Infrastructure investment themes of digitization through A.I. and the energy transition are converging, which KKR expects to lead to continuing investment in renewable and conventional power sources as well in data centers, fiber optic networks and wireless towers, despite political headwinds, according to a report from the private markets firm.
KKR estimates that a trillion dollars will be needed in U.S. data centers alone over the next four to five years. The nation’s data center market is expected to triple in size over that period to support growth of AI and cloud technology, among other growing technologies.
What’s more, KKR estimates that about one-third of the increase in U.S. annual electricity demand could come from data centers. A single data center typically requires 300-500 megawatts of power, and with A.I’s energy intensive power requirements, electricity demand is projected to nearly triple by 2030, the paper notes.
“This is a complex problem that is going to require a range of solutions — no one energy source can solve it completely,” said the paper’s author Raj Agrawal, partner and global head of infrastructure at KKR, in written responses to questions.
The convergence of decarbonization and digitalization are “structural shifts that will continue to unfold over subsequent years and decades, rather than months or election cycles,” Agrawal said in the paper.
KKR has a $40 billion data center portfolio and $77 billion in infrastructure assets under management.
This new demand is expected to lead to an increase in renewable energy investing as well as new energy transition technologies, the paper said. However, “at this point, conventional energy sources are still essential to supporting everyday life” with 60% of the energy generated in the U.S. and 29% of electricity generation in Europe from fossil fuels. In the U.S., coal is the second biggest source of electricity generation.
“Not just in the United States but around the world, new administrations and governing bodies will almost certainly alter certain aspects of energy policy, and these changes will likely affect the investment landscape for both conventional and renewable energy,” Agrawal said in the written responses. “However, many components of U.S. energy and infrastructure policy, including support for renewables, are bipartisan.”
KKR is bullish on renewable energy, he said. Renewable energy has become cost-competitive and relatively quick and practical to deploy, the paper said.
