Datacenters driving US clean energy growth while still threatening climate

Datacenters are driving unprecedented growth in the US Clean Energy industry, paradoxically boosting a sector that was sputtering before the Artificial Intelligence boom even as AI’s rollout creates immense environmental challenges.However, observers caution that while the centers are propelling wind, solar, and other Clean Energy companies, Datacenters remain a climate nightmare.Utilities across the US are racing to build new Fossil-fuel plants to accommodate the facilities, or are keeping ageing gas and coal plants online to meet the staggering demands of Datacenters. In Michigan and other states, the centers have effectively derailed the grids’ planned transitions to Renewable Energy.The Gas industry is powering much of the datacenter boom, including fracking firms and pipeline companies. Some gas companies are building new plants solely to serve Datacenters, and the industry has the added benefit of the Trump administration’s support.However, supply chain snags, regulatory delays, energy generation shortages and other issues are holding up Datacenters’ connections to the electric grid by as much as 12 years, and the delay is forcing Big Tech to throw huge sums of money at producing its own power through the quickest and cheapest alternatives – battery storage, solar, wind, fuel cells, and similar technology.“It is unquestionable that the increase in electricity sales is driving an increase in renewables,” said Douglas Jester, a Clean Energy consultant with 5 Lakes Energy who works in upper midwest utility regulatory cases. “It’s right to think about it as a paradox.”The Clean Energy industry boomed in 2020 as the pandemic drove down interest rates and Joe Biden’s administration made historic investments in working toward decarbonizing the nation. But it faltered as inflation hit, projects became expensive and energy demand remained flat. Then came the second Trump administration - hostile to Biden’s plans and the Clean Energy movement, it canceled the government programs that had helped wind, solar, and electric vehicles.Most Clean Energy companies’ stocks steadily plummeted in value from their early 2021 peaks through early 2025, when many began to spike along with datacenter demand. The IShares Global Clean Energy ETF, which includes about 100 Clean Energy stocks, fell by around 80% between late 2021 and early 2025, but is up about 52% over the last year.The industry is also being propelled by increasing electricity demand globally in other industries like oil and gas exploration, as well as the sharply falling costs for solar panels, batteries, and other renewable infrastructure, said Lucas Davis, a UC Berkeley energy economist.But not all Clean Energy segments are benefitting equally. Datacenters are spurring the development of batteries and solar geared toward powering Datacenters onsite. But it is having little direct benefit on home rooftop solar.Among companies at the leading edge is Nextpower, a utility-scale solar infrastructure producer, which just reported 20% year-over growth and recently purchased datacenter battery producer Prevalon.Google, meanwhile, just developed the world’s largest grid-scale battery to power a datacenter in Minnesota, and purchased an energy company with which it is expanding renewable development, including at a new “off the grid” center in Texas that will include wind, solar, batteries, and gas.“It looks to me like they’re setting up to be vertically integrated to supply their own electricity, and they’ll drive a lot of development,” Jester said.There is some benefit to the larger grid. In Wisconsin, energy regulators don’t have a Renewable Energy standard guiding their decisions, but are building about 15 wind or solar facilities to accommodate Microsoft and Oracle Datacenters, though those also include some natural gas, Jester said.“Between the speed to power and the preference by Datacenters companies for Clean Energy,” the renewables made more sense, Jester added. In Michigan, DTE Energy is building a 330 MW battery system instead of building a new gas plant to support a 1.4GW Oracle datacenter, which was the only way to meet Oracle’s timeline. The company will pay for the batteries.Davis stressed that the “huge increase” in demand is largely motivating tech companies, not a benevolent desire to save the planet from climate disaster with Clean Energy.“I would say tech is desperate for electricity and oftentimes it’s going to whatever is the quickest – it could be the fuel cell, it could be natural gas turbines, or it could be solar and batteries, but the underlying demand is electricity,” Davis said.An example of that lies in rising star Bloom Energy, which produces relatively cleaner energy, but not renewables. Its solid oxide fuel-cell systems generate power through an electrochemical process that does not emit toxic sulfur oxides, particulate matter, and other dangerous emissions. However, it does emit carbon dioxide, even if its process is more efficient than traditional natural gas turbines.Bloom can deploy its cells in as little as 90 days, which has drawn intense interest from datacenter owners. It just announced plans to provide power to Oracle, it is in the process of doubling its manufacturing capacity by the end of 2026, and its stock is up 1,338% over the last year.The green growth spurt comes with some big caveats. Energy demand is hard to predict, even if “the forecasts are staggering”, Davis said. The industry may be susceptible to an AI bubble that many observers say could burst at any time. But a portfolio manager who helps oversee Black Rock’s flagship sustainability funds told Bloomberg the sector is well prepared to withstand a turn.“We don’t correlate any potential ‘AI bust’ as an existential risk to sustainable energy equities,” the manager said. “Sustainable energy equities could stand to even further benefit as US rates come down and we see a broadening out of the market.”