Sam Altman invests in energy startup focused on AI data centres

Sam Altman and venture-capital firm Andreessen Horowitz are among the investors putting $20 million into Exowatt, a company launched to tackle the clean-energy needs of big data centers.

Electricity is a flashpoint for the AI industry. Limited supply could pinch growth. Surging demand is also threatening to slow the transition to clean energy because utilities need to keep coal and natural-gas power plants running to meet demand.

Current solar, wind and battery technologies aren’t advanced or cheap enough in many parts of the world to cost effectively provide the 24/7 power data centers need. A single new data center can use as much electricity as hundreds of thousands of homes.

Companies from Amazon.com to Microsoft—a big investor in Altman’s OpenAI—are moving closer to power generation to ensure they get the electricity they need.

“You don’t have to go back to fossil fuels to solve the data-center energy problem…That’s counterproductive," Hannan Parvizian, Exowatt’s chief executive, said in an interview.

Instead of solar panels arrayed across a field, Exowatt has developed modules roughly the size of shipping containers that contain solar lenses. The lenses convert energy from the sun into heat. That heat can then be used to warm up cheap, basic materials much like electricity heats up a toaster, allowing the modules to store energy for up to 24 hours a day.

The goal is to take advantage of the cost reductions from storing energy as heat. To produce electricity, the module passes the heat through an engine. Many other companies are working on different approaches to solar and low-cost heat batteries, but Exowatt says it is unique because it combines them in one unit.

Exowatt declined to provide more details about what materials it is using and how the heat engine works. Other companies are using carbon blocks, bricks, sand or salt to store heat.

Altman has also invested in nuclear power—both fission, which is used in today’s nuclear power plants, and fusion, which is far on the horizon. Other efforts like geothermal are also years away from operating cheaply at large scales.

Exowatt is prioritizing using components made in the U.S. to limit its dependence on China and to qualify for rich subsidies in the 2022 climate law. It could potentially stack tax credits for solar generation and energy storage, making the product ultracheap for customers. It is aiming to deploy its first units for data-center customers later this year.

The company hopes to eventually offer electricity as cheap as 1 cent per kilowatt-hour without subsidies, well below the cheapest power available today in energy-rich states like Texas. It has analyzed data showing that a large chunk of data centers in the U.S. are in areas with attractive solar profiles.

Parvizian is an engineer who worked at Tesla, General Electric and Siemens. He previously founded a vertical takeoff and landing drone startup that was acquired in 2022. He started working on Exowatt last year with Jack Abraham, the CEO of Atomic, a venture-capital firm that also helps executives build startups. They tested about 50 designs of their modules.

Abraham is a friend of Altman’s, leading to the AI executive’s investment. Altman and other technology executives have become increasingly vocal about the industry’s energy challenges. Amazon recently said it is buying a data center adjacent to a nuclear power plant for $650 million.

Altman is a big investor in a nuclear-fusion upstart called Helion and a nuclear-fission company called Oklo. Oklo is trying to go public by combining with a special-purpose acquisition company, or SPAC, also backed by Altman. Some of his bold plans, including raising trillions of dollars to reshape the global semiconductor industry, are viewed as long shots.

Miami-based Exowatt can succeed because its module is much cheaper to deploy due to its simplicity, Parvizian said.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com