Throughout 2023 and into 2024, the technology sector has dominated equity market performance. This performance has been very narrow in scope, concentrated on a few publicly traded companies that investors view as beneficiaries of the economic potential of Artificial Intelligence (AI).
Without exception, advances in technology are driving insatiable growth in the demand for electricity. The rapid development of computer data centres, the deployment of AI, the onshoring of factories to North America utilizing clean technology and robotics, the mining of crypto currencies and the evolution of electric vehicles are all contributing to an exponential increase in demand for electric power.
As renewable and lower carbon energy replace fossil fuels, there is significant pressure placed on the utility grids that deliver power. Not only is the demand for electricity exploding, but so is new routing needed to get newer sources of energy from renewable sites to end markets. In much of North America, the grids that deliver electricity are aging and in need of extensive capital investment. So are many commercial buildings, mostly constructed after World War II.
The United States currently has 2,700 data centres which are consuming 5% of the country’s electricity supply and growing rapidly. Their location is relatively concentrated, with Virginia having emerged as the largest data centre hub. The International Energy Agency forecasts that data centre demand for power will double between 2022 and 2026. Furthermore, there are immediate plans to build over 150 new power-hungry clean technology factories.
This burgeoning demand is significantly altering both power generation and the grid to deliver it. Ironically, growth in demand is delaying the shutdown of coal plants in the U.S., slowing the transition to clean power. Nuclear energy, long viewed as a pariah, has come back into vogue. Small modular reactors (SMRs) and smaller microreactors are being designed to produce electricity quickly, cheaply and at scale. They provide steady power and do not emit carbon dioxide. Solar energy is expanding rapidly worldwide. Some have forecast that solar will be the single biggest supplier of electricity by the mid 2030s and perhaps the largest source of all global energy by the 2040s.
Our client portfolios are well positioned to capture the opportunities offered by this evolving electricity landscape. ATS is capitalizing on the rapid growth of new automated factories featuring robotic technology. Microsoft is rapidly expanding its data centres due to the success of its Azure cloud offering and requires a constant supply of power with little tolerance of downtime. Johnson Controls is taking advantage of the opportunity to upgrade buildings and facilities while significantly improving energy efficiency. nVent is playing a key role in providing electrical protection and connection for facilities of all types. Finally, Brookfield Renewable Energy is a leading global player adding all manner of renewable energy capacity while Fortis provides for the safe and reliable transmission of electricity and natural gas to North American customers.
The rapid electrification of the modern world is forcing change and shaking up staid industries. While there are several moving parts to this economic revolution, there are also many attractive investment opportunities that will result from it. We are vigilant of this transition and will continue to position your portfolio to take advantage of these opportunities.
Second Quarter 2024
Throughout 2023 and into 2024, the technology sector has dominated equity market performance. This performance has been very narrow in scope, concentrated on a few publicly traded companies that investors view as beneficiaries of the economic potential of Artificial Intelligence (AI).
Without exception, advances in technology are driving insatiable growth in the demand for electricity. The rapid development of computer data centres, the deployment of AI, the onshoring of factories to North America utilizing clean technology and robotics, the mining of crypto currencies and the evolution of electric vehicles are all contributing to an exponential increase in demand for electric power.
As renewable and lower carbon energy replace fossil fuels, there is significant pressure placed on the utility grids that deliver power. Not only is the demand for electricity exploding, but so is new routing needed to get newer sources of energy from renewable sites to end markets. In much of North America, the grids that deliver electricity are aging and in need of extensive capital investment. So are many commercial buildings, mostly constructed after World War II.
The United States currently has 2,700 data centres which are consuming 5% of the country’s electricity supply and growing rapidly. Their location is relatively concentrated, with Virginia having emerged as the largest data centre hub. The International Energy Agency forecasts that data centre demand for power will double between 2022 and 2026. Furthermore, there are immediate plans to build over 150 new power-hungry clean technology factories.
This burgeoning demand is significantly altering both power generation and the grid to deliver it. Ironically, growth in demand is delaying the shutdown of coal plants in the U.S., slowing the transition to clean power. Nuclear energy, long viewed as a pariah, has come back into vogue. Small modular reactors (SMRs) and smaller microreactors are being designed to produce electricity quickly, cheaply and at scale. They provide steady power and do not emit carbon dioxide. Solar energy is expanding rapidly worldwide. Some have forecast that solar will be the single biggest supplier of electricity by the mid 2030s and perhaps the largest source of all global energy by the 2040s.
Our client portfolios are well positioned to capture the opportunities offered by this evolving electricity landscape. ATS is capitalizing on the rapid growth of new automated factories featuring robotic technology. Microsoft is rapidly expanding its data centres due to the success of its Azure cloud offering and requires a constant supply of power with little tolerance of downtime. Johnson Controls is taking advantage of the opportunity to upgrade buildings and facilities while significantly improving energy efficiency. nVent is playing a key role in providing electrical protection and connection for facilities of all types. Finally, Brookfield Renewable Energy is a leading global player adding all manner of renewable energy capacity while Fortis provides for the safe and reliable transmission of electricity and natural gas to North American customers.
The rapid electrification of the modern world is forcing change and shaking up staid industries. While there are several moving parts to this economic revolution, there are also many attractive investment opportunities that will result from it. We are vigilant of this transition and will continue to position your portfolio to take advantage of these opportunities.