Much has been made of the clean future of computer technology. When the internet began its triumphal march around the globe, tech companies envisaged not only a paperless society, but a society which would be way more energy efficient. Tech companies optimistically predicted energy savings of vast proportions: less travel, less polluting industries, the end of wasteful manufacturing – a brave new world where ever smarter productivity gains would replace smoke-belching chimneys.
It did not quite turn out that way. Three billion internet users, sending emails, streaming films and creating and storing more data in one year than in the entire history of mankind, need electricity to do so. Our online activities consumed approximately 300 terawatt of electrical power in 2016, the equivalent of a country the size of Denmark. In 2017 computing power sucked up seven per cent of the world’s electricity – an energy demand surpassing aviation and maritime transport combined.
In 2020 there will be more than four billion internet consumers. We rely on 5G technology in communication and artificial intelligence in science, manufacturing, healthcare, banking and fund management; we will use self-driving cars and items of daily use emitting and storing an ever bigger deluge of data, not even taking into account preying social media and surveillance.
Computing power in 2025 will consume an estimated 20 per cent of all electricity produced. This will raise not only questions of energy security, as our current projections of demand will be severely tested, but will also endanger our commitment to reduce the world’s greenhouse gas emissions in order to slow the effects of climate change – all this against the backdrop of vast, rapidly growing and necessary future electricity demands of the world’s poorest nations.
A few weeks ago, Heidar Gudjonsson, chairman of Vodafone Iceland, writing an opinion piece for the Financial Times, gave a good illustration [slightly edited]: “When a smart phone owner googles ‘Despacito’, she activates between six and eight data centres around the world. To then hear the song on YouTube, she will add to almost 5bn replays. Based on the current composition of the world’s electricity production, the song’s carbon foot print is the emission equivalent of 100,000 taxis per year.”
I asked Christiana Figueres, former UN general secretary for climate change, how she sought about the internet’s insatiable thirst for ever more power generation. Christiana, after all, was instrumental in negotiating the Paris Agreement – so far the world’s biggest step towards international cooperation to mitigate climate change and to adapt to its consequences.
Computing power in 2025 will consume an estimated 20 per cent of all electricity produced
She is an indefinable optimist. When Republican congressman Mo Brooks explained to his fellow US representatives in a session on May 16 how rising sea levels were caused by rocks falling into the sea rather than by melting glaciers, she promptly tweeted: “I agree. And the moon is a cheese, a blue cheese actually. This is why the holes are darker”. Christiana is not scared by an exponential demand for electricity: “If we want to drive, sail and fly on batteries, if we want to make use of ever more clever machines, if we want, and this is crucial, for developing nations to sit on the same table, we will need yottawatts of more electricity in the future. There is nothing bad about a rising need for electricity. But will it be vital how we produce it.”
Excitedly she showed me a report how the UK on April 22 provided electricity for households and industry without burning even a kilogram of coal: “And this in a country which was synonymous with coal!” She rhapsodises about a recent resolution of the International Maritime Organisation and its 173 Member States to cap vessel emissions by 40 per cent of 2008 levels until 2030, and ‘at least’ by 50 per cent by 2050.
Her optimism will only be justified if renewable electricity generation manages to outpace demand. Take the exuberant phenomenon of crypto currencies as a worrisome example. The creation and distribution of Bitcoin, brewed in oversized hangars all over the world for no apparent purpose, created an electricity demand of 32 terawatt in 2017. This was almost 15 times more than Malta had produced for its needs in the same period. Not even if we had covered our isles with a photovoltaic roof could we have produced that much electricity.
As long as those mega data centres are run by renewables, all looks fine. Companies with a public face, like Google, Amazon, or Microsoft promise to do so. But countries generating power predominantly on the basis of fossils, like Poland or China, or even Malta for that matter, will have to drastically increase their emissions, Paris or not. And even the big tech names engage partly in false labelling. They predominantly purchase most of their energy off the grid, demanding renewable sources. Only 20 per cent of the world’s data centres have their own renewable generation capacity. With their purchases they displace households and force them into consuming more dirty energy.
It’s a free riding exercise. Ireland which is adamant to roll out the red carpet for European data storage will soon have to chose between growth and climate change. And we all will have to choose between relocating those ceaselessly calculating machines to Arctic climes to keep their temperatures in check or move ourselves into permafrost zones to keep our cool.
For long-term investors this could mean picking winning countries and avoiding damaging industries. We will have to look out for companies investing into grid logistics, smarter energy solutions and renewable energy programmes on a much grander scale. Investing in Saudi Aramco (if it ever goes public) or crypto miners will not be smart. To shun Big Oil entirely though may rob us of the possibility of seeing them transform into cleaner service providers. It cannot be excluded that the most able of them will be capable to meet green energy demands of the future. We will have to listen and see. If they walk the walk, we should be ready to invest.
The same holds true for the big electricity producers. They will have to think about improving supply logistics as hard as green power generation. In the meantime we will have to pray that law makers will do their utmost to implement Paris plus, before we’ll reach the point of no return. When the last tree is cut down, the last fish eaten, and the last stream poisoned, said the Creed Indians, we will realise that money cannot be eaten. Crypto coins, I may add, are not edible either.
Andreas Weitzer is an independent journalist based in Malta. He reports on the economy, politics and finance. The purpose of his column is to broaden readers’ general financial knowledge. It should not be interpreted as presenting investment advice or advice on the buying and selling of financial products.