America's core energy security policy is no longer just focused on crude oil tankers, LNG cargoes, or even shale output. The new chokepoint is the power grid - nearly half a century old, with limited spare capacity, and now, according to Goldman analysts, at the very center of energy security. As they put it: "The grid is a vulnerable link in energy security."
"The need to invest in the power grid – a vulnerable link in the energy supply chain – and the associated metals demand boost are becoming more acute with the rise of AI, geopolitical tensions, and the shift to hybrid warfare," analysts Lina Thomas and Daan Struyven wrote in a note to clients on Thursday titled "AI and Defense Place Grids at the Center of Energy Security."
Thomas and Struyven stress that Western power grids are averaging 50 years in Europe and 40 years in North America, and are near the end of their operating life.
"In the US, power demand growth has already started to strain regional markets. More specifically, the PJM power market in Virginia – the data center capital of the world – hit significant transmission bottlenecks in 2022, and nine out of 13 US regional power markets have already reached critical tightness this summer, while we expect all but one to reach critical tightness by 2030," the analysts noted.
Meanwhile, the US and Europe paralyzed their economies and power capacity under the guise of a "climate crisis," where globalist-aligned Democrats forced green policies that swapped stable fossil-fuel generation with unreliable solar and wind (unleashed a power bill crisis). At the same time, China added massive amounts of coal and nuclear power. It appears as if Western globalists deliberately neutered the West to enable China's rise.
The analysts argue that power grids are the most "critical link" for AI and defense, with all three intertwined, making the grid a national security priority.
"The need to invest in the power grid – a vulnerable link in the energy supply chain – and the associated metals demand boost are becoming more acute with the rise of AI, geopolitical tensions, and the shift to hybrid warfare. This is because the grid is a critical link for AI and defense, with all three being interdependent," Thomas and Struyven noted.
AI in the defense world is just beginning...
Data centers draw massive amounts of power.
On the commodity side, the analysts pointed out that with AI and defense putting the power grid at the center of energy security, the urgent need for grid upgrades is turning copper into the new oil.
"Such grid upgrades are metals-intensive: we expect grid and power infrastructure to drive ~60% of global copper demand growth through the end of the decade, adding the equivalent of another US to global demand and underpinning our bullish copper price forecast of $10,750/t by 2027," they said.
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The full Goldman note is available to ZeroHedge Pro Subs in the usual place. This note includes additional charts and in-depth view on how the power grid has become the "vulnerable link in energy security."