For years, energy investors flocked to anything labeled “green” or “clean”, with governments making it clear that there is only one energy policy path forward, and that is the green, clean one. That ended in 2025 with the rise of AI, which caused a surge in energy demand—for the first time in decades.

Energy demand in the organization for Economic Cooperation and Development had been growing at a modest 1% for the three decades between 1990 and 2020, Global Corporate Venturing author Fernando Moncada Rivera noted this week in a report about the latest trends in energy investing. In 2024, the rate of demand growth doubled to 2.2%, which forecasters expect to continue.

There were signs, of course. All those deals between Big Tech and energy suppliers, including gas generators and even the operator of the idled Three Mile Island nuclear power plant, indicate that the industry was going all in on artificial intelligence. Because of that bet, they needed to secure reliable electricity supply—and that overrode their net-zero ambitions, revealing in the process the major drawbacks of alternative energy sources, namely, the lack of reliability.

It seems that the perception of an AI race is quite real for many—and the race is urgent. In the United States, power utilities are delaying the retirement of so-called peaker plants, used only during demand spikes. They are also extending the lives of coal plants, and coal production is growing in response to all that new demand for power.

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“The priorities are clearer now. It’s speed first, cost second, clean third,” the report cited one investment executive as saying. “The mandate has now changed to: I need to win,” TechEnergy Ventures’ chief investment officer, Alejandro Sole, also told the publication, adding that in that race to win, the importance of how low-carbon a company’s energy supply was had given way to how fast this supply could be secured, and at what price.

One might argue here that this represents a course correction for the investment industry. Five years ago, transition industries were all the rage, and Big Tech waved its power purchase agreements with wind and solar generators as guarantees of its green credentials and evidence that it was very serious about reducing its emissions to net zero. Now, Big Tech and the booming AI-related startup sector have all realized that, first of all and above all else, they need energy that is there on demand, regardless of how it was generated.

“The velocity and pragmatism with which the world has refocused on this topic has been surprising. There are a lot of good energy startups that, if they’re not at the centre of AI, it’s as if no one is interested, even if they have a lot to offer,” TechEnergy Ventures’ Sole also told Global Corporate Venturing.

The AI segment of the tech industry is certainly bursting at the seams with hopefuls, so much so that some are starting to suspect a bubble. But until such time as the bubble bursts—or doesn’t—energy supply security will remain a top priority, with a twist. The twist is that some claim artificial intelligence can improve the performance of wind and solar. In fact, some believe that AI itself is instrumental for the energy transition by helping transform the grid and improve power generation and distribution, while keeping energy affordable.

“From optimising grids to scientific breakthroughs, AI can help advance the shift to reliable, affordable renewable energy – unlocking the full potential of AI to benefit everyone,” OpenAI’s VP of Global Business, Nate Harbacek said in a survey conducted last year by Microsoft and Adnoc. This certainly sounds like a win, but there are challenges, and they are financial challenges. All that “unlocking” requires massive investment in grid upgrades that, in addition to money, also take time that cannot be reduced, not least due to a shortage of qualified workers to carry out the upgrades—once the money is secured.

But as indicated by tech industry executives, the rush to secure energy supply is on now, and nobody has time to wait for those grid upgrades. The AI race is not the only reason for that rush. Another big reason for that rush is boosting energy resilience amid global geopolitical upheaval that is making politicians and energy executives nervous, a recent study from Siemens has suggested. So, like energy investors, politicians once spearheading so-called climate action are now making supply security a priority.

This is not all bad news for energy transition businesses. Per that Siemens study, local energy production is key to achieving that supply security that has become priority number one. And wind and solar are the easiest forms of local energy production—even if more and more often there is too much or too little of them. But that could be a problem for another day.

By Irina Slav for Oilprice.com

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