BEP.UN - Excerpt from Q4 2024 Letter to the Unitholders
We are a key enabler of the technology sector
With the significant growth in demand for data globally, the position of the technology mega-cap players as the largest and fastest growing businesses in the world continues to solidify. Since 2020, the cloud computing segments of these companies have grown by over 30% annually, representing their highest growth segments and generating their highest margins. Demand for cloud computing from digitalization and the adoption of AI enabled tools is incentivizing these companies to continue investing heavily in their capabilities and capacity, and two of the key ingredients needed to deliver these products are computing power and energy.
Over the last twelve months, the race to increase computing power has been illustrated by the increase in demand for certain inputs, such as computer chips. However, we believe most investors have yet to grasp the importance of a secure energy source in being able to deliver data center and computing power growth.
The largest cloud computing businesses run on clean power. These companies have 100% clean energy targets and have been growing their consumption by approximately 50% per annum over the past couple years, making them the largest buyers of green power globally. However, the highly power intensive nature of AI is acting as a multiplier on energy demand which is increasingly becoming a key bottleneck for growth of cloud computing. For example, the integration of AI uses up to ten times more power when integrated into a typical search process. The accelerating global trend of digitalization was already driving a step change in electricity needs, which is now being further multiplied by the implementation of AI. Renewable power, as the cheapest form of bulk electricity production, is the solution to this growing electricity demand.
Furthermore, as the scale and energy intensity of data centers increases, these facilities put pressure on global electricity grids. As a result, certain regulators are now requiring data center developers to provide a power solution in order to receive data center permitting approvals. This has put power on the critical path to growth for these technology companies. Along with electrification of large segments like industrials and transportation, this trend creates an environment where significant increases in demand for new electricity projects is a reality in developed markets for the first time in decades.
It is widely estimated that global electricity consumption from data centers will increase to approximately 10% of total electricity demand by 2030 (from approximately 2% today). Meaning to satisfy the needs of data centers alone – which doesn’t factor in the penetration of EV or broader electrification – additional generation capacity will be required equivalent to the size of the current U.S. grid.
For the better part of a decade, we have been positioning our business to capitalize on these trends. By building a leading global development platform, combined with our early focus on corporate power marketing capabilities, this has allowed us to serve the needs of the largest and fastest growing buyers of green power. The global technology companies have been the largest corporate customers of our business for years, as we have differentiated ourselves with our scale and credibility, delivering new energy projects on time to enable their growth.
Our ability to deliver 24/7 clean power solutions at scale and across geographies positions our business to continue to be a major beneficiary of this robust demand growth going forward. Further, our ability to provide unique and tailored solutions of scale allows us to avoid competition and drive better returns in bilateral contracts. We have signed contracts to provide over 60 terawatt hours of power over the past two years to the large technology businesses, an amount we expect to increase dramatically in the coming years.
As a result, going forward we expect the vast majority of our new renewable power development will be contracted to corporate customers where we are seeing strong demand for our differentiated offerings at attractive contract terms. Currently we have approximately 22 terawatt hours per year of generation contracted to corporate customers representing approximately 30% of our total contract volumes, over double the volumes contracted to these types customers five years ago. Based on our existing development pipeline we expect contracted generation to corporate customers to double again by 2028 to approximately 44 terawatt hours per year, or 45% of contract volumes.
Connor Teskey
Chief Executive Officer
February 2, 2024
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