Solar to Dominate Energy by 2035, but AI Data Centers Will Keep Fossil Fuels in Business

Solar is poised to become the largest source of power in the next decade, eclipsing coal, oil, and natural gas, according to a report from BloombergNEF. This seismic shift in the energy landscape will occur alongside a historic rise in energy consumption driven by artificial intelligence and the electrification of entire industries. "Solar is winning the race," Matthias Kimmel, head of energy economics at BloombergNEF, told TechCrunch.

The consultancy expects the transition to happen on economic grounds alone, driven by the plummeting cost of solar energy. For example, Pakistan has added 25 gigawatts of solar power in the last two years after natural gas prices spiked following Russia's invasion of Ukraine. The power handoff comes as investors view energy as one of the biggest opportunities for growth in recent decades.

Data centers have been at the center of this obsession, and BloombergNEF's data reinforces the scale of the opportunity. The energy consultancy expects data centers to drive an additional 1 terawatt of utility-scale solar, 400 gigawatts of solar, 370 gigawatts of natural gas, and 110 gigawatts of coal. However, because of gas and coal's ability to operate 24/7, BloombergNEF expects those fossil fuels to provide 51% of incremental generation for data centers by 2050.

This means that tech companies and data center developers will have an outsized influence over which energy sources remain viable by mid-century. The forecast is not set in stone, though. Other technologies, including long-duration energy storage, geothermal, and nuclear, are vying for a piece of the data center market.

Big batteries received a boost from Google, which included $1 billion worth of 100-hour batteries from Form Energy in a recent data center project. The cost of solar panels has dropped dramatically in recent years, spurred by declining costs and China's industrial policy, which has favored the technology. By 2035, prices are expected to drop another 30%, outcompeting coal and natural gas.

By 2050, solar panels are expected to generate more than twice as much electricity as natural gas.