Excess Returns Podcast

Episode: "Electricity Is the New Oil | Rob Thummel on the Energy Opportunity from the AI Boom"

Date: October 6, 2025
Guest: Rob Thummel (Tortoise Capital)

Episode Overview

This episode explores how the accelerating development and deployment of AI is fundamentally reshaping energy demand—particularly for electricity. Rob Thummel, Managing Director at Tortoise Capital, joins hosts Jack Forehand, Justin Carbonneau, and Matt Zeigler to discuss how "electricity is the new oil," why natural gas and nuclear are likely to lead the next era of energy supply, and where investors should look in this rapidly changing landscape. With investments in energy infrastructure, digital hardware, and data centers surging, Rob outlines both the challenges and opportunities of powering the AI economy, providing a data-driven look at macro energy trends and actionable investing insights.

Key Discussion Points & Insights

1. The New AI-Driven Energy Paradigm

• AI’s demand for electricity is now the bottleneck:
  “The regulator on the development and the pace of development of AI is going to be electricity…that’s why we say going forward, what’s going to drive the economy? It’s AI. But what does AI need? It needs electricity. So electricity is the new oil as the main driver of the future economy, both domestically and globally.” — Rob (00:00)

• Staggering scale of growth:
  “We’re going to have to add three Japans of electricity here to the US between now and 2050.” — Rob (00:27, 14:50)
  This equates to roughly a 75% increase in U.S. electricity demand between now and 2050, driven in large part by hyperscalers and data center expansion.

2. Evolving U.S. Energy Mix & Infrastructure Needs

• Current mix:

  • Oil and natural gas each provide about one-third of U.S. energy.
  • Nuclear: ~10% (of electricity production, it's about double that).
  • Wind and solar: Single-digit percentages of total U.S. demand.
  • Biofuels and other sources comprise the rest.
    (06:41–07:25)

• Fossil fuels remain critical:
  “For two decades, actually longer than that, three or four decades, fossil fuels, hydrocarbons have represented over 80% of the energy supply to us…You can’t just replace this stuff overnight.” — Rob (03:08–03:45)

3. Energy Poverty & Global Perspective

• There are still over a billion people living in energy poverty worldwide, especially in populous countries like India and China, where per capita energy use is a fraction of that in the U.S. As these economies grow, so will global energy demand. (05:01–05:46)

4. AI, Data Centers, and Incremental Electricity Demand

• Hyperscale data centers:

  • Mega-projects like OpenAI/Nvidia’s Stargate (Abilene, TX) and Meta’s Hyperion campus (Louisiana) exemplify the explosive demand for power.
  • Vacancy rates for existing data centers are under 3%, with demand for capacity and cooling surging. (12:17–13:31, 37:08)

• Magnitude of demand:
  U.S. electricity demand has been flat (~4,000 terawatt-hours/year) for two decades but is now poised to grow sharply due to AI/data center needs. Each new 1,000 terawatt-hours added is equivalent to the total power generation of Japan. (13:49–14:45)

5. Challenges Scaling Renewables

• Grid and storage limitations:
  “The big challenges for wind and solar…first of all, you need a bigger transmission network...but the biggest step change would be the development of large-scale battery storage...and we don’t have a solution yet.” — Rob (17:05–17:51)
• Baseload reliability:
  Data centers require uninterrupted (baseload) power, which wind and solar alone cannot reliably provide. This has led large tech companies to pivot back toward natural gas and nuclear as foundational sources. (16:09–17:03)

6. The Case for Natural Gas and Nuclear

• Natural gas as the bridge:

  • It’s abundant, efficient, and has enabled the U.S. to become the world’s largest energy producer and exporter.
  • When gas replaced coal, U.S. carbon emissions from power generation fell by 20% since 2005. (24:11)

• Nuclear’s resurgence:

  • Carbon-free and gaining public sentiment, with facilities like Three Mile Island being restarted to power Microsoft’s data centers.
  • Key challenge: limited uranium enrichment capacity in the U.S.; must be addressed for nuclear to scale. (20:35–23:52)

7. Inflation, Shale Revolution, and Energy Security

• Shale as an inflation shield:
  “The US Shale industry is probably one of the most underappreciated technologies and impactful—without this, we would have a huge problem with inflation... Instead, prices for oil and gas are lower than they would have been, and so is inflation.” — Rob (25:29–27:47)

8. Energy Investing: Infrastructure Over Commodity Picks

• Steady, fee-based returns:
  Energy infrastructure companies (e.g., pipelines, storage) are less sensitive to commodity prices and benefit from stable, recurring cash flows—more like “toll bridge” businesses than commodity bets. (32:31–34:56)
• Dividend and total return appeal:
  “You can get 5% dividend yields or more from energy infrastructure companies that are going to grow 3 to 5%...” — Rob (34:40)

9. Investing in the AI-Enabled Energy Transition

• Second-order beneficiaries:
  Beyond mega-cap tech, “the enablers of the AI revolution” include data storage device makers (Seagate, Western Digital), network switch suppliers (Arista), advanced cooling companies, and even Bitcoin miners transitioning to data center power suppliers.
• Tortoise’s Three-Pillar Framework:
  Tortoise’s new active ETF (TCAI) covers:
  • Energy systems (core infrastructure)
  • Data infrastructure (data centers & network)
  • Digital hardware (technology/components)
    (36:15–41:22)

10. U.S. Grid Resilience and Expansion

• Power grid is more resilient; now expansion is urgent:
  “A lot of the electricity companies were still spending money and they were investing money in making the grids more resilient... Now we’re going to enter a new phase where we’ve got to expand the grid as well.” — Rob (49:25–51:14)
• Significant capital will be needed for transmission, substations, and hardening against outages and cybersecurity risks.

Notable Quotes & Memorable Moments

• “Electricity is the new oil as the main driver of the future economy, both domestically and globally.”
  — Rob (00:00, 09:01, 09:41)

• “We’re going to have to add three Japans of electricity here to the US between now and 2050.”
  — Rob (00:27, 14:50)

• “The best investments I’ve ever made are ones when everything… seems like it’s time not to be investing.”
  — Rob (00:30, 53:42)

• On the 20-year U.S. energy demand plateau and coming surge:
  “That number of 4,000 [terawatt-hours] has been consistent for 20 years. But what’s changing is that’s about to change and it already is changing in a major way.” — Rob (13:49–14:08)

• On natural gas and U.S. energy security:
  “Because of U.S. shale technology, the U.S. has become the largest oil and gas producer in the world and the largest energy exporter in the world. Without this, we’d have a huge problem with inflation.” — Rob (00:37, 26:01)

• On energy infrastructure investing:
  “A lot of the energy infrastructure companies don’t benefit from higher or lower oil prices. They basically charge a fee…they’re more volume driven, less commodity price sensitive.” — Rob (33:41)

• On the opportunity for “second order” AI beneficiaries:
  “Those companies really, the benefit of AI to them has yet to be entirely felt, especially in their valuations…they’re underrepresented in portfolios, but they’re underappreciated as well.” — Rob (40:30)

• On why infrastructure investment matters now:
  “If we’re going to generate—if electricity demand in the US and we’re in the age of electricity—it’s going to grow 75% by 2050, we’re going to need a lot more electricity generation and…more power lines, more generation, more transmission, more substations, everything.” — Rob (49:44)

Timestamps for Key Segments

• 00:00 – 01:00: Electricity as the new oil; AI’s energy dependency
• 02:13 – 05:46: Evolution of energy sector; importance of hydrocarbons; global energy poverty
• 06:41 – 07:25: U.S. energy mix breakdown
• 13:04 – 14:45: Explosive growth in electricity demand & comparison to Japan
• 15:35 – 17:51: Limits of renewables for AI/data center energy needs
• 20:23 – 23:52: Nuclear energy challenges and resurgence
• 25:29 – 27:47: U.S. shale revolution’s impact on inflation and energy security
• 32:31 – 34:56: Energy infrastructure as a stable investing opportunity
• 36:15 – 41:22: Tortoise’s “Three Pillar” AI Infrastructure investing strategy
• 41:22 – 44:49: Second order AI/energy beneficiaries, bitcoin miners as power suppliers
• 49:25 – 51:14: Power grid resilience and need for expansion
• 53:42 – 54:55: Rob’s best investing lessons

Takeaways for Investors

• Electricity demand is set to surge, largely from AI and data centers.
• Natural gas and nuclear are realistically best positioned to meet new baseload demand.
• Renewables face significant grid and storage challenges, particularly for 24/7 reliability.
• Infrastructure “toll bridge” businesses offer compelling, defensive, and dividend-rich ways to play energy.
• The biggest investment opportunities may not be the biggest tech names, but rather the less obvious “enablers”—infrastructure, data storage, cooling, and grid buildout companies.
• U.S. energy abundance, driven by shale, is a major tailwind for both the economy and energy prices.

For Listeners Who Haven’t Tuned In

This episode is a data-packed, practical exploration of the seismic shifts reshaping energy investing in the age of AI. Rob Thummel breaks down complex topics—energy demand, infrastructure, investing frameworks—into actionable insights, highlighting both the inevitability of growth in electricity need and how investors can capture the adjacent opportunities. If you want to understand “the picks and shovels” of the AI boom and why “electricity is the new oil,” this episode is essential listening.