AI is reshaping US-China tech race – can electricity tilt the balance?

China’s state-owned power grid giant has pledged to increase fixed-asset investment by 40 per cent over the next five years, at a time when some analysts view electricity capacity as a strategic asset in the US-China rivalry amid soaring demand from artificial intelligence (AI) and other power-hungry industries.\nThe State Grid Corporation of China expects the investment amount to reach 4 trillion yuan (US$574 billion) through 2030, a company record, as it accelerates efforts to build a “new-type power system” – a more efficient and flexible grid designed to integrate renewables.\nThe expansion could raise electricity’s share of end-use energy consumption to 35 per cent, with about 200 gigawatts of wind and solar capacity added annually, the company announced on Thursday.\nThe massive investment comes as the world grapples with the enormous energy appetite of AI. The International Energy Agency estimated that from 2024 to 2030, China’s data centres would consume 170 per cent more electricity while the consumption in the US would increase 130 per cent, with both accounting for nearly 80 per cent of global growth.\nHowever, China and the US – the world’s two AI powerhouses – face completely different pictures. China tops all countries with a third of global electricity generation volume due to aggressive government planning, while the US is facing an intensifying power shortage, prompting tech giants from Google to Meta to acquire power assets to secure supply for training their AI models.\n“In the AI race, computing power comes down to chips, electricity and algorithms – and electricity is the one area where China holds an undeniable advantage,” said Peng Peng, executive chairman of the Guangdong Society of Reform, a think tank affiliated with the provincial government.\n\n\nPierre Lau Hin-tat, China equity strategist at Citigroup Global Markets, said State Grid’s investment had “beat market expectations” and would help China “cement its edge over the United States in power supply”.\nShares of Chinese electricity and grid equipment makers surged on Friday morning after State Grid unveiled the 4 trillion yuan (US$574 billion) plan to upgrade the country’s power networks.\nTesla and SpaceX CEO Elon Musk has also predicted that China will lead the world in AI computing power, estimating that its electricity output – already the world’s largest – could reach about three times that of the US’ by 2026, giving it the capacity to support energy-hungry data centres.\n“China’s going to have more power than anyone else and probably will have more chips,” he told the “Moonshots with Peter Diamandis” podcast, in an episode released on January 6.\nChina’s total electricity generation was expected to reach about 10.6 trillion kilowatt-hours (kWh) in 2025, according to the National Energy Administration. By comparison, US power plants were projected to generate about 4.24 trillion kWh in the same year, according to the US Energy Information Administration – suggesting that China may have produced more than twice as much.\nThe State Grid Corporation of China said it also plans to fast-track ultra-high-voltage transmission projects, boosting cross-regional and cross-provincial power transfer capacity by more than 30 per cent by the end of the current five-year plan. It also aims to further electrify end-use energy demand, including connecting 35 million electric vehicle charging facilities to the grid.\nThe company said the expansion would help raise the share of non-fossil fuels in China’s energy mix to 25 per cent, advancing the national goals of building a new energy system and achieving economy-wide carbon peaking on schedule.\n