Electricity may shift balance of power in AI race

China is aggressively scaling up its power generation capacity, an expansion that is increasingly serving as vital support for its pursuit of global artificial intelligence leadership as Beijing transforms a widening "electron gap" into a strategic counterweight to Washington's export controls on advanced chips.

While the global AI race has long centered on high-performance semiconductors, industry experts suggest that the sheer abundance of low-cost electricity may shift the balance of power.

China's massive energy surge is intended to offset those in hardware by fueling compute-intensive research and development with a scale of power that currently dwarfs other major economies, they said.

As power supply becomes a decisive factor in the US-China AI competition, Beijing is leveraging low-cost electricity as a strategic asset to fuel its data centers and compute-intensive R&D, said Lin Boqiang, head of the China Institute for Studies in Energy Policy at Xiamen University.

China's massive energy surge is intended to offset Washington's export controls on advanced chips, and the expansion is primarily fueled by a massive shift toward green energy, said Lin.

While the AI race has long focused on high-performance semiconductors like those from Nvidia, electricity may shift the balance of power, he said.

China's total electricity consumption last year was more than double that of the United States, said the China Electricity Council.

China has further solidified its position as the world's largest consumer of electricity, reaching a scale that dwarfs other major economies, said Jiang Debin, deputy director of the center of statistics and data of the China Electricity Council.

Renewables, such as solar and wind, also account for a much higher percentage of the new capacity, while China's continuous efforts in stepping up other forms of clean energy, such as nuclear power, further accelerate the momentum, he said.

Electricity prices for Chinese data centers are approximately 3 US cents per kilowatt-hour, roughly one-third of the cost in the US, according to calculations by The Washington Post.

Industry experts suggest that China can achieve an advantage by utilizing massive amounts of low-cost electricity.

According to Jiang, China's power system has achieved leapfrog development in recent years, characterized by high reliability, stable output and the maintenance of relatively sufficient reserve capacity.

Beyond generation, China has secured its lead through the world's most comprehensive power equipment supply chain. The nation has emerged as the world's largest producer of transformers, accounting for approximately 60 percent of global capacity.

China has established the most comprehensive production system globally with the "hard power" of a fully autonomous and controllable supply chain, said Cai Yiqing, secretary-general of the power equipment branch of the China Electricity Council.

"Our production capacity now accounts for approximately 60 percent of the global total. In 2025, China's total transformer exports reached 60 billion yuan ($8.72 billion), representing a year-on-year increase of over 20 percent," he said.

According to Cai, the rapid evolution of AI has upgraded the transformer from a traditional piece of electrical equipment into a core component of computing infrastructure.

"AI supercomputing clusters demand exceptionally high-quality power, as voltage fluctuations can result in significant losses," he said.

"Leveraging core technological advantages, Chinese enterprises have developed targeted solutions such as solid-state transformers and high-frequency transformers. These offer higher efficiency with reduced size and power loss, providing the essential support needed for the stable operation of AI computing clusters."

While the US faces potential shortages, with Morgan Stanley predicting a 44-gigawatt shortfall for data centers by 2028, experts such as David Fishman from the Singapore-based consultancy Lantau Group assert that China's abundant power supply will not constrain its AI development.

The advantages, however, are rooted in a State-led system that prioritizes long-term infrastructure over immediate corporate profit.

The National Energy Administration intends to push for appropriately advanced construction of power grids, increasing investment at all levels to ensure a unified national electricity market, he said.

His voice is echoed by State Grid Chairman Zhang Zhigang, who said that the utility must play a "foundational and leading role" in stabilizing growth.

Investment should be "moderately ahead of demand" to support the nation's major strategic projects and strengthen the resilience of the industrial supply chain, he said.

This "moderately advanced" construction strategy is backed by a record 5 trillion yuan investment over the next five years. While the US faces potential shortfalls, analysts suggest China's State-led system ensures that power will not be a constraint for its AI development.

According to International Energy Agency forecasts, global IT loads are expected to see a cumulative increase of 106 GW between 2025 and 2030.

To ensure a stable and efficient power supply, distribution systems have become a critical component, now accounting for approximately 10 percent of total data center investment, the IEA said.

China has been stepping up investment in key energy projects in recent years, which reached a historic milestone in 2025, surpassing 3.5 trillion yuan for the first time, a year-on-year increase of nearly 11 percent, significantly outperforming growth rates in the broader infrastructure and manufacturing sectors, according to the NEA.

As part of the investment, a major focus is on transmission capacity. China has been accelerating efforts to expand its cross-country power transmission capacity to 420 GW by 2030, as the world's second-largest economy advances the strategic modernization of its electrical grid to harness a massive influx of renewable energy.

China's grid has already evolved into the world's largest and most advanced network in terms of transmission capacity, voltage levels and renewable integration, it said.

Domestic utility giants are also stepping up investments to safeguard energy security.

China is set to pour a record-high investment into its power grid over the next five years, a massive bet on new infrastructure designed to eliminate renewable energy bottlenecks and propel the nation toward its 2030 carbon peak goal.

The substantial capital injection will also serve as a vital macroeconomic ballast to stabilize national growth and accelerate industrial modernization.

State Grid Corp of China, the nation's primary utility, said its fixed-asset investment rose to a record high of around 650 billion yuan in 2025. Total investment during the 14th Five-Year Plan (2021-25) rose to more than 2.85 trillion yuan, it said.

China Southern Power Grid, on the other hand, which serves the country's southern industrial hubs, disclosed a 180 billion yuan budget for 2026 alone.

In contrast, US investment decisions are far more decentralized, with utilities following varied federal and state regulations, making it difficult to execute power infrastructure as a unified national strategy.

The AI competition is evolving into a battle of energy-intensive compute, said Lin. China's ability to rapidly deploy massive, low-cost power infrastructure may provide a critical workaround to US-led chip sanctions, he said.