A Regulatory Setback for Amazon’s AI Data Center Could Tighten Power Market

In a move that could have far-reaching implications for the power market, the United States Federal Energy Regulatory Commission (FERC) has rejected a request from Amazon to divert some of its electricity output from an adjacent Pennsylvania power plant. The decision is likely to exacerbate an already competitive market for power, potentially impacting Bitcoin miners who rely on abundant and affordable energy sources.

The FERC Ruling: A Barrier to Quick Power Supply

On November 1st, the FERC rejected Amazon’s request to divert some of its electricity output from Talen Energy’s Susquehanna nuclear plant in Pennsylvania. This decision comes as no surprise, given the growing trend of tech giants and AI firms vying for power procurement deals. However, it does create a barrier to the quick supply route that data centers demand, particularly as AI rapidly evolves.

The Impact on Bitcoin Miners

According to Bitcoin mining expert Jaran Mellerud, AI facilities are on an "aggressive hunt" across the US and other developed nations, devouring massive amounts of power in prime locations with ample fiber and infrastructure. With the ability to generate much higher revenues per kilowatt-hour, these AI operations can easily outbid Bitcoin miners for electricity – and they are doing exactly that.

The Future of Bitcoin Mining: A Threat from AI

Mellerud predicts that over the next five years, the US Bitcoin mining industry faces a dire threat of displacement by these AI facilities. As AI’s appetite for power grows, Bitcoin miners will be pushed to the fringes, forced to chase down power in areas lacking the infrastructure AI demands.

By 2030: A Shift in Global Hash Rate

He predicts that by 2030, "the US share of the global hash rate will plummet from the current 40% to below 20%, while mining activity shifts to remote regions inaccessible to AI," primarily in developing countries. This shift could have significant implications for the global Bitcoin network.

Energy Requirements: A Comparison

While this particular deal was rejected, it is worth noting that the energy required to run AI systems may already be higher than the amount of power used to mine Bitcoin. According to the Bitcoin Policy Institute (BPI), while AI offers up to 25 times more revenue than Bitcoin per kilowatt hour (kWh), its energy requirements are also significantly higher.

The Growing Trend: AI-Focused Data Centers

Tech giants like Amazon and Microsoft have been making major power procurement moves as the competition for energy intensifies. Additionally, some miners are already adding AI processing to their data centers or even switching entirely from Bitcoin to AI.

A Changing Landscape for Bitcoin Miners

Crypto assets adviser Anibal Garrido notes that this trend is not without its challenges. Miners use application-specific integrated circuit (ASIC) machinery designed solely to calculate the hashes of the proof-of-work protocol, which can’t be repurposed for AI or data mining.

The Future of Power: A Shift Towards AI

While the FERC ruling may seem like a setback for Amazon’s AI data center, it highlights the growing trend of AI-focused power procurement deals. With an estimated 169 TWh in usage by 2024 and 240 TWh by 2027, AI is set to outpace Bitcoin mining in energy requirements.

Key Takeaways

  • The FERC ruling creates a barrier to the quick supply route that data centers demand.
  • AI facilities are on an "aggressive hunt" across the US and other developed nations.
  • By 2030, the US share of the global hash rate may plummet from 40% to below 20%.
  • AI energy requirements may already be higher than those for Bitcoin mining.
  • Tech giants like Amazon and Microsoft are making major power procurement moves.

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