The Race Is On for Clean Energy

Big Tech firms like Microsoft (MSFT), Meta Platforms (META), and Apple (AAPL) claim to be the cleanest companies out there...

If you listen to their claims, these companies are completely net zero.

That means they don't add more greenhouse gases to the atmosphere than they take out of it. And these firms are net zero using that strict definition.

But getting to zero involves more than a simple math formula...

In reality, all Big Tech companies emit like crazy. And to remain net zero on paper, they spend billions on clean-energy investments and carbon credits.

So they aren't actually cutting emissions... They're just throwing money at the problem to keep up appearances. And today, one powerful trend is making it even more difficult to achieve net-zero emissions – the rampant energy demand from data centers.

Data centers support IT infrastructure across big organizations... That includes energy-intensive computing, storage, and network functions. They're also some of the biggest energy hogs in the country.

As we'll explain, demand for data centers is rising. Along with pressure for truly net-zero emissions, it's driving the next big phase toward clean energy.

And it's boosting demand for one key "stopgap" measure in the meantime...

Investment in data centers is already way up due to rising demand...

In 2023, Big Tech spent $236 billion on data centers. That number is estimated to grow to $260 billion in 2024. And this technology will drive a hefty 38% of expected power demand through 2030.

So it's no surprise that "real" emissions have soared...

Software giant Microsoft's emissions rose about 30% between 2020 and 2023. Google parent Alphabet's (GOOGL) have surged 50% since 2019.

E-commerce titan Amazon (AMZN) emitted more than 15 million metric tons of carbon dioxide last year. By purchasing carbon credits and investing in renewable-energy projects far from its own data centers, it can report less than 5 million metric tons.

Tech leaders are also spending billions of dollars building solar and wind projects in places like India to get credit for them back home.

In short, these companies have found accounting solutions to a real-world problem. But there's a limit to what they can do without truly clean energy, like solar and wind...

These projects have many roadblocks. And current technology limits how well we can store and transmit solar and wind energy. That means most of this energy must be used roughly when and where it's produced.

There's also nuclear energy, but this "clean" source is still hotly debated. Plus, it takes a while to actually build the power plants.

Rather than relying on the 'dirtiest' energy sources, like coal and oil, new data centers are turning to a different commodity...

We're talking about natural gas.

While it's not completely clean, natural gas is far cleaner than coal. It emits 50% less carbon dioxide than coal and 30% less carbon dioxide than oil to produce the same amount of energy.

It's also more reliable than wind and solar. And you can use it instantly... without worrying about storage issues and weather conditions.

Data centers alone are expected to increase new demand for natural gas by anywhere from 3.3 billion cubic feet to 8 billion cubic feet per day through 2030.

As a cleaner and more reliable energy alternative, demand for this commodity should grow substantially as energy use explodes. That's going to keep natural gas demand high and prop up prices.

In the next few years, energy-exploration and production (E&P) companies that prioritize natural gas will benefit from these trends.

Remember, E&Ps conduct onshore and offshore drilling for energy products... And while some continue to focus on oil, others, like Chevron and ConocoPhillips, are investing a lot of money to extract natural gas.

Until Big Tech firms fully transition to clean energy, keep your eye on E&Ps that have large natural-gas reserves.

Regards,

Rob Spivey,
September 24, 2024