Hard Fork: AI's Energy Path  ## Document Notes ## Highlights - **Long Contracts Unlock Power Investment** - The Trump administration pushed tech companies to underwrite new generation capacity via long-term contracts to meet surging AI demand. - Long contracts give certainty to developers and can unlock roughly $15 billion for new power plants. Transcript: Jaeden Schafer So the Trump administration is joined by a group of governors in the mid-Atlantic and Midwest. I think most, it's kind of bipartisan group that's coming together on this, but they've all asked PJM Interconnection. So this is the grid operator that serves about 65 million Americans. It's over about 13 different states and it is, you know, holding an quote unquote emergency power auction to procure new generation capacity. So the idea is that tech companies, especially those that are building these huge data centers everywhere, are going to bid on 15-year power contracts that could help underwrite the Construction of a lot of new power plants, essentially trying to keep pace with all of the surging electrical demands. Literally double as a lot of new facilities, a lot of subsidies and government grants went out to a lot of these companies, building data centers, building chip fabs. And then of course, the electrical bill of everyone else goes up as those ones are subsidized. So in my opinion, this is a fantastic program. We need to build more power generation. This is something that's definitely, I think, on the top of everybody's mind in the industry. And how to do that is something that we're all discussing. This deal right here, I think, could unlock up to about $15 billion in new generation capacity. ([Time 0:01:13](https://share.snipd.com/snip/7702eeb0-6bba-43d8-bfc7-440971df9330)) - **Compute Is Outpacing Grid Expansion** - Data center electricity demand is skyrocketing and utilities can't keep up because new generation takes years to build. - Without planned capacity increases, reliability and consumer costs will suffer as load forecasts grow. Transcript: Jaeden Schafer And of course, electrical demand from data centers is absolutely skyrocketing right now. Utilities are really struggling to keep up because all of the new generation takes years, and it is a massive investment if you're going to build them. So right now, the grid really can't run on air, you know, it can't run on paperwork. So it needs actual concrete, physical plants, and it needs these things online. So there's a lot of different strategies that, you know, companies are using to try to make this a reality. One from Microsoft is they went to the decommissioned nuclear power plant on Three Mile Island and said, hey, if you guys can recommission this, we give you a billion dollars to do that And then we'll make a contract to buy all of the power that comes out. So we're seeing, you know, decommissioned nuclear power plants come back online or start getting retrofitted to come back online to generate electricity. There's a lot of deals. I mean, we even see like there's a whole scandal with XAI and I believe Memphis where they had a big data center there and they literally just brought on like thousands of these portable Diesel generators and turned them all on to power their whole facility because they couldn't get enough power from the grid so obviously this is a very acute problem for a lot of these Things and um with all of this we need to start i think doing some you know better planning than just firing up a million generators um and i mean there's some you know there's some like Good angles like the the three mile island nuclear, but that's not going to be something that, you know, there's like a million of these decommissioned nuclear power plants all over The country that can be reactivated. There's a few of these little, you know, sort of side projects or a few of these sort of undiscovered areas that people can capitalize on. But for sustainable long term, America needs to be building a lot more energy consumption. So with all of that going on, PJM and a lot of the power markets in the region have been under a lot of strain. And so these capacity auctions in recent years, they had seen some record high prices. And I think there's real concern among regulators about the reliability as kind of load forecasts are continuing to just increase. So right now you have the Trump administration's plan, which is looking to help with reliability. ([Time 0:02:32](https://share.snipd.com/snip/ff3b9a0d-1bc5-4a85-ae36-d314938e2a0a)) - **Three Mile Island Was Offered $1B** - Microsoft offered $1 billion to recommission Three Mile Island and contract its power to secure supply for its workloads. - Jaeden uses this example to show creative deals that bring decommissioned nuclear plants back online. Transcript: Jaeden Schafer One from Microsoft is they went to the decommissioned nuclear power plant on Three Mile Island and said, hey, if you guys can recommission this, we give you a billion dollars to do that And then we'll make a contract to buy all of the power that comes out. So we're seeing, you know, decommissioned nuclear power plants come back online or start getting retrofitted to come back online to generate electricity. There's a lot of deals. I mean, we even see like there's a whole scandal with XAI and I believe Memphis where they had a big data center there and they literally just brought on like thousands of these portable Diesel generators and turned them all on to power their whole facility because they couldn't get enough power from the grid so obviously this is a very acute problem for a lot of these Things and um with all of this we need to start i think doing some you know better planning than just firing up a million generators um and i mean there's some you know there's some like Good angles like the the three mile island nuclear, but that's not going to be something that, you know, there's like a million of these decommissioned nuclear power plants all over The country that can be reactivated. ([Time 0:02:58](https://share.snipd.com/snip/e9c1dc59-046a-47d9-aabb-8e7df646765f)) - **Diesel Generators Power A Data Center** - XAI reportedly deployed thousands of portable diesel generators at a Memphis data center when the grid couldn't supply enough power. - This incident illustrates acute, avoidable power shortfalls at large facilities. Transcript: Jaeden Schafer So we're seeing, you know, decommissioned nuclear power plants come back online or start getting retrofitted to come back online to generate electricity. There's a lot of deals. I mean, we even see like there's a whole scandal with XAI and I believe Memphis where they had a big data center there and they literally just brought on like thousands of these portable Diesel generators and turned them all on to power their whole facility because they couldn't get enough power from the grid so obviously this is a very acute problem for a lot of these Things and um with all of this we need to start i think doing some you know better planning than just firing up a million generators um and i mean there's some you know there's some like Good angles like the the three mile island nuclear, but that's not going to be something that, you know, there's like a million of these decommissioned nuclear power plants all over The country that can be reactivated. There's a few of these little, you know, sort of side projects or a few of these sort of undiscovered areas that people can capitalize on. ([Time 0:03:09](https://share.snipd.com/snip/e2bf46a7-2fdb-4d0f-bdc0-f2f3c5ba623f)) - **Signal Demand To Accelerate Buildout** - Use long-term purchase agreements to lower financing costs and speed construction of big power projects. - Governments and tech buyers should signal demand to unlock private investment fast. Transcript: Jaeden Schafer Long term contracts bring a lot of certainty that private developers need to invest in big power projects. They also guarantee revenue, which can lower financial costs and can help accelerate the construction timeline for new generation. ([Time 0:05:51](https://share.snipd.com/snip/b8d703c0-91b8-4b14-9da4-fbaf6b6f7229)) - **Intermittency Limits Renewables For 24/7 Loads** - Solar and wind are crucial but intermittent and can't alone supply 24/7 data center loads. - Batteries help short-duration gaps but currently fall short for long-duration, always-on industrial demand. Transcript: Jaeden Schafer Something else that I know a lot of people like to talk about is a lot of these renewables, you know, electrical sources, solar, wind as kind of being the silver bullet. I think that they're really important for our energy future. But as far as what we're doing today, I think something that not a lot of people like to talk about, a lot of the mainstream news does seem to gloss over, is the fact that solar and wind is Intermittent. So they only generate when sun is shining or when the wind is blowing. Data centers and a lot of these really heavy industrial loads, they don't get to take, you know, any sort of breaks or clock out when the grid goes quiet at night. So they need a firm, dependable 24-7 electricity. Now, the solution in the past for that has been battery storage, and today is battery storage. This definitely helps, but it definitely is not a full replacement because batteries paired with solar can cover, you know, definitely a few hours of demand, but they are still limited For long duration loads. And something that I had an experience with when I was growing up, I sailed from California to the South Pacific on a sailboat, which we largely were powering by solar. And, you know, we would have times where we'd have a storm blow over for like four or five days of really cloudy, and our batteries were completely depleted. It was really scary because all of our like an autopilot navigation systems, all of our charts, like, you know, everything we're running on our ship was depending on these batteries In the solar, and it was all starting to glitch out and stopped working. And, you know, lucky for us, the storms passed, we've recharged our batteries, we moved on. But this has always kind of been something that's reminded me that while these are amazing, you know, options, we use solar panel for like a whole year on this ship, it's not always sustainable, You do need, I think, multiple facets, multiple types of energy to power this stuff. I think for I lot of these kind of data centers, it's going to be the same thing. When a weather event happens or there's a really prolonged, you know, cloudy period, you still need very consistent solid energy. And so solar and wind can't keep up with that forever. So I think this is why right now the current administration is putting a push to include some traditional baseload capacity. And I think at the end of the day, the best option is multiple sources of energy production. ([Time 0:06:07](https://share.snipd.com/snip/f2877b59-2632-4a1b-a63f-9362adc665ae)) - **Sailing Story Shows Battery Limits** - Jaeden recounts sailing on a solar-powered boat that lost power after days of storms and drained batteries. - The story underscores reliance risks of solar-plus-battery systems during prolonged low-generation periods. Transcript: Jaeden Schafer And something that I had an experience with when I was growing up, I sailed from California to the South Pacific on a sailboat, which we largely were powering by solar. And, you know, we would have times where we'd have a storm blow over for like four or five days of really cloudy, and our batteries were completely depleted. It was really scary because all of our like an autopilot navigation systems, all of our charts, like, you know, everything we're running on our ship was depending on these batteries In the solar, and it was all starting to glitch out and stopped working. And, you know, lucky for us, the storms passed, we've recharged our batteries, we moved on. ([Time 0:06:57](https://share.snipd.com/snip/68e0edce-b4f2-4eb5-844d-ca8060874cbf)) - **Align Costs With Demand Creators** - Making big tech pay for capacity better aligns costs with who creates demand and prevents ratepayers from shouldering the risk. - Contracting for capacity can restrain regional rate increases driven by rapid data center growth. Transcript: Jaeden Schafer Okay, so I think something else I've heard a lot of people critical on this is, you know, like there's a whole TechCrunch article that's like, you know, asking why you'd make tech giants Pay for the power that they might not use. And like, maybe this isn't what we need to do. I think if you kind of look at this, there's, there's a couple ways to look at this. But really, a lot of these companies are building massive facilities, right? All these data centers that they require continuous, powerful electricity. They aren't just occasional users. Like if you if you set up a data center, it's not something that can just like, you know, use electricity every once in a while, like it's going to be sucking electricity, and lot of it for Forever, basically. So whether you're trying to power an AI training cluster or cloud service, critical internet infrastructure, they're depending on power, basically like a factory does. And it's very constant and consistent. So when data centers connect to the grid, and they haven't really ensured, you know, that there is enough power in future generation, it transfers the risk onto rate payers and families. So electrical costs have already been rising in the JPM region. I think that's why we're kind of looking at it and addressing it there specifically right now. I think in part of this is because the capacity markets are being stressed by demand growth. There's a lot of demand. I personally have seen this. The electrical costs from when I first purchased a house in Arizona has doubled. I was just looking over my finances and looking at like the last five years of finances and today versus like four years ago, my electrical costs have doubled. I know maybe people could say like, maybe I'm using double as much electricity. I'm not. It's the exact same. It's the same AC unit. It's the same house. Everything's exact same. The electric costs have just literally doubled. So I think we're definitely seeing this. I think by having these companies, you know, contract for new capacity, it kind of better aligns responsibility with the demand like they are using this. And I think that this is why it's important to get them to start paying for this, in my personal opinion. I also say it's worth noting that JPM hasn't been fully on board with this whole idea yet. So it seems more like the Trump administration and a lot of these bipartisan governors are kind of pushing this on them. They are reviewing the proposal and they're working through some competing stakeholder interests. I think that's exactly how this probably should work. ([Time 0:08:12](https://share.snipd.com/snip/593071e3-7acd-48b8-9116-bea02adf3952)) - **Proposal Sparks Necessary Market Debate** - PJM hasn't fully committed and is reviewing stakeholder interests, showing the proposal must pass market scrutiny. - The administration's move shifted the conversation and forced planning for compute-driven energy needs. Transcript: Jaeden Schafer I also say it's worth noting that JPM hasn't been fully on board with this whole idea yet. So it seems more like the Trump administration and a lot of these bipartisan governors are kind of pushing this on them. They are reviewing the proposal and they're working through some competing stakeholder interests. I think that's exactly how this probably should work. Greater operators and private companies negotiating in kind of a market framework rather than having this all imposed on them. But I do think that the administration's move has already kind of shifted the conversation in a really meaningful way. I think it sparked a really serious debate about how we plan energy infrastructure. ([Time 0:10:03](https://share.snipd.com/snip/b7193016-d50e-492c-985b-7255d8d78338))