As Albert O. Hirschman argued in National Power and the Structure of Foreign Trade, an economy’s true power lies in its ability to manage the choke points that affect its industries. In the AI ecosystem, the United States has been leveraging its dominance in chip design by strategically limiting exports to China, while China has exerted pressure on the US through its control of rare-earth materials needed to manufacture chips, magnets and other components of advanced technology.

But as the scale of the AI industry and its reliance on computing power grows, the bottleneck will move from chips to electricity, because all the data centers in the world will not help you if they lack a continuous supply of affordable energy. The International Energy Agency estimates that roughly 20 percent of planned global data-center capacity will be at risk by 2030, owing to grid bottlenecks and interconnection queues. And as energy supplies are constrained, costs will rise, eventually trickling down to households and firms.

Which country will dominate this next leg of the race? China has certainly made a statement with its massive build-out of energy supply and distribution infrastructure, much of which focuses on renewables. According to the Financial Times, Chinese investments in clean energy cover everything from solar and hydropower to the hardware needed to move cheaper inland power to coastal demand centers, thus lowering costs and improving reliability. China has also invested massively in manufacturing, driving down the price of a solar panel by a factor of 20. All told, it is now capable of adding between 500 gigawatts and one terawatt of capacity per year.

Moreover, China has matched its carefully planned industrial policy with equally strong local execution. To offset the higher cost of using domestic chips, for example, local governments offer electricity subsidies for data centers under their jurisdiction. If these facilities are powered by domestic chips, they can cut their power bill by as much as 50 percent.

The US effort is rather unimpressive by comparison. According to the Financial Times, “China installed 429 GW of new power generation capacity in 2024, more than six times the net capacity added in the US during that time.” Even as the US' locally planned grids face enormous around-the-clock demand from data centers, US industrial policy is failing to give electricity the attention it deserves.

Viewpoint

Every Thursday

Whether you're looking to broaden your horizons or stay informed on the latest developments, "Viewpoint" is the perfect source for anyone seeking to engage with the issues that matter most.

View More Newsletter

By registering, you agree with The Jakarta Post's Privacy Policy

Sign Up

Thank You

for signing up our newsletter!

Please check your email for your newsletter subscription.

View More Newsletter

For example, OpenAI and its partners are planning to build data centers that will require ten GW of capacity, which is on the order of New York City’s summer peak load electricity usage. But, while data centers can be built in a couple of years, researchers at the Deloitte Research Center for Energy & Industrials point out that completing the transmission infrastructure needed to move energy takes almost a decade.

Popular

KUHP must be challenged

Start-up scandals in 2025 force investors to raise the bar, change playbooks

Indonesia may face rising instability in 2026: CSIS