Electricity the new backbone of commodity trading in the AI era

The world is on the brink of a new electricity revolution, one driven by artificial intelligence and the rapid transformation of power grids. For years, electricity was seen as just another utility, a background element in the functioning of economies. Now, it has become a commodity in its own right, one that is increasingly volatile, in high demand, and reshaping entire industries.

At the heart of this shift is the explosive growth of artificial intelligence and data centers. Unlike traditional factories that operate on fixed schedules, data centers work continuously, consuming massive amounts of power to keep servers cool and algorithms running. The rise of artificial intelligence-powered applications, from language models to real-time analytics, has intensified this demand. A single large data center can consume as much electricity as a mid-sized city, and with artificial intelligence adoption accelerating, the pressure on global power supplies is only growing.

This is happening at a time when the electricity grid itself is undergoing dramatic change. The push for renewable energy has introduced both promise and unpredictability. Solar and wind power are clean and increasingly cost-effective, but they depend on the weather, creating a supply that fluctuates. When the sun is not shining or the wind is not blowing, the grid needs backup power sources, and that is where things get complicated.

Take what happened in Europe during the winter of 2024. A prolonged period of cloudy, windless days—what energy experts call a “dunkelflaute” event—caused a temporary shortfall in electricity production. Prices spiked, and industries that depend on stable electricity costs, such as aluminum and steel manufacturing, were caught off guard. Some companies had to slow production.

Meanwhile, in China, the growing demand from artificial intelligence, electric vehicles, and digital industries has sent electricity consumption soaring. By 2027, China alone is expected to account for half of the world’s new electricity demand. The rapid rise of artificial intelligence has added an entirely new factor to market predictions. Unlike traditional industrial electricity use, which follows seasonal patterns, artificial intelligence demand is relentless. A factory might reduce its energy use at night or on weekends, but a data center processing machine learning models does not take a break. This constant demand is forcing electricity suppliers and power market analysts to rethink how they price and allocate power.

For investors and market participants, this new landscape presents both opportunities and risks. Electricity is no longer just a cost factor in the production of goods; it is now a market variable that can make or break an industry. The shift to renewables and the electrification of everything from cars to factories means that understanding electricity markets is as important as tracking oil or gas prices.

In some places, electricity markets have even flipped upside down. Negative wholesale prices, once a rare phenomenon, are becoming more frequent. This happens when there is too much electricity supply and not enough demand. For instance, on particularly sunny days in parts of California and Germany, an oversupply of solar power has led to electricity prices dropping below zero. That means energy producers must pay consumers to use their electricity. While this might sound unusual, it highlights a fundamental shift: electricity markets are becoming more dynamic, and those who can predict these swings stand to gain.

The challenge now is how to manage the growing divide between electricity supply and demand. Battery storage, smart grids, and artificial intelligence-driven energy forecasting are becoming crucial tools. Countries that invest in flexible energy systems—ones that can store excess power or shift consumption when needed—will be better positioned to handle the coming changes.