According to a new report from the International Energy Agency, the world will spend $580 billion on data centers this year — $40 billion more than will be spent finding new oil supplies.

Those numbers help to illustrate some big shifts in the global economy, and comparing data centers and oil seems particularly apt given concerns about how generative AI might accelerate climate change.

Kirsten Korosec, Rebecca Bellan, and I discussed the report’s findings on the latest episode of TechCrunch’s Equity podcast.

There’s no question that these new data centers are going to be hungry for power, and that they could place even more stress on already taxed electrical grids. But Kirsten pointed to a potential upside, with solar poised to power many of these new projects, which could also create new opportunities for startups pursuing innovative approaches to renewable energy.

We also discussed how these projects will be funded, with OpenAI saying it has committed  $1.4 trillion to building data centers, Meta committing $600 billion, and Anthropic recently announcing a $50 billion data center plan.

You can read a preview of our conversation, edited for length and clarity, below.

Kirsten: Here’s what I think is the potential upside. So Tim De Chant, who’s our climate tech reporter, has done a ton of reporting about not just data centers, but actually how a lot of data centers are turning to renewables because in terms of regulatory [hurdles] and cost, they are the go-to. It’s a lot easier to get a permit to throw up a bunch of solar panels adjacent to a data center.

So to me, the one upside is that it could really mean a positive for any kind of company that is doing interesting things around renewables or data center design and some of the technology to reduce the global emissions component of it.

But of course, the sheer number to me is what really stood out. As a former energy reporter myself, I know how much is spent on trying to find new oil.

Rebecca: I mean, it’s a lot. And a lot of that’s coming from the U.S. I think that report found that half of the electricity demand will be coming from the U.S., and the rest is a mix of China and Europe.

And another thing that struck me about it was that most of the data centers are coming to cities, or near cities, like populations of a million people, roughly. So that means there’s a lot more challenge with the grid connection and with connection pathways. I think that, to your point, renewables will have to [be a focus] — it’s just good business, it’s not because of any environmentally friendly policies.

Kirsten: Redwood Materials’ new business unit, Redwood Energy, is going to be an interesting company to watch with this. A few months ago, I went to their big reveal, and they’re taking the old EV batteries that aren’t quite ready to be recycled, and then they’re creating these microgrids, and then specifically going after AI data centers. And that, to me, would alleviate the problem or the concern that you just mentioned.

The question is: Are other companies going to do this? Are there other Redwood Energies out there that are trying to do the same thing? And how much of an impact could they make? Because I do think that like the pressure on the electrical grid, especially during certain times of the year, like in the middle of the summer, for instance, places like Texas that have rolling brownouts and blackouts, that is going to be a real concern. And it could spur a whole new kind of investment into companies doing what Redwood is doing.

Anthony: It also underlines this question about what is that going to do to the spaces that we live in? Even if they’re not in cities themselves, I feel like the landscape is definitely going to be transformed by construction at this scale.

And then, of course, there’s also this question of how much of [the planned data centers are]  actually going to get built because there’s definitely very ambitious plans that require huge amounts of spending.

To start with OpenAI, that’s a company that a lot of people have been talking about, how much money are they actually making versus the trillions of dollars of capital commitments they have for the next decade. And then there was this whole controversy over their CFO saying, “The government should backstop our loans to build these data centers.” And then she’s like, “No, no, no, no, no, I didn’t mean backstop, that was a poor choice of words,” but it does look like they have been asking for an expansion of tax credits from the CHIPS Act. 

I think that this is going to be an effort that’s not just going to fall on the companies, but also on the government — or at least that’s going to be a question that the government is considering over the next few years.