A New IEA Report and the Iberian Blackout End Dreams of an 'Energy Transition'

Yahoo

16-05-2025

It's no secret that the Republican's 'Big Beautiful Bill' plans to axe large swaths of mandates and billions of dollars in subsidies directed at achieving a so-called 'energy transition.' If that budget axe falls, it will be the proverbial third strike that puts to rest the idea that the U.S., never mind the world, will abandon fossil fuels. The other two strikes already happened.
Strike two came last month with the Great Iberian blackout. Preliminary forensics make clear that over-enthusiastic deployment of unreliable solar and wind power was the fulcrum that put 55 million people in the dark for days. Few politicians will want to risk allowing something like that to happen again, anywhere. And, as the North American Electric Reliability Corporation keeps warning, blackout risks are rising here, and for the same reason. Reliability used to be the core feature of electric grid designs, before the rush to push an energy transition in service of climate goals.
And strike one came a few weeks prior to the Iberian calamity with the release of a new report from the International Energy Agency (IEA) titled Energy and AI. That report sought to answer the question about how to reliably meet the surprising jump in power demands expected in the coming decade's boom in artificial intelligence (AI) data centers. Answering that also answers, even if not intentionally, the same question about meeting society's future demands.
As the IEA report noted, just one large AI data center uses as much electricity as two million households, and myriads are planned. Thus, digital infrastructures will soon create demands equivalent to—reliably—powering hundreds of millions of new households. Spoiler alert: the IEA forecast shows fossil fuels continue to play a central role.
However, since the IEA is the chief cheerleader for an energy transition, the executive summary of this latest report leads by observing that half the expected data center demand will be 'met by renewables.' Not until deep into that report's 300 pages does one find the candid observation that natural gas supplies the other half in the U.S., and coal fills that role in China. The IEA's framing of the answer is a glass-half-full view of a failed vision, especially considering that trillions of dollars have been invested so far in pursuing the transition goal.
Meanwhile, counting on far more renewables to supply half of new demands means ignoring the political and economic headwinds for U.S. solar and wind deployments. Long before the November 2024 election, or the Iberian grid collapse, the IEA itself flagged what many now know: China has unprecedented global dominance in wind and solar supply chains. Setting aside tariff impacts, the kind of spending required to build-out transition hardware would entail a massive wealth transfer to China. At the same time, it has become obvious that jamming wind and solar onto grids wreaks economic havoc on consumers. The economic fallout is starkly visible in Germany and the U.K., for example, where aggressive transition policies are further along, and have rendered those nations 'poster children' for de-industrialization and energy poverty.
Cost of power, however, is not the central issue for the data center industry. After all, it has deep pockets. The Magnificent Seven, collectively, have about a trillion dollars of cash on their books. Even if ratepayers and most businesses are price sensitive, Big Tech is not. Why not just pay the premium for wind and solar?
The answer: The prime drivers in digital domains are reliability and velocity. It's vital to ensure that power is ready when construction is done, i.e., the very near future. And it's vital to deliver that power continuously and reliably once operations start. Thus, we're seeing an almost covert reliance on massive quantities of natural gas turbines in nearly all the announced projects from Meta's Louisiana site, to Amazon's Virginia sites, to Microsoft's sites, and to Open AI's Stargate site in Texas. As Nvidia executive Josh Parker said at a recent energy conference, the tech community wants 'all options on the table' because at 'the end of the day, we need power. We just need power.' Likewise, households from Iberia to Indiana. Of course, nuclear energy is on everyone's wish list, but there's no prospect that it will make a significant contribution during the coming decade of furious data center buildout.
This doesn't mean Big Tech or the IEA are backing off climate pledges. Nor does it mean the climate debate is settled. Nor will we see any diminution in transition fervor from the climate-industrial complex. Likely that fervor heats up as the Trump Administration attempts to deliver on its promise to defund the panoply of climate-energy programs marbled throughout federal agencies.
What it does mean is that whatever one believes about the science of the climate, the fact is that mandates and subsidies can't change the physics of energy systems. Systems that can deliver reliable power at the scales necessary for robust growth remain anchored in precisely the fuels the transitionists want to abandon.<>
Mark P. Mills is the executive director of the National Center for Energy Analytics, and the author of The Cloud Revolution.