China is building new power generation at an unprecedented pace to power the AI boom as the U.S. grid struggles to keep pace with the development of data centers, triggering more delays and project cancellations.
“I think we should be really worried,” said Tesla cofounder JB Straubel at Fortune’s Brainstorm Tech conference in Aspen on Monday.
“I think the grid can’t handle it,” said Straubel, who left Tesla in 2019 to build the Redwood Materials battery recycling firm as its founder and CEO. “The pace of growth and demand of energy is unprecedented.”
Straubel and Redwood are increasingly interested in the grid. Originally focused on electric-vehicle battery recycling, Redwood is now growing even more on using battery recycling to build battery energy storage for hyperscalers and the grid.
With U.S. electricity demand expected to surge anywhere from 50% to 80% between 2024 and 2050, depending on projections, the need for more sources of energy is critical.
Redwood just announced this week a new partnership with General Motors to use recycled EV batteries to power GM’s plant operations—just as GM invests in the next wave of battery technologies for EVs.
Straubel said the industry requires a mix of rapid grid growth and more behind-the-meter power solutions to hopefully meet the challenges. “It’s a period of renaissance for the energy industry,” he said, arguing that big problems spur the most innovative solutions.
Dana Guernsey, cofounder and CEO of Voltus, focused on the optimistic side of the future. “The grid can’t handle it yet,” Guernsey said during the panel, emphasizing the “yet.”
“Energy is now often the gating thing to furthering the AI economy,” she said. “Being able to get more out of the current grid” is critical.
In that vein, Voltus focuses on demand response and virtual power plants, convincing industrial users and residential customers to turn their thermostats over to AI at times of peak demand—and returning excess renewable energy back to the grid if available—to save energy and keep energy prices lower, essentially acting as a de facto power plant.
More from Fortune’s 25th Brainstorm Tech:
‘Not an Allbirds Moment’: Xbox’s new CEO says she is grounding the console in gaming roots not AI
In addition to power growth, Guernsey said, the key to winning the AI race is maximizing the potential of the existing grid because it is built to accommodate peak power demand times, wasting much of the power capacity the rest of the time.
“There’s a ton of excess headroom on the grid,” she said. “People need power yesterday.”
Otherwise, she added, “the energy space moves at the pace of regulation, and the tech space moves at the pace of tech. It’s just a really, really big problem.”
Tori Shivanandan, chief operating officer for Radiant, which is developing portable nuclear microreactors, also struck a positive tone.
“When our back is up against the wall, we build, and that’s what America is doing right now,” she said.
Grid failure doesn’t just mean the lights turning off, Straubel said. It means projects delayed and data centers that get built overseas. More than half of all data center projects are behind schedule.
“That’s a lack of competitiveness. If it’s not the U.S., that to me is a failure. We’ve lost our competitive edge,” he said.
Battery storage is rapidly growing, Straubel said, enabling all of the power sources to work together, from fossil fuels to nuclear to renewables. But about 100 times more energy storage is needed on the grid than today, he said.
The industry also needs to win over the hearts and minds, they said, as public opposition to data centers grows and more people blame them for rising electricity prices.
Straubel said the industry needs to explain what the energy and data centers are accomplishing with AI—and how the consumers are benefiting—so that data centers are seen less as the “boogeyman” and the “death star that’s just sucking this energy.”
And hyperscalers need to do more to ensure they are covering the costs, Guernsey said.
“We’re in a huge affordability crisis. As electricity has become more scarce, the laws of economics kick in,” she said.
Subscribe to Fortune Gulf Brief. Every Tuesday, this new newsletter delivers clear-eyed, authoritative intelligence on the deals, decisions, policies, and power shifts shaping one of the world’s most consequential regions, written for the people who need to act on it.