear Energy in Illinois,” June 2025. https://www.constellationenergy.com/news/2025/constellation-meta-sign-20-year-deal-for-clean-reliable-nuclear-energy-in-illinois.html
[22] Vistra Corp., “Vistra and Meta Announce Agreements to Support Nuclear Plants in PJM and Add New Nuclear Generation to the Grid,” 9 January 2026. https://investor.vistracorp.com/2026-01-09-Vistra-and-Meta-Announce-Agreements-to-Support-Nuclear-Plants-in-PJM-and-Add-New-Nuclear-Generation-to-the-Grid
[23] NextEra Energy, “NextEra Energy and Google Announce New Collaboration to Accelerate Nuclear Energy Deployment in the U.S.” (Duane Arnold restart), 28 October 2025. https://newsroom.nexteraenergy.com/NextEra-Energy-and-Google-Announce-New-Collaboration-to-Accelerate-Nuclear-Energy-Deployment-in-the-U-S
[24] Currence (formerly Sightline Climate), “Data Center Outlook: Half of 2026 Pipeline May Not Materialize,” 2026 (https://www.networkworld.com/article/4201941/up-to-50-of-data-center-capacity-slated-for-2026-could-be-delayed.html). https://www.currence.ai/blog/data-center-outlook
[25] Inc., “Nearly 5 Data Centers Are Announced for Every 1 Being Built. Many May Never Break Ground” (citing SynMax satellite tracking, August 2026, and Aterio). https://www.inc.com/georgia-fearn/nearly-five-data-centers-are-announced-for-every-one-being-built/91386819
[26] Data Center Watch, Q1 2026 Report (75+ projects and approximately $130 billion blocked or delayed). https://www.datacenterwatch.org/q1-2026
[27] G42, “Global Tech Alliance Launches Stargate UAE,” 2025. https://www.g42.ai/resources/news/global-tech-alliance-launches-stargate-uae
[28] The National, “Stargate UAE data centre to cost more than $30bn, AI minister says,” 26 January 2026. https://www.thenationalnews.com/future/technology/2026/01/26/stargate-uae-data-centre-to-cost-more-than-30bn-ai-minister-says/
[29] Data Centre Dynamics, “Saudi Arabia’s AI co. Humain looking for US data center equity partner, targets 6.6GW by 2034 with subsidized electricity.” https://www.datacenterdynamics.com/en/news/saudi-arabias-ai-co-humain-looking-for-us-data-center-equity-partner-targets-66gw-by-2034-with-subsidized-electricity/
[30] Computer Weekly, “Middle East datacentre capacity set to triple by 2030.” https://www.computerweekly.com/feature/Middle-East-datacentre-capacity-set-to-triple-by-2030
[31] World Nuclear Association, “Nuclear Power in the United Arab Emirates” (Barakah Nuclear Energy Plant). https://world-nuclear.org/information-library/country-profiles/countries-t-z/united-arab-emirates
[32] Argus Media, “UAE warns of power crunch as data-demand soars” (remarks by the UAE Minister of Energy and Infrastructure, World Utilities Congress). https://www.argusmedia.com/en/news-and-insights/latest-market-news/2692573-uae-warns-of-power-crunch-as-data-demand-soars
Owner of “The Europe Today” and Patron-In-Chief/Owner of “The Gulf Observer”, Chairman “The Gulf Observer Research Forum”, Foreign Affairs Expert, Analyst, International Award Winning Author and Poet.
