Renewable Energy Capacity in the US Set to Surge by 80% Amid AI-Driven Power Demand

US to increase generating capacity by 80% by 2035, with renewables playing a key role amid rising AI-driven energy demand.

By Athena Xu

5/16, 12:45 EDT
EQT Corporation
First Solar, Inc.
Kinder Morgan, Inc.
Southern Company
DBA Sempra

Key Takeaway

  • US to increase total generating capacity by 80% by 2035, with solar capacity quadrupling and wind capacity more than doubling.
  • AI and data centers to drive a significant rise in power demand, accounting for 8% of US power needs by 2030.
  • Inflation Reduction Act spurs a green tax credits market, expected to exceed $100 billion annually by 2030, boosting renewable energy investment.

Surge in Renewable Energy Capacity

The United States is on track to significantly increase its total generating capacity by 80% through 2035, with a substantial contribution from renewable energy sources. BloombergNEF reports that developers are expected to add 737 gigawatts of solar panels, quadrupling the nation's solar capacity from the end of 2023. Wind energy is also set to see a significant boost, with nearly 200 gigawatts of new installations, more than doubling the current turbine capacity. This expansion is part of a broader effort to decarbonize the grid and meet the rising electricity demand from various sectors, including factories and technology-driven industries like artificial intelligence.

The transition to renewable energy, however, presents challenges, particularly in managing the intermittent nature of wind and solar power. BloombergNEF highlights the need for a major expansion in the U.S. grid infrastructure to accommodate the new capacity. Additionally, the deployment of 221 gigawatts of battery storage, a more than elevenfold increase from last year's capacity, is anticipated to address the variability of renewable energy sources.

AI-Driven Energy Demand

Goldman Sachs projects a surge in power demand over the next decade, primarily fueled by artificial intelligence and data centers. The investment bank estimates that AI and data centers will account for 8% of U.S. power demand by 2030, up from the current 3%. To meet this growing demand, a mix of natural gas and renewable energy sources is expected, with renewables accounting for 40% of the growth. Goldman Sachs recommends buying call options for stocks in companies like Kinder Morgan, EQT, First Solar, Sempra, and Southern Company, which are poised to benefit from the anticipated increase in power demand.

Green Tax Credits Market Expansion

The Inflation Reduction Act, signed into law by President Joe Biden in 2022, is set to catalyze investment in clean energy through tax credits. This legislation has facilitated the creation of a market for green tax credits, nearing $50 billion in size, where energy projects can trade tax credits for cash with investors looking to offset their tax liabilities. Evercore predicts that the market for these credits will exceed $100 billion annually by 2030. The influx of cash from the sale of tax credits is expected to support the development of solar and wind projects, which have faced challenges due to high interest rates and inflation.

Companies across various industries, including Blackstone, Vitol, and even ventures involving celebrities like Travis Kelce, are participating in this new market. The flexibility introduced by the Inflation Reduction Act allows for the transfer of credits to third parties, simplifying the investment process in renewable energy projects. This development has attracted a wide range of investors, including those from the oil and gas sector, seeking to manage their tax liabilities while supporting green energy initiatives.