Energy and Our World

This article originally ran on Forbes.com on November 27, 2024. All rights reserved.

Daniel B. Markind is a Forbes.com energy column contributor. The views expressed in this article are not to be associated with the views of Flaster Greenberg PC.

Paradoxically, the world of the mid 2020s is a world in which countries  otherwise rich in energy supply nonetheless have been having trouble keeping the lights on, both undermining their political, societal, and economic stability and decreasing their ambitions for international growth and trade.

In South Africa, a massive crisis of rolling electricity blackouts (called “load-shedding” in the trade) in 2023 has so far not been as severe in 2024, but residents of Johannesburg are still wondering how this change from the prior year was accomplished at all, and why it could not have been done sooner. (Source). They may now be finding the answer to that question, as state-owned power provider Eskom has just proposed to the National Energy Regulator of South Africa (NERSA) a 36.15% electricity tariff increase for 2025, with additional increases proposed for 2027 and 2028. (Source).  Already facing insecurity over the availability of safe and clean drinking water throughout the country, South Africans now must also worry that their overall standard of living will be devastated by the increased energy costs, as well as recurring power cuts.

India faces a fundamental electricity deficit, with peak demand evening power shortages reaching as much as 20-40 GW by 2027.  Meanwhile, in Iran, fuel shortages have already forced the governing Islamic Mullahs to enforce rolling blackouts. (Source).  Winters in many parts of Iran can be extremely cold, and the commencement of such blackouts portends a possible long hard winter of discontent for Iran’s long suffering people.

Then there’s Russia, which is going into its third winter of war against neighboring Ukraine and which has a history of using its energy holdings as a weapon. (Source). While the first two winters of the war have actually gone more smoothly than many would have expected, the next one coming up is not looking as promising.  On November 19, Russia announced a ban on cryptocurrency mining in occupied Ukrainian territories and energy-stressed regions due to potential electricity shortages. (Source).  Crypto-mining, which is the process that blockchain networks, like Bitcoin and other cryptocurrencies, use to finalize transactions, requires immense amounts of energy to be carried out. (Source).  It remains to be seen what effect, if any, Russia’s ban on crypto-mining in certain regions will have on the availability of energy generally in that country.

It is in another field however, that Russia’s electricity shortage may have truly long-term strategic adverse consequences.  That is in the field of Artificial Intelligence (AI), including Russia’s reliance on the Internet to allow access to AI in the first place.

In 2024, Russia assumed the chairmanship of the so-called “BRICS” group (Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia and the UAE).  The mission of that group, of course, is to challenge longstanding Western dominance in many fields, including technologies and infrastructures.  On October 24-25, leaders of 36 countries, including many BRICS leaders such as Xi Jinping of China, Nerendra Modi of India and UN Secretary General Antonio Guterres gathered in Kazan, Tatarstan (Russia) in what the Kremlin touted as the “largest foreign policy event ever held”. (Source). As reported in TASS, the Russian news agency, a high-profile Russian diplomat gave a bold message.  “BRICS will be at the forefront” of digitalization and artificial intelligence, he claims, “not the G7 and Western associations.”  To facilitate that, in 2024 Russia hosted a series of events in Moscow covering all areas of cooperation, including banking, urban development, customs, trade and more, and pushing forward its “anticolonial”  AI and digital cooperation agenda. (Source).

If successful, this would include establishing protocols that would bypass the United States and Western nations generally, including, possibly, even setting up its own internet.  Initial results, however, have not been promising, at least in Russia.

For Russia, the drive into AI has been receiving massive state support going back many years. (Source).  Russian President Vladimir Putin, smarting over the poor performance of his military in Ukraine and the uneven success of his air defense technology in the Middle East, views AI as a path through which he can potentially challenge the West on more equal footing. (Source). 

To further tout this AI push, Moscow has been holding BRICS events proclaiming its prowess in fields like entertainment.  On November 13-14, at the latest in a series known as the “Culture Media Digital Forum” in Moscow (Source).  that attracted the likes of American movie director Oliver Stone, and included a “red carpet show” and other famous and formerly famous personalities, the Russians again touted Moscow as a BRICS hub for an AI-powered creative response to Hollywood.  Moscow’s Mayor Sergey Sobyanin announced that with the help of AI, Moscow’s creative industries have grown 35% over the past two years. (Source).  According to official statistics, Russia’s authorities are heavily incentivizing the creative sectors to deploy as much cutting-edge AI as possible. They now account for about 3.5% of Russia’s GDP and almost 10% of Moscow’s city economy.

Unfortunately for Putin, his AI ambitions are running directly into the wall of Russia’s unreliable electricity grid.  According to Russia’s national grid operator, AI electricity use consumed approximately 2.5 GW in 2024.  In coming years, that figure may reach 10 GW. (Source).

However, Russia has shown no ability to grow its energy capacity and grid infrastructure to that level.  Over the last decade, Russia has only achieved an electric capacity growth rate of 2-3 GW per year. (Source).  It is difficult to imagine how Russia would achieve a sufficient growth rate under any circumstances, let alone when it is staggering under the burden of the Ukraine war.

The bottom line is the Russian AI story is a cautionary tale for any country with big development dreams.  Without sufficient infrastructure and basic energy resources, no such development is likely to succeed.  With the demand for electricity growing exponentially across the globe, especially in view of the increased reliance worldwide on cryptocurrency and AI, national leaders need to prioritize energy security in order to accomplish anything as we move into the uncertain future.