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According to a new report from the International Energy Agency, the world will spend $580 billion on data centers this year — $40 billion more than will be spent finding new oil supplies.

Those numbers help to illustrate some big shifts in the global economy, and comparing data centers and oil seems particularly apt given concerns about how generative AI might accelerate climate change.

Kirsten Korosec, Rebecca Bellan, and I discussed the report’s findings on the latest episode of TechCrunch’s Equity podcast.

There’s no question that these new data centers are going to be hungry for power, and that they could place even more stress on already taxed electrical grids. But Kirsten pointed to a potential upside, with solar poised to power many of these new projects, which could also create new opportunities for startups pursuing innovative approaches to renewable energy.

We also discussed how these projects will be funded, with OpenAI saying it has committed  $1.4 trillion to building data centers, Meta committing $600 billion, and Anthropic recently announcing a $50 billion data center plan.

You can read a preview of our conversation, edited for length and clarity, below.

Kirsten: Here’s what I think is the potential upside. So Tim De Chant, who’s our climate tech reporter, has done a ton of reporting about not just data centers, but actually how a lot of data centers are turning to renewables because in terms of regulatory [hurdles] and cost, they are the go-to. It’s a lot easier to get a permit to throw up a bunch of solar panels adjacent to a data center.

So to me, the one upside is that it could really mean a positive for any kind of company that is doing interesting things around renewables or data center design and some of the technology to reduce the global emissions component of it.

But of course, the sheer number to me is what really stood out. As a former energy reporter myself, I know how much is spent on trying to find new oil.

Rebecca: I mean, it’s a lot. And a lot of that’s coming from the U.S. I think that report found that half of the electricity demand will be coming from the U.S., and the rest is a mix of China and Europe.

And another thing that struck me about it was that most of the data centers are coming to cities, or near cities, like populations of a million people, roughly. So that means there’s a lot more challenge with the grid connection and with connection pathways. I think that, to your point, renewables will have to [be a focus] — it’s just good business, it’s not because of any environmentally friendly policies.

Kirsten: Redwood Materials’ new business unit, Redwood Energy, is going to be an interesting company to watch with this. A few months ago, I went to their big reveal, and they’re taking the old EV batteries that aren’t quite ready to be recycled, and then they’re creating these microgrids, and then specifically going after AI data centers. And that, to me, would alleviate the problem or the concern that you just mentioned.

The question is: Are other companies going to do this? Are there other Redwood Energies out there that are trying to do the same thing? And how much of an impact could they make? Because I do think that like the pressure on the electrical grid, especially during certain times of the year, like in the middle of the summer, for instance, places like Texas that have rolling brownouts and blackouts, that is going to be a real concern. And it could spur a whole new kind of investment into companies doing what Redwood is doing.

Anthony: It also underlines this question about what is that going to do to the spaces that we live in? Even if they’re not in cities themselves, I feel like the landscape is definitely going to be transformed by construction at this scale.

And then, of course, there’s also this question of how much of [the planned data centers are]  actually going to get built because there’s definitely very ambitious plans that require huge amounts of spending.

To start with OpenAI, that’s a company that a lot of people have been talking about, how much money are they actually making versus the trillions of dollars of capital commitments they have for the next decade. And then there was this whole controversy over their CFO saying, “The government should backstop our loans to build these data centers.” And then she’s like, “No, no, no, no, no, I didn’t mean backstop, that was a poor choice of words,” but it does look like they have been asking for an expansion of tax credits from the CHIPS Act. 

I think that this is going to be an effort that’s not just going to fall on the companies, but also on the government — or at least that’s going to be a question that the government is considering over the next few years.

The USDA report released after the government reopened showed only two Chinese purchases of American soybeans since the summit in South Korea that totaled 332,000 metric tons. That’s well short of the 12 million metric tons that Agriculture Secretary Brooke Rollins said China agreed to purchase by January and nowhere near the 25 million metric tons she said they would buy in each of the next three years.

American farmers were hopeful that their biggest customer would resume buying their crops. But CoBank’s Tanner Ehmke, who is its lead economist for grains and oilseed, said there isn’t much incentive for China to buy from America right now because they have plenty of soybeans on hand that they have bought from Brazil and other South American countries this year, and the remaining tariffs ensure that U.S. soybeans remain more expensive than Brazilian beans.

“We are still not even close to what has been advertised from the U.S. in terms of what the agreement would have been,” Ehmke said.

Beijing has yet to confirm any detailed soybean purchase agreement but only that the two sides have reached “consensus” on expanding trade in farm products. Ehmke said that even if China did promise to buy American soybeans it may have only agreed to buy them if the price was attractive.

Trump said his team spoke with Chinese officials today and they assured the White House they would be purchasing more soybeans, but he didn’t offer any details of how much.

“They’re in the process of doing not only a little bit but they’ll be doing a lot of soybean purchases,” he told reporters.

The Chinese tariff on American beans remains high at about 24%, despite a 10-percentage-point reduction following the summit.

Soybean prices fell sharply by 23 cents to $11.24 per bushel Friday. Ehmke said “that’s the market being shocked by the lack of Chinese demand that was confirmed in USDA data today.” Prices are still higher than they were before the agreement when they were selling for $10.60 per bushel, but the price may continue to drop unless there are significant new purchases.

Before the trade agreement, Trump had promised farmers would receive an aid package to help them survive the trade war with China. That was put on hold during the shutdown, and now it’s not clear whether the administration will offer farmers aid like Trump did in his first administration.

American farmers have been through this before after Trump’s first trade war with China. The trade agreementChina signed with the United States in 2020 promised massive purchases of U.S. crops. But the COVID-19 pandemic disrupted trade between the two nations just as the agreement went into effect. In 2022, U.S. farm exports to China hit a record, but then fell.

Soybean prices are actually still a little higher than they were a year ago even without China’s normal purchases of roughly one-quarter of the U.S. crop. That’s because this year’s soybean crop is a little smaller while domestic demand remained strong with the continued growth in biodiesel production.

But farmers are dealing with the soaring cost of fertilizer, seed, equipment and labor this year, and that is hurting their profits. The Kentucky farmer who is president of the American Soybean Association, Caleb Ragland, has said he worries that thousands of farmers could go out of business this year without significant Chinese purchases or government aid.

Ragland said he’s still optimistic that China will follow through on the purchases, but it’s hard to be confident in that right now with so few sales reported.

“We don’t want to assume they won’t. But it’s going to be a wonderful day when we actually deliver those soybeans, and when there’s my money in hand and so forth and the transaction’s complete,” Ragland said.

China is the world’s largest buyer of soybeans. China bought more than $12.5 billion worth of the nearly $24.5 billion worth of U.S. soybeans that were exported last year.

But China quit buying American soybeans this year after Trump imposed his tariffs and continued to shift more of their purchases over to South America. Even before the trade war, Brazilian beans accounted for more than 70% of China’s imports last year, while the U.S. share fell to 21%, World Bank data shows.

Ragland said that every vender he talks to has told him they are increasing their prices for next year, which will continue to put pressure on farmers.

“We’re still looking at sharp losses and the red ink as we figure budgets for 26 is still very much in play,” he said.