How The AI Race is Driving an Energy Wild West

Summary

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WSJ What’s News – "How The AI Race is Driving an Energy Wild West"

Date: October 16, 2025
Host: Caitlin McCabe
Featured Reporter: Jennifer Hiller

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Episode Overview

This episode explores the mounting energy crisis driven by the explosive growth of AI and data centers in the United States. As tech companies scramble for more power, grid capacity and energy infrastructure can’t keep pace—leading companies to take unprecedented steps to create their own sources of electricity. The episode dives into how these energy challenges are reshaping the industry, introducing an “energy wild west,” and what this means for the future of AI, energy markets, and infrastructure policy.

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Key Discussion Points & Insights

1. Headlines and Market Movers

• Brief mention of global political and economic news, including U.S.-Venezuela tensions and oil trade negotiations impacting global markets.

2. The AI Boom's Insatiable Energy Appetite

[08:26]

• Host Caitlin McCabe: Highlights that the demand for electricity from data centers is set to reach a staggering 12% of U.S. usage by 2028—up from less than 2% pre-2020.
• Key Issues:
  • U.S. is not building power plants or transmission lines fast enough.
  • Supply chain disruptions and permitting delays further bottleneck expansion.
  • Urgent need for infrastructure threatens to stifle the AI boom.

3. Supply Squeeze and Infrastructure Lag

[09:14]

• Jennifer Hiller:
  • The U.S. needs to build 80 GW of new power capacity annually, but is 15 GW short each year.
  • Retiring old plants adds pressure; current construction isn't closing the gap.
  • Equipment shortages, particularly transformers and gas turbines, slow down all projects.
  • The permitting process for new power lines is notoriously slow due to legal hurdles.

“We need definitely a lot of new power and a lot of new power infrastructure to be able to accommodate all of the AI growth.”
– Jennifer Hiller [09:14]

4. The "Energy Wild West": Tech Companies Take Control

[10:25]

• Companies are building their own on-site power plants as a stopgap, sometimes considering permanent off-grid operations.
• Case Studies:
  • OpenAI’s Stargate project in West Texas uses a combination of on-site and grid power.
  • Elon Musk’s Memphis initiatives started entirely off-grid, with possible future grid connections.
  • Traditional backup generators at data centers are now considered for primary use during early operations.

“What some tech companies and data center developers are doing is essentially building their own power on site and just providing their own power plants.”
– Jennifer Hiller [10:36]

• These solutions are deemed “bridges” until the grid can catch up, but some may remain fully independent if the grid doesn’t expand.

5. The Scale of New Data Centers

[12:14]

• The energy needs of a modern data center are enormous; single sites can require as much electricity as 1,000 Walmart stores.
• Construction of substations, transmission infrastructure, and transformers to support this demand is slow and logistically challenging.
• The U.S. has ample generation capacity, but the concentration and instantaneous requirements of new data centers overwhelm local infrastructure.

“Some of them use, for instance, the power of a thousand Walmart stores... it takes a while to build that out.”
– Jennifer Hiller [12:14]

6. Outlook: Will Supply Catch Up?

• Near-term: Expect energy crunches and power races over the next five years as demand massively outpaces supply.
• Mid-term: Potential transition to oversupply once infrastructure projects catch up, though not all markets or companies may benefit equally.
• Ongoing: The race to secure power will likely become the new battleground for AI dominance.

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Notable Quotes & Memorable Moments

• On urgency:
  “People are really seeing this as a big crunch, maybe in the next five years or so, and that things may start to ease up after that.”
  – Jennifer Hiller [12:14]

• On solutions:
  “We’re seeing a lot of different creative solutions out there, but what some tech companies and data center developers are doing is essentially building their own power on site and just providing their own power plants.”
  – Jennifer Hiller [10:36]

• On the scale:
  “The size of these data centers is so overwhelming, it can be difficult to connect them in one location and provide that much power in one spot...”
  – Jennifer Hiller [12:14]

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Important Segment Timestamps

• AI and energy demand introduction: [08:26]
• Explanation of grid and supply challenges: [09:14]
• Tech companies building their own power plants: [10:36]
• Data center scale and infrastructure needs: [12:14]

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Takeaways

• The explosive growth in AI is creating a massive, immediate need for electricity that the U.S. grid is struggling to meet.
• Tech giants are increasingly building their own energy infrastructure, with some looking to permanently bypass public utilities.
• These emergency measures expose deep systemic planning failures in U.S. infrastructure and could have lasting impacts on energy policy, the environment, and the economy.
• The situation is fluid, with the potential for infrastructure to catch up in the long run—but the next five years will be marked by volatility and innovation as companies scramble to power the AI revolution.

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Episode Tone:
Urgent, insightful, and pragmatic, with a focus on systemic challenges and the creative, sometimes desperate, solutions emerging in response to AI’s runaway growth.

Transcript

[Jennifer Hiller]

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[Caitlin McCabe]

Crude prices gain as President Trump says India plans to pause buying Russian oil Plus the Trump administration moves to weaponize the IRS in its campaign against left leaning groups and tech companies pushing for AI dominance are desperate for power. Lots of it.

[Jennifer Hiller]

We're seeing a lot of different creative solutions out there, but what some tech companies and data center developers are doing is essentially building their own power on site and providing their own power plants.

[Caitlin McCabe]

It's Thursday, October 16th. I'm Caitlin McCabe for the Wall Street Journal and here's the AM edition of what's News, the top headlines and business stories moving your world today. President Trump has authorized covert CIA operations in Venezuela while floating the idea of land strikes inside the country as the US Broadens its campaign against alleged drug trafficking. An administration official said the authorization allows the CIA to potentially take action against Venezuelan President Nicolas Maduro, his government and drug traffickers. Asked by a reporter if the CIA would have the power to remove Maduro, Trump said it was a, quote, ridiculous question. A CIA spokesman declined to comment.

[Jennifer Hiller]

No queremo juna guerra en el Caribe nie en Suramerica.

[Caitlin McCabe]

In a televised speech yesterday, Maduro appealed for peace while lashing out at the CIA's involvement in past conflicts in Latin America.

[Jennifer Hiller]

No word.

[Caitlin McCabe]

Just spit on the people in the United States.

[Jennifer Hiller]

Please, please, please, please.

[Caitlin McCabe]

The announcement comes amid the biggest US Military buildup in the Caribbean in decades, including fighter jets, Reaper drones and guided missile destroyers. The Trump administration is preparing sweeping changes at the Internal Revenue Service. The Journal understands that would allow the agency to pursue criminal inquiries of left leaning groups more easily. Gary Shapley, a senior IRS official and advisor to Treasury Secretary Scott Besant, is drawing up a list of potential targets that includes major Democratic donors. It couldn't be determined on what grounds Shapley would seek to begin such an investigation. The effort coincides with a larger administration effort to probe left leaning groups for helping finance organizations that the president says are stirring up political violence. Democrats say the effort is politically motivated and not based on real evidence. Shapley and the Treasury Department didn't answer questions about changes to the IRS criminal unit or desired targets. And the Supreme Court has signaled an openness to scaling back protections against racial discrimination in redistricting, potentially making it more difficult for minorities to elect candidates of their choice. The case stems from Louisiana's move to redraw the state's congressional map after the 2020 census, the justices heard arguments to re examine when, if ever, it is permissible to take RA into account in drawing electoral lines. Several conservative justices suggested that creating race based congressional districts to ensure the election of minority backed lawmakers might no longer be justified under the Voting Rights act of 1965. If the Supreme Court now weakens or strikes down Section two of that act, states would not be bound by any limits and how they draw electoral districts Oil prices are heading higher this morning, reversing a recent stretch of declines after President Trump said Indian Prime Minister Narendra Modi told him he plans to pause purchases of Russian oil. Our South Asia Bureau chief Tripti Lahiri says the announcement could resolve trade tensions between Washington and New Delhi, which crescendoed in August when Trump imposed 50% tariffs on Indian goods, including an extra 25% levy to penalize the country's large Russian oil purchases.

[Tripti Lahiri]

I think that the latest tweets and the phone calls between Modi and Trump show that things are improving and certainly if India could buy more U.S. oil, that would help a lot. Modi and Trump have spoken twice in about the last three weeks. One of those occasions was when Modi called Trump to congratulate him for the Gaza deal. So things are improving and oil may be the way that they improve further.

[Caitlin McCabe]

But Trump's statement yesterday may not be so straightforward. Tripty says India's Foreign Ministry issued a carefully worded statement following Trump's announcement.

[Tripti Lahiri]

They began by saying that, you know, first and foremost India thinks about its energy purchases from the point of view of what is good for the Indian consumer. And that has been a stated rationale for why India started buying so much Russian oil when the war broke out and Russian oil became very cheap for India. Russia is the top provider of oil to India right now from almost nothing before the war. And so this has become a big bone of contention with the U.S. but the stance that India is taking that it is going to put the Indian consumer first, that does it doesn't actually totally contradict the idea that it could also start reducing the Russian oil purchases and maybe substitute that for US Oil. So I think this carefully worded statement gives India the wiggle room to cover a lot of different actions and that could be continuing to buy some Russian oil but starting to buy more US Oil and buy less Russian oil, tripty said.

[Caitlin McCabe]

It's unlikely India would act in a way that would cast aside its relationship with Russia. But she added. The country is also eager to reach a trade deal with the US and wants to be on good terms with Trump. Federal officials have found no evidence of appliance makers cheating on tariffs, despite Whirlpool's accusations last month that its overseas competitors were undervaluing imported appliances in order to pay lower duties. Some customs brokers said the plunging values were likely due to data entry errors, not tariff dodging, which US Customs and Border Protection agreed with after a review. Some import data has been revised since Whirlpool raised the issue. GE Appliances, which last month said Whirlpool's allegations were inaccurate, issued a fresh rebuke, saying Whirlpool weaponized the data for competitive advantage. Canada has threatened Stellantis with legal action after the company said it plans to make midsize Jeeps in Illinois instead of Ontario. In a letter to Stellantis and viewed by the Journal, Canadian Industry Minister Melanie Jolie said the carmaker is in danger of defaulting on agreements it made to maintain its factory Footpr Southern Ontario in exchange for billions of dollars in subsidies. Earlier this week, the company said it was moving Jeep production to Illinois as part of a plan to invest $13 billion in the US and add 5,000 jobs in the Midwest to protect the company from President Trump's tariffs. Speaking to the Canadian press, Jolie called the move unacceptable.

[Jennifer Hiller]

We've been engaging with the company for months now, knowing that the Brampton facility was going to be retooled. We've invested more millions of dollars in that facility based on the commitment that they would be investing in a new model. And so that's why if they don't do so, we'll hold them to account.

[Caitlin McCabe]

A Stellantis spokeswoman said that Canada remains important to the company and that they would share plans with Ottawa to offset the Jeep move. Coming up as AI data centers grow increasingly desperate for electricity, tech companies are creating an energy wild by bypassing the grid. More on that story after the break.

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[Caitlin McCabe]

Tech companies competing in the AI race need power, and lots of it. But there's one big problem. The US Isn't building power plants or transmission lines fast enough to meet demand. Supply chain snarls and permitting challenges are among the issues complicating the effort all while electricity demand continues to grow. By 2028, data centers are projected to use as much as 12% of U.S. electricity, up from less than 2% before 20. Journal reporter Jennifer Hiller covers the energy transition. She says an energy wild west is now unfolding as tech titans race to bridge the gap themselves. Jennifer, walk us through what's happening right now. How much power is needed to fuel this AI boom and how far behind.

[Jennifer Hiller]

Is the US well, we need definitely a lot of new power and a lot of new power infrastructure to be able to accommodate all of the AI growth. Analysts estimate that the US should be building about 80 gigawatts of power a year. That's about 15 gigawatts more than we're building because you're retiring older plants and you need new stuff coming online to replace those and to accommodate new growth. And we still have by far more data centers than other parts of the world. But it is a struggle to keep up because the supply chain is just really bogged down in this industry. It's very hard to get equipment like transformers. It can be hard to get large gas turbines for big natural gas fired power plants. Building transmission lines is a very slow process in the US There's a lot of permitting or legal challenges that pop up and so people are trying to build faster and accommodate all of this, but it's just slow going and there's not really easy and quick fixes.

[Caitlin McCabe]

Jennifer, you have this really interesting story out where you mentioned this energy wild west that's happening, meaning tech companies are taking the power issue into their own hands. How are we seeing that manifest?

[Jennifer Hiller]

Well, we're seeing a lot of different creative solutions out there, but what some tech companies and data center developers are doing is essentially building their own power on site and just providing their own power plants. Most of them are doing this as what they call a bridge until the grid can catch up. And others are talking about maybe being off grid forever. So we see different examples of this kind of emerging in different places. Stargate out in West Texas, which is the big OpenAI project, is using some on site power and got started with that and is going to be using kind of a mix of grid and on site power. And you've seen the Elon Musk projects in Memphis start off grid as well and then maybe later connect a lot of these data centers. They all traditionally have 100% backup power on site. So to some extent they can maybe beef up and do some different planning to be able to perhaps use that in the beginning of a project. And if they need to maybe move that equipment to the next project later on once the grid catches up or transition something to being backup or emergency power, you know, they're in the same difficult supply chain as everybody else too.

[Caitlin McCabe]

Will we get to a point where supply can meet demand or will this always just be a pervasive issue, especially as AI becomes more dominant in all of our lives?

[Jennifer Hiller]

Yeah, I think at some point supply does catch up with demand. People are really seeing this as a big crunch, maybe in the next five years or so, and that things may start to ease up after that. The risk on the other end is that things go to an oversupply later on. But for right now, there is a little bit of this crunch going on and this race for power wherever people can find it. And they are still trying to connect to the grid wherever they can all over the country and looking for those spots where, where there is some excess capacity, you know, because the US has lots of power and generates a lot of power. It's just that the size of these data centers is so overwhelming, it can be difficult to connect them in one location and provide that much power in one spot because some of them use, for instance, the power of a thousand Walmart stores. So just when you imagine the substations and transformers and things like that that are needed to deliver that kind of power to a site, it takes a while to build that out.

[Caitlin McCabe]

Jennifer, this is super interesting. Thank you so much for joining us.

[TrueStage/Kodiak AI Announcer]

Thank you.

[Caitlin McCabe]

And that's it for what's news for this Thursday morning. Today's show is produced by Daniel Bach and Kate Bullivant. Our supervising producer is Sandra Kilhoff. And I'm Caitlin McCabe for the Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.

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