AI Critical to Success of Energy Sector, says Goldman Sachs

Goldman Sachs research says AI is critical to securing the success of the energy industry
Goldman Sachs research shows nearly 70% of S&P 500 energy companies mentioned AI on their earnings calls, up from 19 percent in the fourth quarter of 2023

In its analysis of the energy sector, investment bank Goldman Sachs details that nearly 70 percent of S&P 500 energy companies mentioned AI on their earnings calls — discussions between company executives and analysts or investors about the company's financial performance and strategic outlook. 

This is up from a mere 19% in the final quarter of last year, showing an exponential growth in companies leveraging the power of this intelligence for the benefits of their business.

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This comes as the demand for power — driven in part by the rise of Gen AI — grows to unprecedented levels to that not seen this generation.

The frequency of AI mentions in earnings calls is a useful indicator of how integral AI is becoming to these companies’ operations and future plans.

How AI has become critical to the energy industry’s success

These figures from Goldman Sachs suggest that AI is now considered critical for the success of companies in the energy sector. This includes its applications in areas such as predictive maintenance, optimising energy production, managing supply chains and improving operational efficiency.

It also highlights a shift in attitudes and companies feeling obliged to mention the use of AI in its earning calls. This substantial increase in mentions from 19% to 70% in a six-month period indicates that more companies are recognising and discussing the role of AI in their business strategies and operations.

“Since the start of March, a basket composed of energy producers that benefit from rising power demand has outperformed a basket of companies pursuing or enabling AI technology,” the report said.

“Goldman Sachs Research expects US power demand growth to accelerate to an annual average of 2.4% until 2030, up from 0% the previous decade, driven in part by the needs of AI.”

AI-driven algorithms provide alerts to the likes of physical changes, methane, liquid leaks, vegetation, nutrient loading, metals and more, thanks to its ability to analyse satellite imagery. It also offers the ability to analyse data quickly, learn from misidentified threats and provide accurate early warnings for energy companies. 

AI and energy — the new ‘power couple’

In its research, the International Energy Agency (IEA) says AI and energy are the new ‘power couple’, highlighting that managing the grids of the future will require more powerful analytical tools, with a critical role for AI at the core of this shift.

The commentary, published at the end of last year, says AI’s role is critical in managing future power grids as their complexity deepens thanks to increased electricity demand and decarbonisation efforts. This is because of AI’s advanced data processing capabilities, which the IEA deems as essential for improving supply and demand forecasting, predictive maintenance and grid operation efficiency.

However, challenges like cybersecurity risks, data biases, skill shortages and AI’s own energy consumption must be addressed, the IEA firmly states. It advocates for a global coordination on data sharing and governance, which it says is necessary to fully harness AI’s potential and support the energy transition.

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