Apr 30, 2024 - Economy

🔌 Demand response for AI

Illustration of an exclamation point with the dot resembling a power button.

Illustration: Annelise Capossela/Axios

If artificial intelligence providers get good at powering down quickly they can get access to a lot more sources of power, with much better terms, at least that's how bitcoin miners see it.

Why it matters: AI is projected to be one of the most transformative technologies in decades, but only if it can access torrents of new electrical power.

  • This new demand is a shock to the power industry, which had been retiring plants as it watched energy consumption go down in the U.S.

Friction point: Axios spoke to Bitcoin miners, an industry that lives and dies by its ability to access surplus electricity, about how AI teams can meet their need for power.

  • The mining executives we spoke to kept circling back to one topic: demand response.

Zoom out: Sources of clean electricity, particularly wind and solar, don't tend to be located where existing demand is. To persuade financiers to back building such projects, it helps to know that they can guarantee some kind of base load.

  • This is where Bitcoin miners have come in, and where AI companies could. They can take out long-term contracts at a consistent power load, to guarantee a minimum return on capital for power generators.

Yes, but: What happens when the grid upgrades and gets more customers for those new sources, and then demand peaks? That's no problem for Bitcoin miners: They can switch off any time.

  • Such customers get sweetheart deals on power when they commit to doing so.
  • This flexibility is extremely valuable in places with seriously variable demand. It allows generators to justify capital expenses on greater capacity while delivering consistent service at peak demand.

Case in point: In Texas, which has a robust demand response program due to high variability in demand, "it's often the case that a bitcoin mining facility turns off rather than a natural gas plant turning on," Pierre Rochard, head of research at Riot Platforms, explained to Axios.

Reality check: AI providers will probably never be able to power down nearly instantly like Bitcoin miners do, but they can optimize their systems to power down as quickly as possible.

  • If they can strike deals with power companies to shed loads within a certain timeframe, miners explained, AI companies will be able to get more favorable deals on long-term power supply.

Of note: Traditional data centers are much, much less energy intensive per square foot than Bitcoin mines, but AI facilities will have an intensity somewhere in the middle of the two.

Bitcoin miner Terawulf runs on nearly 100% carbon-neutral power, with hydro and nuclear power.

  • "There's a convergence between where we operate, and where these operations are going to want to be," Terawulf cofounder Nazar Khan told Axios.

The bottom line: It's unlikely that AI facilities will ever be able to switch off as fast as Bitcoin operations, but the faster they can do so, the better deals they will be able to ink with power providers.

  • "These AI loads are going to have to be more responsive than they are envisioning today," Khan predicted.

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