JPMorgan: Extreme Heat Is Reshaping Global Energy Demand
N.R. Finch
JPMorgan argues that surging cooling demand — not AI data centers — will become the single largest source of incremental power consumption, directly challenging the market's dominant AI-driven energy narrative and forcing a recalibration of where energy investment should flow.
Why will cooling consume more power than AI?
JPMorgan sustainability head Luke Nelson put it bluntly: "AI comes up in every conversation, but it is not the biggest contributor to power-demand growth."
The real increment comes from air-conditioning in the Global South and megacities — IEA data shows Southeast Asian AC ownership is expected to grow ninefold between 2020 and 2040.
Space cooling — the energy used to keep buildings cool — is already the fastest-growing demand source in the global buildings sector, rising nearly 4% per year through 2035.
This means → while the market fixates on AI power draw, a larger and more certain electricity gap is opening across tropical cities.
Why can't wind and solar close this gap?
Cooling is an around-the-clock need — air conditioners run at night and on cloudy days, exactly when wind and solar output drops.
In plain terms = intermittent energy sources — wind and solar, whose output swings with the weather — cannot handle a 24/7 load alone.
JPMorgan climate advisory head Sarah Kapnick noted that investors are turning to nuclear and geothermal because both deliver baseload power — steady, all-hours supply that doesn't depend on peak conditions.
Kapnick said nuclear "can guarantee baseload and provide greater certainty amid uncertain future political risks."
Nuclear, geothermal, and batteries — who benefits most?
JPMorgan global sustainability head Heather Zichal said the urgent need for baseload will also create a "powerful push effect" on battery storage, enabling more effective pairing with renewables.
This means → the beneficiary chain extends beyond nuclear and geothermal — energy-storage technology is pulled into the same growth trajectory.
This reflects a deeper signal: the market is shifting from "which energy is cleanest" to "which energy is most reliable."
How large is the carbon lock-in during the transition?
Zichal acknowledged: "Everyone is doing everything they can to find power" — driving simultaneous rises in natural gas and coal consumption.
In plain terms = clean energy isn't ready yet, air conditioners can't wait, so fossil fuels step in as the stopgap.
Kapnick admitted: "How much carbon we will lock in during the transition remains an open question."
This means → the more urgent the cooling demand, the longer fossil fuels get "drafted" into service, and the harder it becomes to control carbon lock-in — once a fossil-fuel plant is built, it typically runs for decades.
Why must corporate boards act now?
CDP CEO Sherry Madera pushed the issue to the boardroom: extreme heat is not just a climate topic — it will force boards to reallocate global capex and opex.
The goal is building genuine climate resilience — the capacity to keep operations running through extreme weather.
This reflects a fundamental shift: extreme heat is moving from "environmental risk" to "financial risk" — and the speed and scale of that reallocation will directly influence the severity of future heatwaves.
Content is for reference only, not financial advice.