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Fossil fuels are essential, despite renewable energy zealotry

Mark Perry Detroit News

Date Posted:: August 16, 2021
Is Database:: Database

Carbon-based fuels provided 81% of American total energy demand in 2020, and 71% of electrical demand.

In 2020, carbon-based fuels, including oil, coal, and natural gas, supplied 81% of the U.S. energy demand and 71% of electrical demand, underscoring their critical role in the economy. Despite rising natural gas prices, coal generation surged, with a 37% increase in the Midcontinent Independent System Operator (MISO) and a 42% rise in the Southwest Power Pool (SPP) in June. This shift highlights coal's role as a price shock absorber and its importance in maintaining grid reliability amid increasing reliance on intermittent renewables. The Biden administration's push for renewable energy, while reducing fossil fuel reliance, risks undermining energy security and economic stability. As rolling blackouts and grid challenges persist, maintaining a balance between renewable additions and existing fossil fuel capacity is crucial to avoid potential energy crises and ensure a reliable power supply for the growing economy.

Takeaways by Macro Roundup^® AI

Carbon-based fuels — oil, coal, and natural gas — supplied 81% of U.S. energy demand and 71% of electrical demand in 2020.
Coal generation rose 37% in the Midcontinent Independent System Operator and 42% in the Southwest Power Pool in June amid rising natural gas prices, which the author casts as coal acting as a price shock absorber.
The author argues the Biden administration's renewable energy push risks undermining energy security and economic stability, and that balancing renewable additions with existing fossil fuel capacity is needed to maintain grid reliability.

Mark Perry, “… Oil, coal, and natural gas provide the large majority of the nation’s energy, supplying 81 percent of U.S. energy demand in 2020….Rising natural gas prices have shifted energy market share back to coal. Coal generation on the PJM grid, the nation’s largest which extends from Pennsylvania to parts of Illinois, hit a three-year high. Coal generation in the Midcontinent Independent System Operator (MISO) rose 37 percent in June and 42 percent in the Southwest Power Pool (SPP)….”

Fossil fuels are essential, despite renewable energy zealotry

Anyone who thinks that the most important environmental task of the next few years is to reduce the use of fossil fuels must take no comfort in recent energy trends.

The Biden Administration – despite its opposition to domestic drilling – is pressuring OPEC to pump more oil and provide price relief at the gas pump. Global natural gas demand and prices are on the rise and coal prices have recently spiked to record levels.

For energy sources that are supposed to be in their decline, fossil fuels remain absolutely essential to our nation’s economy and security. Oil, coal, and natural gas provide the large majority of the nation’s energy, supplying 81 percent of U.S. energy demand in 2020.

No energy source has been more maligned or written off than coal but coal has increasingly provided an essential insurance policy for a sometimes overwhelmed energy grid, not something that should be cast aside.

Coal is currently helping shield the Midwest and other regions from electricity shortages. According to Argus, in June, coal generation on the PJM grid, the nation’s largest which extends from Pennsylvania to parts of Illinois, hit a three-year high. Coal generation in the Midcontinent Independent System Operator (MISO) rose 37 percent in June and 42 percent in the Southwest Power Pool (SPP).

Rising natural gas prices have shifted energy market share back to coal, with the coal fleet providing an important price shock absorber for the nation’s utilities and their consumers. If more coal plants are pushed into early retirement, that energy balance and fuel flexibility will go with them.

Balance on the energy grid matters as does fuel security. As this past year has demonstrated, with rolling blackouts in California, the near-collapse of the Texas power grid in February, and the threat of capacity shortfalls from the Pacific Northwest all the way to New York, the reliability of the nation’s electricity supply is getting more problematic by the month. While no one fuel source is a cure-all to energy reliability challenges, the months of fuel kept on-site at coal plants is a welcome hedge to the just-in-time fuel delivery at natural gas plants or from wind and solar generation.

Last winter, when bitter cold locked up natural gas infrastructure and wind turbines across the Midwest, it was our coal capacity that came to the rescue – much of it in coal-mining states. It is troubling that the Biden administration fails to grasp the importance of coal and would like to see it disappear in the next few years. If you think there’s a well-designed plan to replace coal and the reliability it provides, think again.

The U.S. Energy Information Administration reports that the vast majority of new power capacity added to the grid this year – nearly 40 gigawatts – will be windmills and solar. Increasing reliance on intermittent renewable power will exacerbate reliability concerns, especially if these additions come in place of the dispatchable power provided by traditional, on-demand sources of generation.

As reliability challenges become more severe across the country, it’s increasingly clear that renewable energy generation additions should come on top of existing coal and natural gas capacity, not in place of it. Pushing more coal capacity and its fuel security off the grid and replacing it with sources of power that are useless at night or when there is no wind is a recipe for a potential catastrophe.

What is critical for our energy future is a reliable and affordable supply of power that doesn’t take a backseat to renewable energy zealotry.

Frequently ignored or overlooked is the fact that fossil fuels remain the nation’s energy lifeblood and will serve as the dominant energy sources to power our vehicles, heat and light our homes, and fuel the growing economy for many decades into the future. Mandating the closure of reliable operating power plants or making it more expensive and difficult to produce the fuels we need in the future is denying reality and putting the American economy at great risk.

Mark Perry, “Fossil fuels are essential, despite renewable energy zealotry.” July 21, 2021, Detroit News, https://www.aei.org/op-eds/fossil-fuels-are-essential-despite-renewable-energy-zealotry/

EIA Staff, “Electricity Explained: Electricity In The United States,” Energy Information Agency, Updated March 18, 2021, https://www.eia.gov/energyexplained/electricity/electricity-in-the-us.php

To your point natural gas share of generation did gain y/y btw 2019-2020 from38% to 40%clearly it’s displacing the other carbon based electrical sources.

Last year (they note the 2020 numbers are preliminary) so same sources generated61%of the total kilowatthours. I suspect that trend will accelerate given trends in renewables.

Steve note: So according to theAEIcarbon based fuels (so coal, natural gas and petroleum) generated 2691 billion kilowatthours of electricity in 2000,71%of total US electrical generation that that year.

Note this includes transportation. The number is 71% for electrical generation from the EIA

How Much Revenue Does The AI Buildout Need In 2030?

William Gildea and Azeem Azhar Exponential View

Date Posted:: October 1, 2026
Is Database:: Database

Beginning with capex projections, Gildea/Azhar derive for their high-growth case a $1.3T annual AI-infrastructure revenue hurdle for 2030. This covers $771B of depreciation and operating costs, plus a 15% return on $3.5T of net capital in service.

We estimate AI CapEx to be $560B in 2026, 64% of the total declared by the hyperscalers. Unfinished facilities can’t generate revenue, so the investment bill and the productive asset base will grow at different speeds. [In the high investment case], by 2030 we see $3.5T of net AI capital in service. The largest component [of the revenue hurdle] is the $555B in compute depreciation. We model lifespans at the current 5-6 years. Shell depreciation and OpEx combined contribute about a further $216B to the required revenue hurdle. [Adding a 15% return on net capital brings required annual infrastructure revenue to $1.3T]. Reaching the $1.3T hurdle would represent 7.4x growth (59% CAGR) from today’s annualized revenues. For its customers to earn 30-50% gross margins, downstream revenues need to be $1.9-2.6T. [Editor’s note: Van Nieuwerburgh’s far larger figure of $3.7T covers mature revenues from projects completed through 2032, using commissioning capital and a 50% infrastructure operating cash-flow margin. This estimate instead charges depreciation and operating costs plus 15% on net capital in service in 2030. Different horizons and cost conventions prevent a direct comparison. Van Nieuwerburgh also has a much higher capex estimate.]

Takeaways by Macro Roundup^® AI

In a high investment case with $3.5tn of net AI capital in service, the authors estimate AI infrastructure must generate $1.3tn of annual revenue by 2030, requiring 7.4x growth (59% CAGR) from today’s annualized revenues.
Compute depreciation of $555bn, modeled on 5-6 year lifespans, is the largest component of the 2030 revenue hurdle, with shell depreciation and operating expenses adding about $216bn and a 15% return on net capital completing the $1.3tn total.

AI and Entrepreneurship: What is Really Happening?

Nathan Goldschlag Economic Innovation Group

Date Posted:: September 30, 2026
Is Database:: Database

Nathan Goldschlag finds that available federal data do not yet establish that AI is boosting entrepreneurship. “Across different cuts of the data, there is no clear evidence of AI affecting entrepreneurship, either for likely employers or nonemployers.”

Employer entrepreneurship is at best rising modestly, and at worst has been falling for several years already. The number of business applications likely to become an employer business was flat in 2025 and began rising in 2026. Fewer of those applications have been the kind that have the highest chance of becoming an employer. Nonemployer entrepreneurship, or “solopreneurship,” is likely rising, but not as the main job of the solopreneurs. These are probably side hustles. Likely nonemployer business applications rose significantly in 2025 and early 2026. But the share of workers claiming to be self-employed nonemployers in their main job — in other words, business owners with no employees — is flat (though noisy). AI-intensive sectors and industries are no exception. Establishment entry in AI-intensive sectors (information and professional services) has been flat or falling in recent years.

Takeaways by Macro Roundup^® AI

Business applications likely to become employer businesses were flat in 2025 and began rising in 2026, with fewer applications of the kind having the highest chance of becoming an employer business.
Likely nonemployer business applications rose significantly in 2025 and early 2026, going vertical in the most AI-intensive sectors of information and professional services, while other sectors kept pace until early 2026 and then flattened.
The share of workers reporting self-employment as nonemployers in their main job is flat, though noisy, including among workers in AI-exposed occupations in 2025 and early 2026.

Tech's Trillion-Dollar Internal Inconsistency

Torsten Sløk Apollo

Date Posted:: September 29, 2026
Is Database:: Database

Tech analysts expect sector operating cash flow to more than double to ~$2.4T by 2028. Analysts covering other S&P 500 sectors (tech’s customers) see far less cash growth in their sectors. Slok “raises the question of who exactly will be writing all those checks to buy AI services.”

Wall Street equity analysts work in sector silos, and when you add up their forecasts, the numbers are internally inconsistent. The analysts covering tech expect the sector's operating cash flow to more than double to roughly $2.4 trillion by 2028, an increase of over $1.2 trillion. Meanwhile, the analysts covering the other sectors in the S&P 500, which are tech's customers, expect those companies to add much less operating cash flow. In other words, the tech silo is betting on a future in which demand for AI and tech services explodes, while the silos covering the companies that would pay for those services see a much more modest outlook. Both cannot be right at the same time. The bottom line is that either tech's customers will generate a lot more cash than their analysts expect, or tech's cash flow forecasts are too optimistic, which raises the question of who exactly will be writing all those checks to buy AI services.

Takeaways by Macro Roundup^® AI

Analysts covering the tech sector expect its operating cash flow to more than double to roughly $2.4tn by 2028, an increase of over $1.2tn.
Analysts covering the other S&P 500 sectors, which are tech's customers, expect those companies to add much less operating cash flow, leaving the combined forecasts internally inconsistent.
Either tech's customers will generate much more cash than their analysts expect, or tech's cash flow forecasts are too optimistic, which raises the question of who will pay for AI services.

Nine Percent of GDP

Hanno Lustig The Two Cents

Date Posted:: September 28, 2026
Is Database:: Database

The US AI-buildout is projected to average ~3.6% of GDP over 2025–32. Lustig notes data-center operators will need ~$3.725T in annual compute revenue by 2032, 9.2% of projected GDP, to earn a 10% unlevered return on the buildout.

What do you have to believe about future revenue in order for all data center owners to to break even on their AI investment? Using a 10% discount rate, Stijn’s baseline number is 3.725 trillion of annual revenue by 2032, which would amount to roughly 9.2% of projected 2032 GDP. This number is the top line earned from selling compute in aggregate by whoever operates the 182.7 GW of US capacity completed by 2032.2. The assumptions behind that number: 183 GW of U.S. data-center capacity completed between 2025 and 2032. $8.54 trillion of construction cost, grossed up to a $9.61 trillion capital base to account for the return on capital tied up during construction. A 10% discount rate. A 6-year life for IT equipment (68% of cost) and a 20-year life for everything else (32%). A 50% operating cash flow margin.

Takeaways by Macro Roundup^® AI

Stijn’s baseline estimate holds that data center owners would need $3.725 trillion of annual revenue by 2032 — roughly 9.2% of projected 2032 GDP — to break even on AI investment at a 10% discount rate.
The break-even calculation assumes 183 GW of U.S. data-center capacity completed between 2025 and 2032 at $8.54 trillion of construction cost, grossed up to a $9.61 trillion capital base for return on capital tied up during construction.
The estimate assumes a 6-year life for IT equipment, which accounts for 68% of cost, a 20-year life for the remaining 32%, and a 50% operating cash flow margin.

Financing the AI Buildout

Stijn Van Nieuwerburgh Brookings Papers on Economic Activity

Date Posted:: September 24, 2026
Is Database:: Database
Is Important:: Important

Stijn Van Nieuwerburgh projects ~$10.3T will be spent on the AI buildout over 2025–2032, averaging 3.63% of GDP. He estimates 2/3 of that spending reflects IT equipment and one-third real estate and associated power infrastructure.

The required investment is enormous. A representative 200 MW AI training campus costs roughly $8.2 billion, about two-thirds of which reflects IT equipment and one-third the real estate and associated power infrastructure. We estimate that 183 GW is completed by 2032 with a further 118 GW completed after 2032. This pipeline will trigger about $10.3 trillion dollars of investment over 2025–2032. At an average of 3.63% of GDP per year, the projected buildout would be larger relative to the economy than the major U.S. canal, railroad, electrification, highway, and telecommunications investment booms. It would double the electricity consumption of the entire U.S. residential sector.

Takeaways by Macro Roundup^® AI

Using Cleanview project-level data from July 2026, the authors estimate roughly 57 GW of operating U.S. data center capacity against a planned development pipeline of roughly 509 GW, which they stress is not a completion forecast.
The authors’ central scenario allocates the announced pipeline so that 182.8 GW of additional U.S. capacity becomes operational during 2025–32, including 19.0 GW tied to projects already operational in 2025 or 2026.
The authors’ scenario has 117.2 GW of planned data center capacity completed after 2032 and 226.9 GW never completed, applying lower realization rates to more distant and less fully documented projects.

Moonshot Capitalism: AI Rewrites The Venture Capital Playbook

Tim Bradshaw Financial Times

Date Posted:: September 10, 2026
Is Database:: Database

Since the start of 2024, more than $150B of venture capital has been invested into non-AI “deep tech” firms whose products are rooted in significant engineering advances, exceeding the $133B invested in such firms btw 2010 and 2019.

The AI boom is fuelling a resurgence in ambitious “moonshot” bets, as early SpaceX backers’ huge returns and falling valuations for traditional software companies force tech investors to embrace riskier and more capital-intensive dealmaking. Excluding the giant sums ploughed into AI start-ups, global investment in “deep tech” — companies whose products are rooted in big scientific or engineering advances — has exceeded $150bn since the start of 2024, more than the $133bn in the entire decade to the end of 2019, according to Dealroom. This year’s deep-tech investments have not yet surpassed 2021’s peak, which was propelled by battery and electric vehicle deals for the likes of Rivian and Northvolt — many of which turned sour, highlighting the risks involved in moonshot dealmaking.

Takeaways by Macro Roundup^® AI

Global "deep tech" investment excluding AI start-ups has exceeded $150bn since the start of 2024, more than the $133bn invested in the entire decade through 2019, according to Dealroom.
Huge returns for early SpaceX backers and falling valuations for traditional software companies are pushing tech investors toward riskier, more capital-intensive "moonshot" dealmaking.
Deep-tech investment has not yet surpassed the 2021 peak, which was propelled by battery and electric vehicle deals for companies such as Rivian and Northvolt, many of which turned sour.

Carbon-based fuels provided 81% of American total energy demand in 2020, and 71% of electrical demand.

Do fossil fuels remain essential to U.S. energy supply and grid reliability?

Takeaways by Macro Roundup® AI

Beginning with capex projections, Gildea/Azhar derive for their high-growth case a $1.3T annual AI-infrastructure revenue hurdle for 2030. This covers $771B of depreciation and operating costs, plus a 15% return on $3.5T of net capital in service.

How much annual revenue must AI infrastructure generate to justify investment?

Takeaways by Macro Roundup® AI

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Nathan Goldschlag finds that available federal data do not yet establish that AI is boosting entrepreneurship. “Across different cuts of the data, there is no clear evidence of AI affecting entrepreneurship, either for likely employers or nonemployers.”

Is AI driving a boom in new employer businesses?

Takeaways by Macro Roundup® AI

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Tech analysts expect sector operating cash flow to more than double to ~$2.4T by 2028. Analysts covering other S&P 500 sectors (tech’s customers) see far less cash growth in their sectors. Slok “raises the question of who exactly will be writing all those checks to buy AI services.”

Are tech cash flow forecasts inconsistent with customers' projected growth?

Takeaways by Macro Roundup® AI

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The US AI-buildout is projected to average ~3.6% of GDP over 2025–32. Lustig notes data-center operators will need ~$3.725T in annual compute revenue by 2032, 9.2% of projected GDP, to earn a 10% unlevered return on the buildout.

How much annual revenue must AI data centers generate to break even?

Takeaways by Macro Roundup® AI

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Stijn Van Nieuwerburgh projects ~$10.3T will be spent on the AI buildout over 2025–2032, averaging 3.63% of GDP. He estimates 2/3 of that spending reflects IT equipment and one-third real estate and associated power infrastructure.

How much of the planned data center pipeline gets built?

Takeaways by Macro Roundup® AI

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Since the start of 2024, more than $150B of venture capital has been invested into non-AI “deep tech” firms whose products are rooted in significant engineering advances, exceeding the $133B invested in such firms btw 2010 and 2019.

Is the AI boom pushing venture capital toward riskier moonshot bets?

Takeaways by Macro Roundup® AI

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