Hello from New York. Later today, Donald Trump is scheduled to be sworn into office as the 47th US president. To prepare for Trump’s return, with his scepticism towards climate action, the Federal Reserve on Friday announced it had withdrawn from the Network for Greening the Financial System. The NGFS said it “regrets” the Fed’s decision, but that it retains a “coalition of the willing” that still includes most of the world’s other major central banks. Life goes on.
For today, I have a piece about a German engine maker bulking up in the US to join the competition for AI energy infrastructure. First, Gillian has a dispatch from Davos, where this year’s World Economic Forum is kicking off today. — Patrick Temple-West
World Economic Forum
Climate split-screen: Davos and Trump’s return
Donald Trump might be heading for his inauguration with pledges to roll back “woke” capitalism and green policies. However, over in Davos, the World Economic Forum shows little sign of following suit. At this year’s annual meeting, one of the five official conference themes is “Safeguarding the Planet”, which features no less than 27 sessions on issues ranging from carbon capture to water usage to LGBTQ rights. Dozens more sessions are taking place outside the formal WEF event.
Why? One reason is that America’s retreat is creating an opportunity for countries such as China to take the green global lead, for commercial reasons as much as anything else (Beijing dominates renewable energy sectors such as solar cell production). Meanwhile, in Europe the issue is now deeply baked into corporate culture, as well as the continent’s political identity (excluding the far right). Global companies with a footprint in Europe thus need to embrace this to some extent.
However, another powerful explanation can be seen in the WEF’s annual survey about looming risks conducted among its members, who are predominantly drawn from the C-suite, policymaking world and academia. In previous years this league table was dominated by concerns about financial stability, inflation, debt and pandemics. But this year, the top four risks that WEF members see in a 10-year horizon are (in order): “Extreme weather events”, “Critical change to Earth systems”, “Biodiversity loss and ecosystem collapse”, and “Natural resource shortage” — beating out dangers such as “cyber espionage and war” or “societal conflicts”. On a two-year horizon, “extreme weather events” ranks in second place, topped only by “misinformation”.
That is a very striking finding given that this survey was conducted late last year, before the wildfires in Los Angeles. And it highlights a key point: notwithstanding Trump’s political rhetoric, most C-suite executives and investors see climate change threats and know this will force them into action in the future.
That does not necessarily mean they like the rulemaking emanating from Europe, or are ready to re-embrace the (now widely scorned) term “ESG”, or are willing to view the corporate world as the main solution to these threats. However, it does mean that most businesses are pressing ahead quietly with energy transition plans, in some form, and urgently need guidance on where the sector is going next. Hence that WEF agenda.
The one downside? Climate issues are now edging out debates about pandemic and medical risks on this year’s agenda as Covid-19 fades from view. The global elite, it seems, have short memories. (Gillian Tett)
electricity demand
AI boom fuels engine maker Deutz’s shift into generators and microgrids
As the global demand for artificial intelligence continues to grow, data centres’ surging appetite for electricity is one of the biggest issues facing investors in the months ahead.
In this challenge, Deutz, one of the world’s oldest engine makers, has found an opportunity. Frankfurt-listed, Cologne-based Deutz is positioning itself to offer back-up power and microgrid solutions for data centres and other companies ravenous for energy, with a special focus on the US.
“Electricity demand is probably going to be doubling by 2040,” Deutz chief executive Sebastian Schulte told me when we met in New York this week. In many areas in the US, “incredibly unstable and outdated power grids” underscore the need for back-up power.
In August Deutz completed the purchase of US-based Blue Star Power Systems, a deal that gave the German company a stronger competitive position in energy infrastructure.
And its opportunities for growth are proliferating. The Los Angeles fires this month have underscored how extreme weather can leave people and businesses vulnerable to power outages.
Absent natural disasters, data centres are the strongest growth driver for power generator systems, according to Deutz.
Spending on data centres surged 35 per cent in 2024, according to Gartner, and it is expected to grow by another 15 per cent in 2025.
Moral Money has previously covered back-up power for data centres and microgrids when we profiled Bloom Energy and Enchanted Rock last year. Now, Deutz is also competing with industrial groups Caterpillar and Cummins in the market for generator systems.
Caterpillar in November reported its power generation sales increased primarily due to data centre demand. Rival Cummins said in November its worldwide revenues inched up by 1 per cent, due to increased power generation demand, mostly from data centre markets.
Deutz is also establishing itself in the clean energy market. It has been a “pioneer” in developing hydrogen engines, Schulte told me. “We have developed over the past three years a hydrogen combustion engine,” he said. For other engines, “we can already today run them with synthetic fuels”.
Earlier this month, the outgoing Biden administration relaxed the criteria for green hydrogen producers to claim tax credits. The Treasury department delayed stricter requirements for the hydrogen tax credit by two years to 2030. Until then, hydrogen developers can qualify for the benefits by reporting annually that their production is powered by renewable energy.
The tougher standards will require them to report hour by hour on their renewable energy consumption.
How much of the clean energy tax credits will survive in Trump’s next administration is uncertain. Deutz and other foreign companies will need to navigate Trump’s tariff threats, adding another headache for their shareholders. But AI demand and data centre growth is likely to continue in 2025, giving investors at least one source of certainty for the months ahead. (Patrick Temple-West)
Smart reads
Decision time Top European banks are reconsidering their membership of the Net Zero Banking Alliance, after US peers quit.
Disaster zone After devastating fires, many Los Angeles residents are wondering whether the escalating risks mean it is time to move away.
Off track The Big Four accounting firms are set to miss their 2025 targets for female partner numbers.
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