Nextracker CEO predicts that renewable energy will become the primary source of power for data centers.

• Dan Shugar, CEO of Nextracker, stated that in the future, renewable energy will become the primary power source for data centers instead of natural gas.
• Solar panels' performance is enhanced by Nextracker, a top provider of tracking systems.
• Solar energy is expanding at a rapid pace, with numerous projects ready to be linked to the power grid, according to Shugar.
• He stated that tech companies are committed to achieving sustainability objectives and are determined to avoid using fossil fuels to power their data centers.

A leading solar company CEO predicts that the increasing energy demands of AI and data centers will mainly be met with renewable energy, not fossil fuels.

The natural gas industry contends that it is best suited to meet the increasing energy requirements of data centers, asserting that renewables are not dependable enough to power these energy-intensive operations on their own.

The CEO of said that the low cost and rapid deployment of solar, along with the ambitious climate goals of Big Tech, will make renewable energy the preferred power choice for data centers.

Nextracker's solar panel tracking systems boost the efficiency of renewable power plants, and the company has exceeded Wall Street expectations for four consecutive quarters. Nextracker has a backlog of over $4 billion and has shipped 100 gigawatts, which is twice the peak power load of California.

The stock of Nextracker has increased by 19% year to date and 37% in the past two months. Approximately 80% of Wall Street analysts who cover the company consider its stock as buy or overweight, as per FactSet.

The Lawrence Berkeley National Laboratory reports that solar power accounts for 70% of the more than 1,500 gigawatts of power generating projects seeking connection to the electric grid, with 1,028 gigawatts specifically being solar projects.

The total renewable power seeking connection is approximately 1,400 gigawatts, which is greater than the entire installed capacity of the U.S. electric grid. In contrast, gas projects account for only 79 gigawatts, or 5%, of the power in line for connection.

According to Shugar, based on data published by the DOE, the primary energy source for these data centers is expected to be renewable energy, despite some gas usage.

The CEO stated that our industry is always in a leading position, regardless of how you look at it.

Big Tech wants clean energy

By 2030, the demand for electricity from data centers in the U.S. is predicted to increase to over 8% of the country's total power consumption, according to Goldman Sachs.

Some "monster data centers" today can be as large as 1,000 megawatts, which is equivalent to the power produced by the average nuclear plant, according to Shugar.

According to an April report from Goldman, natural gas is expected to provide 60% of the power demand growth for data centers, while renewables will contribute 40%.

By 2030, carbon emissions from data centers could increase to approximately 220 million tons, which is 0.6% of global energy emissions, according to Goldman's estimate. Sugar believes that the tech companies' climate goals will drive demand for renewable energy sources.

"The clients developing these data centers have serious sustainability goals and do not want their power to come from fossil fuels. Renewable energy is now lower cost than gas, according to Shugar."

Recently, Microsoft and Brookfield Asset Management signed a massive renewable energy deal, which is the largest between two corporate partners to date.

The backlog problem

The backlog of renewables in the connection queue presents a challenge for the industry, which may lead to increased utilization of existing gas assets to power data centers and other projects in the short term.

According to Maheep Mandloi, director of clean energy research at Mizuho Securities, it will take at least two to three years to obtain all the necessary interconnection approvals for a new renewable or any new project that connects to the grid.

Sugar stated that the backlog can pose a challenge for certain projects, but once the interconnection process is completed, construction progresses rapidly. Fossil fuel plants have a longer development cycle than renewables, face challenges in obtaining permits, and are impacted by the volatility of fuel costs, according to Sugar.

There is a large collection of projects across the US that have already submitted applications, made interconnection deposits, and advanced engineering studies with utilities, as stated.

The CEO rejected the claim that variable weather conditions pose a problem for renewables, stating, "I don't buy it."

Batteries are often associated with utility-scale solar projects involving Nextracker, as they store energy for use when the sun's intensity decreases or wind conditions are unfavorable, Sugar explained.

The Energy Information Administration predicts that battery storage in the U.S. will increase by 14.3 gigawatts this year, bringing the total capacity to nearly double the current capacity of the electric grid. There are currently 1,000 gigawatts of storage waiting for connection, and Lawrence Berkeley National Laboratory reports that there is a total of 2,480 gigawatts of solar, wind, and storage line to be connected.

Renewables are becoming an increasingly significant demand driver for data centers, both from an aggregate demand standpoint and an environmentally preferred source of energy, according to Shugar.