Titan Face-off: US-China AI Arms Race
As Frank Holmes recently noted in Forbes magazine, the major players in AI are the U.S. and China: “Both superpowers understand that whoever leads in this still burgeoning industry will likely influence global standards, intelligence gathering, national defense, commerce and so much more for decades to come”
The US aspires to preeminence in Artificial Intelligence. President Trump has stated: “It is the policy of the United States to sustain and enhance America’s global AI dominance”. Secretary of Energy Chris Wright added that “American energy dominance is the prerequisite for achieving and maintaining AI dominance”. Given the willy-nilly closure of coal in the US, Wright’s goal seems like an impossible dream in terms of electricity.
BloombergNEF projects US data center power demand could reach 106 GW in 2035 from about 25 GW of operating facilities last year. Where will America get the energy required to meet this dramatic increase over the next decade? The US has already dug itself into a hole by blithely closing over 300 baseload coal power plants since 2010 and reducing coal generation from a national 45% to 16%. The underlying reasons for this closure of plants have been aggressive and well-funded political activism, overzealous policy makers and ill-conceived Renewable Portfolio Standards. China carries no such burdens as they approach Artificial Intelligence with the mindset of the Manhattan Project.
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As a result, the US is steadily developing an electric power system that will be increasingly expensive, less reliable, a risk to national security and lead to a steadily eroding position in the race to Artificial Intelligence superiority.
Warnings from the National Electric Reliability Council (NERC), decrying the continuing closure of still productive coal power plants, have gone unheeded. Just last year NERC stated: “Additional coal-fired generator retirements… have caused a sharp decline in anticipated resources … new generation is insufficient to make up for generator retirements and load growth”
By closing baseload coal, the US faces an increasingly strained power grid in a landscape where reliable and swift power access is no longer guaranteed. Data center developers will soon confront this new reality head-on. But hypotheses are the order of the day now, with lip service to wind and solar, nuclear dreams harkening back to the 1960s and belief in an infinite supply of natural gas. Nevertheless, the loss of coal, the most reliable and affordable source of electricity, will haunt this nation for years to come. The need to keep existing coal plants operating and expand their capacity factor is obvious. As is the need to re-commission retired plants and construct a new cohort of low emission Advanced Super and Ultra- Critical units.
China, on the other hand, is building a reliable and affordable electricity supply system with Advanced Coal plants as the anchor, supplemented by nuclear, renewables and hydroelectric. In their 2017 “New Generation AI Development Plan”. The People’s Republic of China developed a coherent, centralized AI strategy to serve its national ambitions for economic modernization and global influence. Rand Corporation researchers recently stated: “By 2030, China wants to be the global leader in AI”
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The Wall Street Journal has pointed out that China now has the most extensive power grid the world has ever seen. Between 2010 and 2024, its power production increased by more than the rest of the world combined. Last year, China generated more than twice as much electricity as the U.S. Some Chinese data centers are now paying half what American centers pay for electricity.
And the beat goes on, Morgan Stanley forecasts that China will spend some $560 billion on grid projects in the five years, up 45% from the previous five years. Goldman Sachs predicts that by 2030, China will have about 400 gigawatts of spare capacity, about three times the world’s expected data-center power demand. Over the next few years this surplus capacity will prove mighty attractive to developers fighting America’s Draconian energy regulations and the inability to connect to the grid. Consider Texas, where the “Grid is sold out” and requests for tens of thousands of MW large load connections have been rejected by ERCOT.
The US has been warned: In October, OpenAI’s Christopher Lehane told the White House that China’s commitment to building new energy generation is giving it an edge in the AI race. The company recommends that the U.S. prioritize “closing the electron gap” by building 100 GW a year of new energy capacity and even this is only 25 % of what China plans to put in place. Lehane noted that in pursuit of its goal to overtake the US and lead the world on AI by 2030, China “added 429 GW of new power capacity, more than one-third of the entire US grid, and more than half of all global electricity growth” The U.S. contributed just 51 GW, or 12%.”
China is preparing to be the global leader in energy for the rest of this Century and coal is the centerpiece. Coal currently provides over 60% of its electricity and China is assiduously expanding its coal fleet. Consider these data relating to coal’s role in their Energy Master plan:
· Announced 58 GW
· Permitted 158 GW
· Under Construction 204 GW
· Operating 1,170 GW (Assume 110 GW retires by 2035)
· TOTAL 1,480 GW of coal generating capacity
Based on the latest DOE Annual Outlook, by 2035 the US will have Three GW, (that’s correct), three GW of coal generating capacity.
Thus, there are real constraints on how much reliable and affordable electricity the US will be able to generate to power AI development. Our ability to seize this once-in-a-century opportunity, and our advantage on the most consequential technology since electricity itself, slips further away with the closure of each coal plant.
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Frank Clemente PhD. specializes in research on the socioeconomic impact of energy policy and is the author of The Global Value of Coal, published by the International Energy Agency (2012). Professor Clemente has served on the faculty of the University of Kentucky, University of Wisconsin and Penn State. He has extensive experience in speaking, writing and presenting data on the value of coal to the United States and the world. All opinions expressed here are presented independently from any university with which he has been affiliated.
Fred Palmer Esq. served as CEO of Western Fuels before he joined Peabody Energy as Senior Vice President for Government Affairs. Palmer was Chair of the World Coal Association Board and a member of the National Coal Council. He received the American Institute of Mining, Metallurgical and Petroleum Engineers Award for “Distinguished Achievement in Coal Technology”. He also received a Statement of Appreciation from the National Coal Council in 2015 with a plaque for “Guidance since 1990”
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