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Q&A

One Investor’s Climate ‘Realism’ In the Data Center Era

A conversation with Craig Lawrence of Energy Transition Ventures

The Q&A subject.
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This week’s conversation is one of my favorites so far – Craig Lawrence of Energy Transition Ventures. Lawrence has been around the block and back again when it comes to the cleantech investment landscape. So I took note when he got into a brief back-and-forth with an activist fighting data centers in Indiana who claimed there were “so many clean energy people who no longer care about climate change” because they “now support fossil fuel data centers if some nominal amount is met with clean energy.”

Lawrence replied, “Some of us are simply realists.”

It was a provocative answer. I reached out to Lawrence and asked if he’d explain what realism on cleantech and climate change looks like in the age of the data center boom. The following conversation was lightly edited for clarity.

So okay, what does “realism” in the clean energy space look like in the era of the data center boom?

In general, it looks like progress. Whether that’s technological or social, which often includes increased energy consumption. This is an extreme example of demand appearing at once. And what’s been incredible for me over 25 years of being involved in this stuff is, we’re finally at a point where clean energy can meet most of this demand – the cost of renewables and the cost of energy storage are now at a point where they directly compete with or without subsidies against fossil fuels.

However we’re not at a point where it's reasonable to expect 100% of this demand can be renewables. I don’t think that’s practical. Natural gas is still a very affordable, very flexible energy source. The data centers are going to use them.

I think the game should be figuring out how to support the most clean energy. That includes nuclear and other low-carbon sources to meet this demand.

I’d like to represent the other side of this really quickly. The pro-moratoria side here would be, why? Why do we actually have to build all of this? Why not just halt these data centers so the gas isn’t built, then invest in renewable energy to green our grid?

I made that comment about being a realist. We have an administration in this country that isn’t going to do that. Who will halt that? Who is in a position to actually do that? The answer is nobody.

We have another problem to worry about – the administration halting renewable energy projects. We have to prevent that from happening. I’ve been following the school of thought that there’s a grand bargain on permitting reform applying to renewables and other sources of energy.

I honestly truly believe that head to head, renewables and energy storage beat natural gas. In the free market of power, as much as it is a free market, renewables are winning and so you are painting a target on your back trying to stop all development unless it’s 100% renewables. You’re going to face a backlash from that.

In the U.S., 93% of new electricity generation is solar, wind, and storage. Do you really need 100%? You’d like it to be but man, take the W.

We’re winning. Not only are we winning but we are destroying the competition. To create a battle that has the potential to create significant backlash against renewables is the wrong move right now.

Okay, but on the opposing side someone would say that argument is what landed us in this place to begin with. Some would say a frame of realism is why we can’t seem to shake a reliance on fossil fuels.

I don’t think that’s the reason why.

Once renewables and storage became cost competitive they’ve dominated since. Prior to that, they weren’t cost competitive and it was a policy fight to say people should be forced to buy more expensive electricity that was cleaner for the climate. That battle was difficult and had some wins and some losses. We’re past that battle now.

Renewables are winning in the global market. Would I love a scenario where we could meet all the demand with solar, wind, and batteries? Yes. And I think we can get there, but there are real practical limitations to those resources too. They’re not 24/7 resources, even though they’re getting close to that.

Let’s just say I agreed with them and that side of the argument. What can you do about it with this administration? You can certainly try to elect candidates that’ll be supportive of it. You can’t force a moratorium.

Luckily, for that side of the argument, there’s plenty of people upset about data centers that aren’t just thinking about climate change.

How do you feel about the data center backlash as an investor in cleantech, and does it impact the decisions you make around who you potentially finance?

Not yet. The data center boom for us is indicative of a broader boom for increased electricity demand, which is generally good for what we invest in.

I think this feels very deja vu. Whether it's nuclear or renewables or pipelines, someone is going to be against it and make a lot of noise. That’s part of the reason we struggle to build things in this country.

But no, if anything, the whole AI and data center buildout is a tailwind for the energy transition and climate technologies. It’s helping gas too, no doubt, because people are trying to procure any power they can, and so they’ll do it by whatever means necessary, but I continue to think we’re oversupplied globally on solar panels and batteries. That’s thanks to China, primarily. And you can build those facilities in one or two years. Gas has five-plus lead times for turbines. We’re in a position to win that battle without having to make it a political battle over halting the buildout of these things.

Do you think the upset over data centers will impact the energy projects to power them?

Yes, I do. I’m seeing subsections of X, farmers and people purporting to support them, that are really upset about solar on farmland and engaged in interesting discussions around it. The same happens with data centers and farmland. It’s interesting to try and figure out their motivations. Is it preserving the farming or an angle to attack development they don’t like?

I am seeing a mobilization of people against buying up land and buying up electricity and water and using it for… xyz. Right now the flavor is data centers. It’ll be something else down the road. We’ve even heard the same things around the EV charging buildout.

Yellow

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Spotlight

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The data center water issues are real – but they aren’t what you think.

Too often, I hear people say the number one reason they’re against data center development is water use. Heatmap’s data shows water consumption is historically the reason cited most often by activists when opposing projects. This complaint, they often say, is rooted in the fear that this nascent buildout of AI infrastructure will simply draw so much H2O it will leave little liquid left for the rest of us.

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And more of this week’s biggest news around project fights.

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1. Matagorda County, Texas – The bipartisan data center backlash is now so powerful that a top Republican Texas state official is doing an event with the Democrat vying to replace him.

  • On Thursday afternoon, outgoing Republican agriculture commissioner Sid Miller and Democratic candidate Clayton Tucker are marqueeing a forum hosted by Matagorda County Against Data Centers, an opposition group that appears to also monitor solar and battery storage for potential opposition, too. Miller is leaving his post at the end of the year after being defeated in a GOP primary by Nate Sheets, who was supported by Gov. Greg Abbott.
  • This bipartisan forum will take place after Abbott himself called for new laws and regulations on data centers in a letter to Texas Public Utility Commission Chair Thomas Gleeson and ERCOT CEO Pablo Vegas. Abbott said he’d push to require data centers to pay costs for electric infrastructure and use “water-efficient technologies such as closed-loop cooling systems.” Also on the to-do list? Mandatory property setbacks and noise reduction.
  • It’s becoming clear the frustrations against AI infrastructure and associated energy projects are starting to boil without a vent. The first county to issue a data center moratorium in Texas has withdrawn the effort after facing a $100 million lawsuit from a developer, and other counties are delaying future moratoria on fears of legal risks. Where will all of this frustration go without the option to pause development locally?
  • We’re starting to see Texas legislators seek to channel this anger. Last week, Rep. Veronica Escobar – a Democrat who represents the dry, data center-anxious city of El Paso – offered an amendment in a House committee to block funding for the EPA’s new data center construction rules. The amendment failed but I’d hardly be surprised to see this sort of rider gain traction if Democrats retake the lower chamber, especially if data centers are a major election issue.

2. Albany County, New York – As we await Gov. Kathy Hochul’s decision on whether to enact the nation’s first statewide moratorium on data centers, I wanted to bring up some pretty crucial facts about the situation in the Empire State.

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How Has the Rise of AI Changed the Odds of a Permitting Deal?

Catching up with the American Council on Renewable Energy’s Ray Long.

Ray Long.
Heatmap Illustration/Getty Images

Today’s chat is with Ray Long, CEO of the American Council on Renewable Energy. We first discussed the odds of permitting reform a year and a half ago, for one of the first Q&As in The Fight. Flash forward and we’re still in the same situation, but now also wrestling with added demand for electricity to power data centers. I wanted to talk again about whether he thought the rise of artificial intelligence would increase the odds of some federal deal happening any time soon. The result: a wide-reaching conversation about the future of the electric grid, the struggles to win community buy-in and the sclerotic nature of the U.S. Congress.

The following conversation was lightly edited for clarity.

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