Asked whether on-site power for data centers is a stopgap or a lasting source of supply, the Morgan Stanley analyst says the estimated AI power shortfall keeps growing and hyperscalers are signing very long contracts for power they generate themselves.
And I'm David Arcaro, Morgan Stanley's U.S. Power Utilities and Cleantech Analyst.
…debate in the industry around whether or not these solutions are quote-unquote bridge or whether they're structural and they can be truly long-term sources of supply to the market. So maybe just help us think about how our views have really changed as it relates to distributed power specifically.
One of the things that we have seen is that the shortfall has grown in our estimates over the last several iterations. We're now looking at upwards of an 80 gigawatt shortfall by 2029. And how do we solve that? I'd say we've leaned more into on-site power, bringing your own power. What is that? You know, if you are still waiting for years for a grid connection from the utility, what can you do as an alternative? You can bring your own power. You could bring small-scale power equipment to get the high reliability in a much faster timeframe than you would waiting for the grid…
I think there's a preconceived notion in the market that the grid's going to catch up and that we won't need these solutions longer term or that we're building too much of it and there's too much manufacturing capacity coming to the market. So maybe we can segment those into two separate questions.…
Yeah, the bottleneck is very often in the utility space. Utilities are seeing such an unprecedented demand for electricity from the data center industry. They're scrambling to keep up with it. They're not used to growing this fast. And it's often their electric transmission network that is falling…
And to that point, it seems like what matters to maybe the developers is changing. It used to just be cost, then it was cost plus time. And now it's cost plus time plus noise and emissions, because obviously there's always a lot of political pushback. Take that maybe one step further and say it's…