Alphabet's (GOOG 1.54%)(GOOGL 1.70%) Google recently announced a landmark strategic energy and technology partnership with leading utility NextEra Energy (NEE +0.23%). The new deal will accelerate AI growth and transform the energy industry.
Here's a look at what Google's new deal means for energy investors.
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The power struggle
Data centers consume a significant amount of power, particularly those designed to support AI. With more AI data centers coming online, the country's power usage is surging. Data centers in the U.S. will require 22% more grid power by the end of this year compared to 2024's level, according to a forecast from S&P Global. Meanwhile, it anticipates that power demand from these facilities will more than triple by 2030.
That's leading cloud computing and AI companies to lock up power supplies -- especially from lower-carbon energy sources -- to ensure they have enough to meet their future needs. Google signed a first-of-its-kind hydroelectric framework agreement with Brookfield Asset Management and its power-producing affiliate, Brookfield Renewable, earlier this year. It will buy up to 3 gigawatts (GW) of this carbon-free energy in the U.S. in the future, the largest-ever hydropower deal. The first two 20-year power purchase agreements (PPAs) as part of this framework cover 670 megawatts (MW) of capacity at a cost of more than $3 billion.
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Google followed that up by announcing a new collaboration with NextEra Energy in October to accelerate the deployment of nuclear energy in the U.S. As part of that agreement, NextEra Energy will restart the dormant Duane Arnold Energy Center in Iowa. The company shut the plant down in 2020 due to economic reasons, but now aims to bring it back online by 2029 to support Google's growing power needs. The tech giant will purchase 615 MW of the plant's power via a 25-year PPA. Additionally, the companies plan to explore the development of new nuclear power generation in the U.S. to support the country's surging electricity needs.
A landmark agreement
Google and NextEra Energy recently announced a meaningful expansion of their long-standing energy and technology collaboration. The companies now plan to jointly develop multiple GW-scale data center campuses across the U.S. They are combining their expertise (Google's data center development capabilities with NextEra's energy development experience) to rapidly develop the land, load interconnection and supporting generation, and capacity resources to build more data centers. They have already identified three locations and plan to develop more in the future.
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Additionally, the companies are collaborating on technology. They plan to have their first commercial product available in the Google Cloud Marketplace by the middle of next year. It will integrate Google's generative and agentic AI capabilities with NextEra's asset data. The AI-powered product will help energy companies manage fieldwork, predict energy equipment issues, and enhance the reliability of the grid.
"Our partnership with Google exemplifies this very singular moment when energy and technology are becoming inextricably intertwined," stated NextEra Energy CEO John Ketchum in the press release unveiling the landmark collaboration. Together, the companies will collaboratively build new data center capacity and energy infrastructure at scale, using advanced cutting-edge technology. This new partnership will, in the words of Ketchum, "reimagine how energy companies operate."
NextEra is moving from an energy supplier to a partner in developing integrated AI infrastructure. The company sees the potential to develop 15 GW of data centers by 2035, which is a conservative estimate. It's also working with other energy suppliers to help them develop lower-carbon energy solutions that support data center development. For example, it has partnered with ExxonMobil to develop gas-fired power plants for data centers that use carbon capture and storage technology to reduce carbon emissions. They're working on a 1.2 GW gas plant that they're marketing to data center developers.
Energy is becoming a focal point
Google's new deal shows the growing importance of energy in supporting the AI boom. The tech giant is significantly expanding its long-standing collaboration with NextEra Energy, which is becoming a partner in developing new data centers that integrate power with technology. It could serve as a blueprint for the energy industry to follow in the future to power its growth.
