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Climate tech startups are finding new opportunities in the AI and data center boom.
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AI growth increases demand for data centers, in turn driving the need for clean energy solutions.
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Big Tech's clean energy commitments can also help startups scale at a time when funding has slowed.
Climate tech startups may be focused on reducing carbon emissions, but some are capitalizing on soaring demand for the energy-intensive data centers powering the AI boom.
Tech giants such as Amazon and Microsoft are ramping up their AI infrastructure investments, while simultaneously looking to bring down costs and carbon emissions.
That's created new opportunities for climate startups to scale in a market known for its notable carbon footprint. Data centers currently account for 1-2% of global electricity use, and Goldman Sachs Research estimates this will rise to 3-4% by the end of the decade.
"We're definitely feeling a lot of market pull because of the AI boom," said Luca Mezossy-Dona, CEO of Ionate, a London-based startup developing hardware to detect disturbances in the power grid.
There are a lot of challenges associated with connecting data centers to the grid, Pippa Gawley, partner at climate fund Zero Carbon Capital, told BI. "We've had people say it may take two to five years, in some geographies, to get data centers connected to the grid," she said. "So, as a result, getting an uninterrupted power supply is important to them."
Data centers can also put additional strain on local networks. For example, Elon Musk's startup, xAI, has requested 300 megawatts of grid power for its supercomputer in Memphis and has been granted approval for 150 megawatts.
It's not just startups connecting data centers to the grid that are getting a boost from the AI boom. Gawley said she's seeing growing interest in more reliable and decentralized energy sources, such as nuclear, clean hydrogen, and energy storage.
Matthew Nordan, general partner at Azolla Ventures, told BI he is seeing growing demand for data center startups among his firm's portfolio. He pointed to startups such as Scalvy, which makes modular power electronics for data center racks to convert voltage and current with lower losses, and Zanskar, a startup using AI to increase the success rate of geothermal power, which he called a "critical" source of electricity for "power-hungry AI data centers."
Big Tech boost
Hardware energy startups, often capex-intensive entities, are finding new customers with deeper pockets — hyperscalers and Big Tech companies.