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Welcome to Thoughts on the Market. I am Mayank Maishwari, Morgan Stanley's South Asia Energy Analyst. Today, How AI and Electrification are rewriting the rules of Global power It's Tuesday, December 2nd at 9pm in Singapore. If you have noticed, your electricity bills are climbing and headlines are buzzing with talk of AI, you're not alone. The way we use and need power is changing fast and it's impacting everyone from homeowners to major tech companies. Global power consumption is surging at the fastest pace in over a decade. Annual demand is set to rise by more than 1 trillion kWh every year through 2030, with AI driven data centers contributing nearly a fifth of that growth. We estimate about $3 trillion investments in data centers by 2028. With power consumption growth of nearly about 126 gigawatts in these three years till 28. This is almost as large as Canada's total power consumption and in this context, power prices are set to further rise. In 2024, the latest full year data available, global power sector investments hit a new high of $1.5 trillion and consumer power prices had risen by about 15%. By 2030, US power markets will account for half of the global data center power consumption and Asia will also see about a 15% spillover of that US hyperscaler demand, which will be also part of why some of the power markets in Asia will get a lot tighter. As power consumption rises, the difference between the price at which electricity is sold and the cost to generate it, also known as power spreads, are likely to rise by nearly 15%. This expansion in profit margins could lead to higher earnings forecast for power generation companies and create $350 billion in value creation through the entire power supply chain. At the same time, years of underinvestments in electric grids have led to bottlenecks, sparking a wave of new spending and pushing the industry to rely more on natural gas, energy storage and other new technologies while also supporting the adoption of renewable power. In 2024, gas investments hit record highs and starting in 2026, gas is set to become a new truly global source of new power generation. Looking ahead, natural gas is expected to meet about a fifth of world's new power needs excluding China, and nuclear energy is well positioned for increased investments, while batteries, which is energy storage, is also getting to get a new set in terms of new investments across data centers and in markets like China. Moving forward, the power industry faces a multi decade transformation marked by unexpected shifts and opportunities. We'll see increased collaboration between fossil and non fossil fuels, wider adoption of tiered pricing and a surge in spot market and behind the meter sales, all driving longer lasting elevated power spreads. Gas, nuclear energy storage and fuel cell supply chains, especially in Asia and the US stand to gain from stronger pricing power, new growth prospects while greed operators benefit from higher investments and better returns. On the flip side, pure solar and wind producers may continue to see rising costs in Asia, something we have already seen in US and Europe as global greed leans more on batteries and steady fossil fuel supplies to balance the requirements of the rising needs of power across the supply chains in AI as well as domestic utilization of manufacturing. Ultimately, as AI and electrification supercharge power demand, the real challenge isn't just adding renewables. It's about building a resilient flexible grid and navigating the new economics of energy. Thanks for listening. If you enjoy thoughts on the market, please leave us a review wherever you listen and share the podcast with a friend or a colleague today.
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