How AI could accelerate energy transition

Stalled demand for energy in Europe pushed investors away from renewables, but artificial intelligence could see cash flow back into the sector, while also uplifting fossil fuels.

Global electricity generation from renewables is expected to jump by 60% in 2030, accounting for 45% of total electricity output, per the International Energy Agency. Almost 50% of European power came from renewables in 2024, and the region has a strong pipeline of solar and on- and offshore wind waiting to be connected to the grid.

“The problem we have now is integrating all of that variable supply into our power markets,” Peter Osbaldstone, research director for European power and renewables at Wood Mackenzie, told CNBC. 

Pressure on integration results in pressure on prices, “which undermines the economics of investments, which makes the whole process of supporting a decarbonized power mix more difficult, more expensive for governments to bear,” he said.

As AI-driven power demand grows, market watchers are eyeing fossil fuels to beat the energy bottleneck. The IEA revised its 2025-2030 growth forecast for renewables downward by 5% compared to 2024, reflecting the changing sentiment and policy, largely from the U.S. 

Redeploying fossil fuel energy is a “short‑term crutch” that helps the AI roll-out get going, but “renewable energy is the only way to win in the long term,” Agate Freimane, partner at venture capital firm Norrsken, told CNBC’s “Europe Early Edition” on Jan. 8. 

“China and the U.S. have both acknowledged the need for vast energy resources to power an AI future, and this is reflected in the adoption of renewables. Taking the global view — renewable energy prices have dropped by more than 90%, and in 2024, 91% of new renewable projects were cheaper than fossil alternatives,” Freimane said in a follow-up email. 

“This shift triggers a self-reinforcing cycle: cheaper clean power accelerates electrification, rising electrification boosts demand for storage and grid intelligence, and those upgrades push the cost of clean energy even lower. In this way, it can be argued that AI is accelerating the shift to renewables,” she added.

Dealing with intermittency 

For Alberto Faraco, a senior analyst who covers infrastructure at Morningstar DBRS, intermittency is still a fundamental issue with renewables. Investment needs to be made across the whole system — not just the energy-generating side, he told CNBC.

“Data centers should help the development of renewables, because that should push the price of electricity up, but transmission would need to be developed, battery storage would need to be developed,” he said, adding that renewables alone will not be enough to serve the stable needs of the data centers.

“Gas for the time being would be impossible to phase out,” said Faraco.

Nuclear energy is touted as a steady baseload option for renewables, but that doesn’t account for volatility in their supply and demand. Nuclear can’t be switched on and off when it’s…