Already a "key bottleneck" for AI, Goldman Sachs: European and American power grids are far behind China, copper will become the new oil.

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Goldman Sachs has issued its latest warning that aging power grids have become the "weak link" in energy security for Western countries as AI demand surges and geopolitical tensions rise. The need to upgrade the grids will drive copper prices to $10,750 per ton by 2027.

Goldman Sachs analysts Lina Thomas and Daan Struyven pointed out in their latest research report that the average operating age of European power grids has reached 50 years, and 40 years for North America, both nearing the end of their operational life span. In contrast, China is vigorously advancing its ultra-high voltage transmission network, creating a world-leading power infrastructure system.

The firm also believes that the power grid has become a “key link” for AI and national defense, with all three being interdependent. Investing in the grid, the weakest link in the energy supply chain, has become more urgent.

Goldman Sachs expects that as AI and defense needs place power grids at the core of energy security, the urgent demand for grid upgrades is turning copper into the "new oil". It is expected that by 2030, grid and power infrastructure will drive about 60% of the growth in global copper demand, supporting its bullish forecast for copper prices of $10,750 per ton in 2027.

Aging Western power grids become a new threat to energy security

Goldman Sachs analysts Lina Thomas and Daan Struyven detailed the challenges facing power grid infrastructure in a report titled "AI and Defense Put Power Grids at the Center of Energy Security."

According to the bank’s analysis, the average age of European power grids is 50 years and North America’s is 40 years, with these infrastructures approaching the end of their designed operational lifespan.

Goldman Sachs notes that the core focus of US energy security policy is no longer just the transportation of crude oil, LNG shipping, or shale oil output, but has shifted to power grid systems that have been operating for nearly half a century with limited backup capacity.

Power demand growth in the United States has already begun to put significant pressure on regional markets. Goldman Sachs specifically points out:

The PJM power market in Virginia, famed as the "global data center capital," faced major transmission bottlenecks in 2022. Data show that 9 out of 13 regional US power markets reached critical stress levels this summer.

Goldman Sachs forecasts that by 2030, except for one market, all US regional power markets will reach a critical stress state. This prediction highlights the urgency of upgrading US power grid infrastructure.

In contrast, China is massively boosting coal and nuclear power and pushing forward its ultra-high voltage transmission network, forming a world-leading electric infrastructure system.

AI development intensifies pressure on power grids

Goldman Sachs analysts note that rapid AI development is pushing the power grid to the core of energy security. Data centers, a key part of AI infrastructure, require huge amounts of electricity, further increasing the pressure on already strained grid systems.

Thomas and Struyven emphasize in their report that the power grid, AI, and defense are interdependent, making grid upgrades a national security priority. The report states:

"With the rise of AI, greater geopolitical tensions, and other factors, the demand for grid investment and increased demand for related metals are becoming more urgent, as the grid is a critical link for AI and defense." With this status established, grid modernization is no longer just an infrastructure issue but a strategic topic related to national security.

Goldman Sachs analysts believe that AI applications in defense have only just begun. This means future power demand will continue to grow significantly, putting even greater strain on already aging grid infrastructure.

Surging Demand for Copper, the "New Oil"

Goldman Sachs predicts the need for grid upgrades will significantly boost metals demand, especially for copper.

The bank's analysts stated that grid upgrades are metal-intensive projects, and copper’s strategic importance as the core material in grid construction is becoming increasingly prominent.

According to Goldman Sachs’ forecast, by the end of 2030, grid and power infrastructure construction will drive about 60% of global copper demand growth. This increase is equivalent to adding another US-sized consumption level to global demand, providing strong support for the bank’s bullish price prediction for copper.

Based on this demand outlook, Goldman Sachs maintains its copper price target of $10,750 per ton for 2027.

The bank’s analysts believe that as AI and defense demand place power grids at the center of energy security, the urgent need for grid upgrades is turning copper into the "new oil".

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