Emerging Tech and GenAI Energy Appetite Could Be the Push Renewables (and the Planet) Need - 9/2024 TRN Newsletter
Executive Bullet Point Summary:
Quantum Computing's Growing Relevance: VP Harris highlighted quantum computing alongside AI during a debate, signaling the importance of emerging technologies for national security. Quantum computing's ability to break current encryption poses a significant cybersecurity threat.
Energy Demands of Emerging Tech: Both AI and quantum computing require immense energy due to computational and cooling needs, contributing to the environmental strain of tech's rapid growth.
AI's Energy Footprint: AI models, particularly large-scale machine learning, are energy-intensive, and their increased adoption has led to a growing energy consumption crisis.
Blockchain Energy Use: Bitcoin's proof-of-work (PoW) consensus mechanism is highly energy-intensive, with the cryptocurrency consuming as much electricity annually as the entire state of New York. However, more efficient blockchain networks, such as Ethereum, have a fraction of Bitcoin's power demand.
Public Health and Bitcoin Mining: Communities like Granbury, Texas, are reporting health issues near Bitcoin mining centers, raising concerns about public health impacts and potential legal liabilities for investors.
Tech's Role in Energy Innovation: Companies like Microsoft and Amazon are investing in renewable energy and more efficient data centers to reduce the carbon footprints of emerging technologies.
Web3's Potential in Energy Transition: Blockchain and Web3 technologies are emerging as tools for increasing transparency, efficiency, and collaboration in energy management, including energy trading and carbon credit markets.
Carbon Credit Controversy: Carbon credits, while intended to offset emissions, have faced criticism for inefficiencies, greenwashing, and fraud, with Shell's recent double-counting scandal highlighting systemic flaws.
Happy Autumn, everyone!
This month we’re talking briefly about quantum computing and taking a closer look at energy use (and abuse) for emerging technology. Let’s get to it.
Like about 67 million other people, I tuned in to watch (some) of the debate between Vice President Harris and former President Trump. While several more colorful soundbites have stolen the show, the one that perked up my ears was this one from the VP:
“… focusing on investing in American based technology so that we win the race on A.I. and quantum computing, focusing on what we need to do to support America's workforce, so that we don't end up having on the short end of the stick in terms of workers' rights.”
Out of the dozens of soundbites she needed to remember, I was surprised (and pleased) that her team prioritized not only AI but also quantum computing as a sound bite in the debates. It was likely a signal to the tech industry rather than the broader debate audience, most of whom do not understand the connection between AI, quantum computing, and national security.
Why Does Quantum Matter?
It matters because if quantum computing erupts onto the scene like ChatGPT did - meaning, with unregulated growth and open access - it could jeopardize national security and all sensitive data of unprepared nations.
Why? Because quantum computing can solve complex mathematical problems much faster than classical computers. This poses a significant threat in its potential to break current encryption methods that protect sensitive data, such as financial transactions, personal information, and national security communications.
Without proper regulation and preparation, hackers could compromise global cybersecurity. You’ll be hearing more from us about quantum computing going forward.
GenAI Energy Use and Emerging Technologies
Speaking of quantum computers, one major hurdle is their energy needs, which represents a “quantum leap” in consumption due to the cooling and computational requirements.
This leads us to a common challenge faced by most emerging technologies—ironically, the tech with the automation, transparency, and increased efficiency to save the planet requires immense energy consumption. AI and the Bitcoin blockchain demand vast computational resources, putting strain on energy grids and raising concerns about their environmental impact.
AI and Energy Use
Artificial Intelligence (AI) models are notoriously energy-intensive, especially large-scale machine learning algorithms. Data centers supporting AI applications consume significant electricity. As AI adoption continues to grow, so does its energy footprint.
Source: ThunderSaid Energy
Much of the energy burden comes from cooling the hardware and running computations for extended periods. The push for more powerful AI systems means water and energy consumption will remain a critical challenge unless sustainable solutions are implemented.
Blockchain: Bitcoin's Energy Use
Quick reminder: Cryptocurrencies like Bitcoin use blockchain as a ledger to record transactions. Before miners record transactions to the blockchain, they verify them by reaching a consensus. There are several consensus “mechanisms,” and they are all confusing.
The only thing most people need to remember is that the type of consensus mechanism is what determines the blockchain’s energy needs. The “PoW” mechanism is much more energy-intensive than most, and that is the one that Bitcoin uses.
The US Energy Administration Information estimates that Bitcoin mining equals about 0.6–2.3% of the US electricity consumption.
Another source reports that Cambridge University’s Cambridge Bitcoin Electricity Consumption Index estimates that as of January 2024, Bitcoin uses 141-160 terawatt-hours (TWhs) of electricity annually. That’s about 0.6-0.7% of the world's electricity in 2022. It’s also equal to all New York State and about a third of Texas’s 2021 electricity consumption.
IMPORTANT POINT, my friends: Most modern blockchain networks are much more energy efficient than Bitcoin. Ethereum represents 0.005% of Bitcoin's power demand, largely because of its different consensus mechanism (PoS).
Public Health Issues Looming
Apart from energy use considerations, even more disturbing is that people in Granbury, Texas, are reporting health issues. Granbury is the home of one of Marathon Digital Holdings’ Bitcoin mining centers. Bitcoin mining at scale, near populated areas, is an issue to keep an eye on for public health impact, ethics, and unresolved claims representing potential business liabiltiy risk for investors.
Emerging Tech Energy Solutions
The AI and Blockchain tech sectors are aware of their energy consumption risks and are working to address them.
I’m not saying the situation is perfect.
However, the nuance that often gets lost in clickbait headlines and articles reporting on tech’s “massive” energy use is this - the tech industry doesn’t create energy sources; it is forced to use what is available. I remember during the Oil Shock in 1973 my Dad got up early to wait in the gas lines to fill up our trusty used VW Beetle. He was an architect, and that meant we had architecture magazines laying around. After the oil crisis there was a tidal wave of articles about solar and the solar transition. It never happened.
If the oil, gas, and coal (fossil fuel) industries had not spent decades since the Oil Shock 70’s fighting regulation, renewables, solar, and cries for reforms, tech companies would be plugging into a cleaner, more resilient grid today.
In the absence of that, tech is doing one of the things it does best - innovating to increase efficiencies. For AI, companies are working on more efficient data center designs, liquid cooling systems, and the development of algorithms that require fewer computational resources.
The other thing that cash-flush Big Tech is good at is inking huge deals. Geekwire reports that tech companies are investing in renewable energy sources to power AI systems and offset carbon footprints. In May, Microsoft signed the largest renewable energy purchase deal ever made by a corporation, locking in 10.5 gigawatts to fuel a fraction of its data center operations worldwide.
The agreement with Brookfield Asset Management’s green energy arm will support projects in the U.S., Europe, Asia and Latin America.
In March of this year, Amazon Web Services reported plans to spend $650 million on a data center in Pennsylvania powered by the nation’s sixth-largest nuclear power plant, providing up to 960 megawatts of carbon-free energy for its operations.
Building out the Energy Infrastructure
Those deals are just two examples illustrating how the infrastructure for emerging technologies will require massive investment.
The investment and asset management community is actively interested in infrastructure deals, recognizing economic opportunities and the energy challenges.
Venture capital and institutional investors are pouring billions into "green" tech infrastructure, such as more efficient data centers, renewable energy projects, and sustainable computing innovations. ESG (Environmental, Social, and Governance) investing is evolving, driving the push for infrastructure that minimizes environmental impact while supporting technological growth.
For a deep dive on this topic, check out McKinsey’s December 2023 report: Accelerating the Journey to Net Zero.
Web3 Technologies and the Energy Transition
In Nov. 2022, none other than Shell and MIT reported that Web3 technologies could revolutionize the energy sector by increasing transparency, efficiency, and collaboration in energy markets.
We’ll be revisiting Shell in another few paragraphs, so stay tuned,
Quick reminder: Web3 is a term used to describe the next generation of the internet, characterized by decentralization, blockchain technology, and tokenization. In the context of energy, these technologies create innovative ways to manage energy production, distribution, and consumption.
For example, blockchain can track the provenance of energy from its source to the consumer. This can help ensure that consumers get the energy they pay for and that renewable energy sources are used effectively.
Web3 technologies can also used to create new markets for energy trading. For example, peer-to-peer energy trading platforms can allow consumers to buy and sell energy directly from each other without needing a central intermediary.
Carbon Credits - the Jury is Still Out
Speaking of new energy trading markets…no discussion of tech and energy use is complete without mentioning carbon credits. Carbon credits are a market-based tool used to reduce greenhouse gas emissions.
A carbon credit generally represents a metric tonne of carbon dioxide or its equivalent that has been reduced, sequestered, or avoided.
Companies or individuals can purchase carbon credits that offset their emissions by support projects that reduce carbon footprints such as planting trees, installing solar panels, or investing in renewable energy.
The concept is that if, for whatever reason, companies can’t reduce emissions quickly, purchasing carbon credits contributes to reducing the overall global carbon footprint as companies transition to real emissions reduction.
In the context of energy use in emerging technologies, carbon credits can offset some of the environmental impact of AI, for example.
As you might imagine (or have heard), carbon credits are not without controversy. They have had mixed impact since their invention in the late 1990s, with successes and significant challenges.
While carbon credits have led to some emissions reductions and catalyzed investment in renewable energy and environmental projects, they have also been criticized for inefficiencies, limited scale, ineffective outcomes, cases of fraud, and greenwashing.
Which leads us back to Shell Corp.
Shell’s shell game, revisted.
In 2024, Shell again made the news, this time with a “phantom” carbon credit double-counting scandal.
According to CFO magazine, “The controversy centers around Shell’s Quest carbon capture facility in Alberta, Canada, which, under a provincial subsidy scheme, registered carbon credits amounting to double the actual volume of emissions avoided between 2015 and 2021.
This scheme, which was reduced and then terminated in 2022, resulted in the registration of 5.7 million credits without corresponding CO2 reductions.
I haven’t been able to find out how the credits were recorded - was it on a blockchain or not? I’m guessing not.
Or if the project was on chain, that might be how the fraud was exposed. It depends on how the blockchain was set up.
If you know, please let me know.
Parting Shots
Solving the global energy puzzle is like a colossal chess game with hundreds of stakeholders on the board, each vying for a piece of the pie. It’s another historic phase of human development.
One reason I write about tech is because it is the solutions sector. People in emerging tech have created tools that can solve the planet’s problems.
The challenge is in the implementation, or lack thereof.
While progress is happening, the pace of change often falls short. Political maneuvering, corporate interests, and shareholder value don’t change the fact that our planet's resources are finite. Ironically, the Earth, the ultimate silent arbiter, will have the final say.
FAQs for September 2024:
Why is quantum computing important for national security? Quantum computing can solve complex mathematical problems faster than traditional computers, making it a potential threat to current encryption systems that protect sensitive data like financial transactions and national security communications.
How does AI contribute to energy consumption? AI models, especially large-scale machine learning algorithms, require significant computational resources and cooling systems, leading to high energy consumption. This trend is expected to continue as AI adoption grows.
Why does Bitcoin consume so much energy? Bitcoin uses a proof-of-work (PoW) consensus mechanism, which is highly energy-intensive as it requires miners to solve complex computational puzzles to validate transactions on the blockchain.
Are there more energy-efficient blockchain technologies? Yes, networks like Ethereum, which transitioned to a proof-of-stake (PoS) consensus mechanism, consume far less energy—about 0.005% of Bitcoin’s power demand.
What are the public health risks of Bitcoin mining? Communities near large-scale Bitcoin mining operations, like Granbury, Texas, have reported health issues, raising concerns about the environmental and public health impacts of these energy-intensive operations.
What is the tech industry doing to reduce its energy consumption? Tech companies are investing in renewable energy sources and more efficient data centers. For example, Microsoft signed a major renewable energy deal, and Amazon Web Services is planning to use nuclear energy for its operations.
What role can Web3 play in the energy sector? Web3 technologies, like blockchain, can increase transparency in energy markets, track renewable energy sources, and enable peer-to-peer energy trading, driving innovation in the energy transition.
What are carbon credits, and why are they controversial? Carbon credits allow companies to offset their emissions by supporting environmental projects. However, they have been criticized for inefficiencies, fraud, and greenwashing, as seen in Shell’s recent carbon credit double-counting scandal.
What’s the biggest challenge in solving the energy puzzle for emerging technologies? The challenge lies in the pace of implementation. While the tech industry is innovating, progress in energy-efficient infrastructure and regulatory reform often falls short, delayed by political and corporate interests.