Maple-Brown Abbott has allocated 37 percent of its global infrastructure trading strategy to US electric and multi-utility companies, reflecting the firm’s strong belief in the sector.

This strategic move underscores the firm’s confidence in US-listed utilities, which are critical to the rapid growth of data centers in the United States, a country that hosts one-third of the world’s data centers.

Data centers, essential to the digital economy by supporting services ranging from cloud computing to e-commerce and artificial intelligence, are voracious consumers of electricity. The International Energy Agency Electricity 2024 the report predicts that global electricity demand from data centers could exceed 1,000 terawatt hours (TWh) by 2026. – a figure comparable to Japan’s entire electricity consumption.

Highlighting the "huge opportunity" that data centers provide for regulated utilities to expand their customer base and revenue streams, Georgia Hall, ESG Analyst, Global Listed Infrastructure at Maple-Brown Abbott said: "We are positive on the utility sector services in the US due to compelling valuations combined with emerging opportunities around data center growth, digitization and decarbonization."

"We believe the undervalued structural growth tailwinds will continue for decades to come, but are not yet reflected in the market prices of these assets," Hall said.

"Our current allocation of 37 percent to U.S. electric and multi-utility companies in the Maple-Brown Abbott Global Infrastructure Network Strategy reflects our belief in the sector."

During a keynote speech at a Melbourne conference in April, Blackstone CEO and co-founder Stephen Schwartzman also highlighted an "explosion" in data center construction.

"It's like nothing I've ever seen," he said.

He also noted that this increased interest will necessitate a global effort to strengthen power grids to meet the significant power requirements of data centers.

"From an investor's perspective, there's something really strange that's going to happen, and this lack of capacity in the electric grid in the industrial world, with AI and EVs, creates huge investment opportunities," Schwartzman said.

Possibility of energy transition

The surge in electricity demand comes at a time when global power grids are facing strain as the transition from fossil fuels to cleaner energy sources.

Hall sees this as an opportunity to accelerate investment in energy transition infrastructure.

Amazon, Apple, Alphabet, Meta and Microsoft, known as "hyperscalers," have zero carbon or 100% renewable commitments and rely heavily on data centers. Research by S&P Global Market Intelligence shows that these companies contribute more than 45 GW of global corporate renewable purchases, accounting for more than half of the market.

“Network capacity is critical not only for the decarbonisation of the transport, industrial and residential sectors, but also for the interconnection of data centres. Integrating large amounts of variable solar and wind power, whose peak output may not meet peak demand times, requires significant investment and sophisticated management of electrical grids. Therefore, the time to invest in the network has never been more important,” Hall said.

"The long time to plan the network versus the shorter time frame to plan and build data centers creates a potential capacity shortage, thereby putting pressure on utilities and regulators to accelerate investment."

Exploring the idea of ​​nuclear power as an alternative to fossil fuels and a means of complementing renewable energy sources, Hall said: "It is reasonable to assume that large and smaller greenfield nuclear power plants are unlikely to solve the short-term need for load growth ".

“However, existing nuclear fleets with spare capacity have the potential to help hyperscalers with their electricity and zero-carbon needs.

"However, not all nuclear plants have this capability. Nuclear power can solve some, but not all, data center power needs.

“Therefore, more creative solutions are needed to combine renewable energy sources with baseload and/or energy storage technologies where this is viable. A lot of that comes down to timelines for technology and project development, having the right policy incentives in place and ensuring affordability of bills,” she said.

The United States leads the data center market with 5,381 centers, followed by Germany with 521 and the United Kingdom with 514. Australia lags behind its peers with 307 centers.