2025 Predictions - Part II
Exploring the World of Energy Tech and Data Centers
Welcome back! In my first edition of the year, I covered a list of my predictions on Enterprise Tech and AI. For those that missed it, you can check that out below.
In today’s feature, we explore the world of Energy Tech and Data Centers.
From cooking food to heating and lighting our homes and powering entire cities, energy is central to our everyday lives. But the way we access, store, and use energy is rapidly evolving, driven by new energy technology developments and environmental concerns.
And chances are if you’re reading this, you’ve heard a thing or two about how demand for AI computing resources is driving unprecedented load growth in the United States. This growth won’t come easily, as there are many bottlenecks to building large AI data centers capable of meeting this demand — transmission capacity, AI chips, fiber connectivity, and of course: firm power supply.
In future articles, I’m thinking about diving into specific tech that can help address projected shortages in energy capacity to power the AI boom. But I’ll leave that for another day. Today, we continue with some fun projections.
2025 Predictions
Part II – Energy Tech and Data Centers
First Up: Energy Tech
Reduced Energy Regulation Accelerates Building. A new Trump administration and an increasingly right-wing EU government is widely expected to bring the elimination of clean energy incentives and other climate-friendly policies. However, a perhaps contrarian view is that less government red tape will lead to faster buildout of much-needed grid transmission, increased openness to nuclear, and more energy projects coming online - faster.
Climate Tech Gets a Rebrand. Given the new administration’s political views towards clean energy, the “Climate Tech” sector as we know it today is reclassified into other investment categories that carry less political stigma. “Climate Software” gets absorbed into Enterprise SaaS, while “Climate Hardware” deals are simply referred to as Deep Tech (as is often already the case).
Energy Startups See Consolidation. Expect to see a wave of well-capitalized industry players and opportunistic PE firms making the move of consolidating climate tech startups. These rollups will take advantage of plateauing valuations of companies with good fundamentals to form diversified industry heavyweights capable of delivering comprehensive solutions.
Wildfire Tech Captures the Spotlight. Given the devastating impact of recent large-scale fires* (CA Palisades, PG&E Camp Fire, Maui), wildfire identification, response and mitigation solutions become a hot focus area for venture investors and DC policymakers alike. Tech for rapid detection and suppression of fires receives most of the attention, but regulatory changes – such as policy that allows for Utilities to recover wildfire prevention costs (such as trimming trees around powerlines) – ultimately prove more critical for progress.
The Palisades and Eaton wildfires are visible from satellite image taken Jan 9th. Source.
Next Up: Data Centers…
SMRs Don't Meet the Hype. Here’s one that’s likely to be unpopular with VCs - who continue to bullishly fund nuclear startups - the hype surrounding SMRs proves to be way overblown. While it’s true SMRs could one day power data centers with clean energy, the challenges are many, and I’ll happily take the under on the number of companies that are able to meet the social-media fueled hype that SMRs are safer, cheaper, and more scalable than alternative power sources.
The Party Arrives for Secondary Data Center Markets. It’s well-known that Data Center Alley in Northern Virginia is by far the world’s largest data center market, with its dense fiber cabling and high concentration of hyperscale sites. Expect to see significant growth in US secondary and even tertiary markets in 2025. Metro areas like Columbus OH, Kansas City, and Raleigh-Durham are already rolling out the red carpet to Hyperscalers, and don’t be surprised to wildcard states like North Dakota also join the party - something which would’ve been unheard of just two years ago! [Editor’s note: full article on this coming soon :)]
Conceptual image of the Person County Mega Park in North Carolina, which is about 1,350 acres. Microsoft bought the site in late 2024, which is 35 miles from Durham.
Local Communities Start Pushing Back on AI Data Center Growth. From environmental concerns to high power demands, to increasing land and water usage, the data center industry faces looming challenges in 2025. Driven by concerns about the high energy consumption of AI data centers, local opposition of new developments is likely to rise in 2025.
Everyone wants more AI Data Centers - until they’re in your backyard.
Green Data Center Plans Become Not-So Green. Another perhaps contrarian take, given the pressing need to make data centers more sustainable. Corporate sustainability goals become the next domino to fall (after 2024 saw a major pullback in DEI programs), driven by simple capitalist greed, capacity bottlenecks of the grid, the need for firm and reliable power, and the return of a coal-loving administration (joking…kinda). For those paying attention, the quiet part is already being said out loud.
Edge Data Centers Become the Ultimate Post-Hype Sleeper. After years of anticipation, AI inference at edge sites finally becomes a massive growth catalyst just like AI training. The high cost of AI inference in the data center is currently a major gating item for the widespread adoption of Gen-AI in the enterprise, and I predict AI chip startups will move aggressively to edge use cases, resulting in a massive leap forward that brings inference costs down across the industry.
The Wait is Over for Onsite Power Generation. Will this be the year where we finally see more data center developers build where the power is? Given the much discussed challenges of integrating renewable energy projects into the grid in 2024, I’d bet on it.
And finally, one Early Prediction for 2026….
Data Centers in Space Become Reality. The largest AI training clusters may soon be deployed in space, as these data centers in space can leverage 24/7 solar energy, natural passive cooling, and avoid the pesky permitting constraints found on Earth. If you haven’t been paying attention to space tech, now is the time, as decreasing launch costs, reusability, the unlimited scalability of space might become a gamechanger for the energy industry.
*Resources to Support Those Affected by L.A. Fires*
It would be lame for me to talk about wildfire tech and the LA fires without also encouraging readers to support wildfire relief efforts. For those who need help or who would like to help, please see below for some helpful resources.
PLACES TO DONATE:
California Fire Foundation Wildfire & Disaster Relief Fund: Works with local fire agencies and community-based organizations to provide support to communities affected by wildfires. The organization, which provides direct support to victims, is supporting those impacted by the Palisades Fire. (Link Here)
California Community Foundation: The organization's Wildfire Recovery Fund targets the most underserved and hard-to-reach communities in the region, with the goal of helping provide long-term recovery relief. (Link Here)
CAL FIRE Benevolent Foundation: Provides financial aid to firefighters and their families in case of injury or loss of life. Also helps support burn victims and their families, along with research focused on firefighter safety. (Link Here)
United Way of Greater LA: Focuses on longer-term recovery efforts to support members of the LA community, and works with community partners to assist displaced residents on the ground. (Link Here)
World Central Kitchen: Nonprofit global food relief organization founded by celebrity chef José Andrés, is already on the ground in Southern California to aid first responders and evacuees. (Link Here)
EMERGENCY SHELTERS, HOUSING & OTHER RESOURCES:
211 LA is partnering with Airbnb to offer free temporary shelter for people displaced from their homes by fire. Start by filling out this form (Link Here)
Temporary Housing Solutions: Locale has put together a great list of hotel discounts for people displaced by the LA fire (Link Here)
Insomniac: Music and events company Insomniac recently announced a series of LA Fire Benefit Shows featuring artists who have generously donated their time. 100% of net proceeds will go directly to those impacted by the fires. (Link Here)
These organizations work together to support people impacted.
Stay tuned for next week’s article: Tips to Increase AI Startup Adoption in 2025.
Disclaimer: The information contained in this article is not investment advice and should not be used as such. Investors should do their own due diligence before investing in any securities discussed in this article. While I strive for accuracy, I can’t guarantee the accuracy or reliability of this information. This article is based on my opinions and should be considered as such, not a point of fact. Views expressed in posts and other content linked on this website or posted to social media and other platforms are my own and are not the views of NextEra Energy Investments (NEI) or NextEra Energy (NEE: NYSE).
Great work! Any good resources you’ve found on data centers in space?