AI and EU Energy Transition Could Lead to Power Shortages

AI data centers (AIDCs) and transport electrification, alongside Europe's energy transition, have drawn growing investor attention to whether Europe's power system can meet additional peak demand. Our review of the EU's power supply-demand structure and our EU power supply-demand balance model suggest: 1) EU power demand has stagnated since 2008, but AIDC and transport electrification are poised to reverse this trend over the next decade and lift peak load. 2) Amid the energy transition, wind and solar units are taking a growing share of installed capacity while coal-fired and other conventional dispatchable assets are retired, so dispatchable capacity will grow slower than peak load and a capacity shortfall could emerge from 2027. 3) Electrochemical energy storage systems (EESS) could increase sharply to fill the peak capacity gap;