SOARING demand for data centres to support artificial intelligence and cloud-computing will boost global spending in the sector to US$250 billion a year, according to KKR.
The US is the biggest developer of data centres. That infrastructure consumes about 16 to 18 gigawatts of power, compared with about six gigawatts each in Europe and Asia, Waldemar Szlezak, KKR’s global head of digital infrastructure, said in an interview. For comparison, one gigawatt is enough to supply more than 850,000 average US households.
“Over the next three to four years, the 18 gigawatts will likely double, if not triple,” he said.
The alternative asset manager announced this week that it had entered into a US$50 billion partnership with Energy Capital Partners to accelerate the development of AI infrastructure. They plan to focus on developing data centres as well as power generation and transmission infrastructure. KKR’s capital will come from existing investment vehicles across infrastructure, real estate, credit and insurance, Szlezak said.
The firm’s competitors are also betting big on data centres.
Since snapping up data centre operator QTS in 2021, Blackstone, the world’s biggest alternative asset manager, has been bankrolling the development of the massive structures. Earlier this year, Brookfield Asset Management said in an investor presentation that it has more than 140 data centres, putting it at the “forefront of the AI revolution.” And BlackRock said in September that it’s teaming up with Microsoft to raise US$30 billion to build out data warehouses necessary to power advances in AI.
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KKR started investing in data centres about five years ago, and its first deal was to acquire data-centre developer and operator CyrusOne The buyout firm has held discussions with technology and power firms and utilities about other potential tie-ups, Szlezak said.
“We saw increasing need for data centres globally,” he said. “We’ve been very much leaning into the sector.”
Data-centre operators are increasingly looking to guarantee that they have access to power, as opposed to the prior “just-in-time” model, Szlezak said. Hyperscalers, or large-scale data centres, will need to invest more in generation and transmission, he said.
Purchase power agreements to support the build-out of power plants fuelled by natural gas are likely to emerge, which would be a pivot as such long-term off-take agreements typically have been used for wind, solar or even nuclear projects. These gas generators may require the construction of lateral lines to tap fuel from larger pipelines, and then there will likely have to be a way to store gas on site to ensure there’s available supply in extreme grid conditions, Szlezak said. BLOOMBERG
