"Already an AI" key bottleneck, Goldman Sachs: European and American power grids are far behind China, copper will become the new oil
Goldman Sachs stated that the aging power grids in Europe and the United States have become a "key bottleneck" for AI development and energy security. The average operation time of European power grids is 50 years, while North American grids average 40 years, with most nearing the end of their lifespan. Among the 13 electricity markets in the U.S., 9 are already experiencing power shortages, and nearly all will be under pressure before 2030. The demand for grid upgrades will make copper the "new oil," with an expected 60% increase in global copper demand driven by grid construction by 2030
Goldman Sachs' latest warning states that with the surge in AI demand and escalating geopolitical tensions, aging power grids have become a "vulnerable link" in the energy security of Western countries, and the need for grid upgrades will drive copper prices to $10,750 per ton by 2027.
Goldman Sachs analysts Lina Thomas and Daan Struyven pointed out in their latest research report that the average operational lifespan of the European grid has reached 50 years, while North America is at 40 years, both nearing the end of their operational life. In contrast, China is vigorously promoting a UHV (Ultra High Voltage) transmission network, forming a globally leading power infrastructure system.
The bank also believes that the grid has become a "key link" for AI and defense, with the three being interdependent, making investment in the weak link of this energy supply chain more urgent.
Goldman Sachs expects that as AI and defense needs place the grid at the core of energy security, the urgent demand for grid upgrades is transforming copper into the "new oil," predicting that by 2030, the grid and power infrastructure will drive about 60% of global copper demand growth, supporting its bullish forecast of $10,750 per ton for copper in 2027.
Aging Western Grids Become a New Threat to Energy Security
Goldman Sachs analysts Lina Thomas and Daan Struyven elaborated on the challenges facing grid infrastructure in their report titled "AI and Defense Place the Grid at the Center of Energy Security."
According to the bank's analysis, the average usage lifespan of the European grid is 50 years, while North America is at 40 years, and these infrastructures are nearing the end of their designed operational lifespan.
Goldman Sachs states that the core focus of U.S. energy security policy is no longer just on crude oil transportation, liquefied natural gas shipping, or shale oil production, but has shifted to the grid system, which has been in operation for nearly half a century and has limited backup capacity.
The growth in electricity demand in the U.S. has begun to exert significant pressure on regional markets. Goldman Sachs specifically pointed out:
The PJM power market in Virginia, known as the "global data center capital," faced significant transmission bottlenecks in 2022. Data shows that nine of the 13 regional power markets in the U.S. reached critical tightness this summer.
Goldman Sachs predicts that by 2030, all U.S. regional power markets, except for one, will reach critical tightness. This forecast highlights the urgency of upgrading the U.S. grid infrastructure.
In contrast, China has significantly increased coal and nuclear power, promoting a UHV transmission network, forming a globally leading power infrastructure system.
AI Development Intensifies Pressure on the Grid
Goldman Sachs analysts point out that the rapid development of AI is pushing the grid to the core of energy security. Data centers, as an important component of AI infrastructure, require a large amount of electricity, further intensifying the pressure on the already strained grid system.
Thomas and Struyven emphasized in the report that there is an interdependent relationship between the grid, AI, and defense, making grid upgrades a national security priority. The report states:
"With the rise of AI, geopolitical tensions, and other factors, the demand for investment in the grid and related metals has become more urgent, as the grid is a key link for AI and defense." The establishment of this position makes the modernization of the power grid not just an infrastructure issue, but a strategic topic related to national security.
Goldman Sachs analysts believe that the application of AI in the defense sector is just beginning, which means that future electricity demand will continue to grow significantly, putting greater pressure on the already aging power grid infrastructure.
Surge in "New Oil" Copper Demand
Goldman Sachs predicts that the demand for power grid upgrades will significantly drive metal demand, particularly for copper.
The analysts at the firm state that power grid upgrades are metal-intensive projects, and copper's strategic importance as a core material for power grid construction is becoming increasingly prominent.
According to Goldman Sachs' forecast, by the end of 2030, power grid and electricity infrastructure construction will drive about 60% of the global copper demand growth. This increase is equivalent to adding the consumption of one United States on top of the global demand, providing strong support for the firm's bullish copper price forecast.
Based on this demand outlook, Goldman Sachs maintains its copper price target of $10,750 per ton for 2027.
The analysts at the firm believe that as AI and defense needs place the power grid at the center of energy security, the urgent demand for power grid upgrades is transforming copper into the "new oil."
