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Introduction to Minimum Cost Flow Optimization in Python

Minimum cost flow optimization minimizes the cost of moving flow through a network of nodes and edges. Nodes include sources (supply) and sinks (demand), with different costs and capacity limits. The aim is to find the least costly way to move volume from sources to sinks while adhering to all capacity limitations. Applications Applications of […]

Minimum cost flow optimization minimizes the cost of moving flow through a network of nodes and edges. Nodes include sources (supply) and sinks (demand), with different costs and capacity limits. The aim is to find the least costly way to move volume from sources to sinks while adhering to all capacity limitations.

Applications

Applications of minimum cost flow optimization are vast and varied, spanning multiple industries and sectors. This approach is crucial in logistics and supply chain management, where it is used to minimize transportation costs while ensuring timely delivery of goods. In telecommunications, it helps in optimizing the routing of data through networks to reduce latency and improve bandwidth utilization. The energy sector leverages minimum cost flow optimization to efficiently distribute electricity through power grids, reducing losses and operational costs. Urban planning and infrastructure development also benefit from this optimization technique, as it assists in designing efficient public transportation systems and water distribution networks.

Example

Below is a simple flow optimization example:

The image above illustrates a minimum cost flow optimization problem with six nodes and eight edges. Nodes A and B serve as sources, each with a supply of 50 units, while nodes E and F act as sinks, each with a demand of 40 units. Every edge has a maximum capacity of 25 units, with variable costs indicated in the image. The objective of the optimization is to allocate flow on each edge to move the required units from nodes A and B to nodes E and F, respecting the edge capacities at the lowest possible cost.

Node F can only receive supply from node B. There are two paths: directly or through node D. The direct path has a cost of 2, while the indirect path via D has a combined cost of 3. Thus, 25 units (the maximum edge capacity) are moved directly from B to F. The remaining 15 units are routed via B -D-F to meet the demand.

Currently, 40 out of 50 units have been transferred from node B, leaving a remaining supply of 10 units that can be moved to node E. The available pathways for supplying node E include: A-E and B-E with a cost of 3, A-C-E with a cost of 4, and B-C-E with a cost of 5. Consequently, 25 units are transported from A-E (limited by the edge capacity) and 10 units from B-E (limited by the remaining supply at node B). To meet the demand of 40 units at node E, an additional 5 units are moved via A-C-E, resulting in no flow being allocated to the B-C pathway.

Mathematical formulation

I introduce two mathematical formulations of minimum cost flow optimization:

1. LP (linear program) with continuous variables only

2. MILP (mixed integer linear program) with continuous and discrete variables

I am using following definitions:

Definitions

LP formulation

This formulation only contains decision variables that are continuous, meaning they can have any value as long as all constraints are fulfilled. Decision variables are in this case the flow variables x(u, v) of all edges.

The objective function describes how the costs that are supposed to be minimized are calculated. In this case it is defined as the flow multiplied with the variable cost summed up over all edges:

Constraints are conditions that must be satisfied for the solution to be valid, ensuring that the flow does not exceed capacity limitations.

First, all flows must be non-negative and not exceed to edge capacities:

Flow conservation constraints ensure that the same amount of flow that goes into a node has to come out of the node. These constraints are applied to all nodes that are neither sources nor sinks:

For source and sink nodes the difference of out flow and in flow is smaller or equal the supply of the node:

If v is a source the difference of outflow minus inflow must not exceed the supply s(v). In case v is a sink node we do not allow that more than -s(v) can flow into the node than out of the node (for sinks s(v) is negative).

MILP

Additionally, to the continuous variables of the LP formulation, the MILP formulation also contains discreate variables that can only have specific values. Discrete variables allow to restrict the number of used nodes or edges to certain values. It can also be used to introduce fixed costs for using nodes or edges. In this article I show how to add fixed costs. It is important to note that adding discrete decision variables makes it much more difficult to find an optimal solution, hence this formulation should only be used if a LP formulation is not possible.

The objective function is defined as:

With three terms: variable cost of all edges, fixed cost of all edges, and fixed cost of all nodes.

The maximum flow that can be allocated to an edge depends on the edge’s capacity, the edge selection variable, and the origin node selection variable:

This equation ensures that flow can only be assigned to edges if the edge selection variable and the origin node selection variable are 1.

The flow conservation constraints are equivalent to the LP problem.

Implementation

In this section I explain how to implement a MILP optimization in Python. You can find the code in this repo.

Libraries

To build the flow network, I used NetworkX which is an excellent library (https://networkx.org/) for working with graphs. There are many interesting articles that demonstrate how powerful and easy to use NetworkX is to work with graphs, i.a. customizing NetworkX GraphsNetworkX: Code Demo for Manipulating SubgraphsSocial Network Analysis with NetworkX: A Gentle Introduction.

One important aspect when building an optimization is to make sure that the input is correctly defined. Even one small error can make the problem infeasible or can lead to an unexpected solution. To avoid this, I used Pydantic to validate the user input and raise any issues at the earliest possible stage. This article gives an easy to understand introduction to Pydantic.

To transform the defined network into a mathematical optimization problem I used PuLP. Which allows to define all variables and constraint in an intuitive way. This library also has the advantage that it can use many different solvers in a simple pug-and-play fashion. This article provides good introduction to this library.

Defining nodes and edges

The code below shows how nodes are defined:

from pydantic import BaseModel, model_validator
from typing import Optional

# node and edge definitions
class Node(BaseModel, frozen=True):
    """
    class of network node with attributes:
    name: str - name of node
    demand: float - demand of node (if node is sink)
    supply: float - supply of node (if node is source)
    capacity: float - maximum flow out of node
    type: str - type of node
    x: float - x-coordinate of node
    y: float - y-coordinate of node
    fixed_cost: float - cost of selecting node
    """
    name: str
    demand: Optional[float] = 0.0
    supply: Optional[float] = 0.0
    capacity: Optional[float] = float('inf')
    type: Optional[str] = None
    x: Optional[float] = 0.0
    y: Optional[float] = 0.0
    fixed_cost: Optional[float] = 0.0

    @model_validator(mode='after')
    def validate(self):
        """
        validate if node definition are correct
        """
        # check that demand is non-negative
        if self.demand < 0 or self.demand == float('inf'): raise ValueError('demand must be non-negative and finite')
        # check that supply is non-negative
        if self.supply < 0: raise ValueError('supply must be non-negative')
        # check that capacity is non-negative
        if self.capacity < 0: raise ValueError('capacity must be non-negative')
        # check that fixed_cost is non-negative
        if self.fixed_cost < 0: raise ValueError('fixed_cost must be non-negative')
        return self

Nodes are defined through the Node class which is inherited from Pydantic’s BaseModel. This enables an automatic validation that ensures that all properties are defined with the correct datatype whenever a new object is created. In this case only the name is a required input, all other properties are optional, if they are not provided the specified default value is assigned to them. By setting the “frozen” parameter to True I made all properties immutable, meaning they cannot be changed after the object has been initialized.

The validate method is executed after the object has been initialized and applies more checks to ensure the provided values are as expected. Specifically it checks that demand, supply, capacity, variable cost and fixed cost are not negative. Furthermore, it also does not allow infinite demand as this would lead to an infeasible optimization problem.

These checks look trivial, however their main benefit is that they will trigger an error at the earliest possible stage when an input is incorrect. Thus, they prevent creating a optimization model that is incorrect. Exploring why a model cannot be solved would be much more time consuming as there are many factors that would need to be analyzed, while such “trivial” input error may not be the first aspect to investigate.

Edges are implemented as follows:

class Edge(BaseModel, frozen=True):
"""
class of edge between two nodes with attributes:
origin: 'Node' - origin node of edge
destination: 'Node' - destination node of edge
capacity: float - maximum flow through edge
variable_cost: float - cost per unit flow through edge
fixed_cost: float - cost of selecting edge
"""
origin: Node
destination: Node
capacity: Optional[float] = float('inf')
variable_cost: Optional[float] = 0.0
fixed_cost: Optional[float] = 0.0

@model_validator(mode='after')
def validate(self):
"""
validate of edge definition is correct
"""
# check that node names are different
if self.origin.name == self.destination.name: raise ValueError('origin and destination names must be different')
# check that capacity is non-negative
if self.capacity < 0: raise ValueError('capacity must be non-negative')
# check that variable_cost is non-negative
if self.variable_cost < 0: raise ValueError('variable_cost must be non-negative')
# check that fixed_cost is non-negative
if self.fixed_cost < 0: raise ValueError('fixed_cost must be non-negative')
return self

The required inputs are an origin node and a destination node object. Additionally, capacity, variable cost and fixed cost can be provided. The default value for capacity is infinity which means if no capacity value is provided it is assumed the edge does not have a capacity limitation. The validation ensures that the provided values are non-negative and that origin node name and the destination node name are different.

Initialization of flowgraph object

To define the flowgraph and optimize the flow I created a new class called FlowGraph that is inherited from NetworkX’s DiGraph class. By doing this I can add my own methods that are specific to the flow optimization and at the same time use all methods DiGraph provides:

from networkx import DiGraph
from pulp import LpProblem, LpVariable, LpMinimize, LpStatus

class FlowGraph(DiGraph):
    """
    class to define and solve minimum cost flow problems
    """
    def __init__(self, nodes=[], edges=[]):
        """
        initialize FlowGraph object
        :param nodes: list of nodes
        :param edges: list of edges
        """
        # initialialize digraph
        super().__init__(None)

        # add nodes and edges
        for node in nodes: self.add_node(node)
        for edge in edges: self.add_edge(edge)


    def add_node(self, node):
        """
        add node to graph
        :param node: Node object
        """
        # check if node is a Node object
        if not isinstance(node, Node): raise ValueError('node must be a Node object')
        # add node to graph
        super().add_node(node.name, demand=node.demand, supply=node.supply, capacity=node.capacity, type=node.type, 
                         fixed_cost=node.fixed_cost, x=node.x, y=node.y)
        
    
    def add_edge(self, edge):    
        """
        add edge to graph
        @param edge: Edge object
        """   
        # check if edge is an Edge object
        if not isinstance(edge, Edge): raise ValueError('edge must be an Edge object')
        # check if nodes exist
        if not edge.origin.name in super().nodes: self.add_node(edge.origin)
        if not edge.destination.name in super().nodes: self.add_node(edge.destination)

        # add edge to graph
        super().add_edge(edge.origin.name, edge.destination.name, capacity=edge.capacity, 
                         variable_cost=edge.variable_cost, fixed_cost=edge.fixed_cost)

FlowGraph is initialized by providing a list of nodes and edges. The first step is to initialize the parent class as an empty graph. Next, nodes and edges are added via the methods add_node and add_edge. These methods first check if the provided element is a Node or Edge object. If this is not the case an error will be raised. This ensures that all elements added to the graph have passed the validation of the previous section. Next, the values of these objects are added to the Digraph object. Note that the Digraph class also uses add_node and add_edge methods to do so. By using the same method name I am overwriting these methods to ensure that whenever a new element is added to the graph it must be added through the FlowGraph methods which validate the object type. Thus, it is not possible to build a graph with any element that has not passed the validation tests.

Initializing the optimization problem

The method below converts the network into an optimization model, solves it, and retrieves the optimized values.

  def min_cost_flow(self, verbose=True):
        """
        run minimum cost flow optimization
        @param verbose: bool - print optimization status (default: True)
        @return: status of optimization
        """
        self.verbose = verbose

        # get maximum flow
        self.max_flow = sum(node['demand'] for _, node in super().nodes.data() if node['demand'] > 0)

        start_time = time.time()
        # create LP problem
        self.prob = LpProblem("FlowGraph.min_cost_flow", LpMinimize)
        # assign decision variables
        self._assign_decision_variables()
        # assign objective function
        self._assign_objective_function()
        # assign constraints
        self._assign_constraints()
        if self.verbose: print(f"Model creation time: {time.time() - start_time:.2f} s")

        start_time = time.time()
        # solve LP problem
        self.prob.solve()
        solve_time = time.time() - start_time

        # get status
        status = LpStatus[self.prob.status]

        if verbose:
            # print optimization status
            if status == 'Optimal':
                # get objective value
                objective = self.prob.objective.value()
                print(f"Optimal solution found: {objective:.2f} in {solve_time:.2f} s")
            else:
                print(f"Optimization status: {status} in {solve_time:.2f} s")
        
        # assign variable values
        self._assign_variable_values(status=='Optimal')

        return status

Pulp’s LpProblem is initialized, the constant LpMinimize defines it as a minimization problem — meaning it is supposed to minimize the value of the objective function. In the following lines all decision variables are initialized, the objective function as well as all constraints are defined. These methods will be explained in the following sections.

Next, the problem is solved, in this step the optimal value of all decision variables is determined. Following the status of the optimization is retrieved. When the status is “Optimal” an optimal solution could be found other statuses are “Infeasible” (it is not possible to fulfill all constraints), “Unbounded” (the objective function can have an arbitrary low values), and “Undefined” meaning the problem definition is not complete. In case no optimal solution was found the problem definition needs to be reviewed.

Finally, the optimized values of all variables are retrieved and assigned to the respective nodes and edges.

Defining decision variables

All decision variables are initialized in the method below:

   def _assign_variable_values(self, opt_found):
        """
        assign decision variable values if optimal solution found, otherwise set to None
        @param opt_found: bool - if optimal solution was found
        """
        # assign edge values        
        for _, _, edge in super().edges.data():
            # initialize values
            edge['flow'] = None
            edge['selected'] = None
            # check if optimal solution found
            if opt_found and edge['flow_var'] is not None:                    
                edge['flow'] = edge['flow_var'].varValue                    

                if edge['selection_var'] is not None: 
                    edge['selected'] = edge['selection_var'].varValue

        # assign node values
        for _, node in super().nodes.data():
            # initialize values
            node['selected'] = None
            if opt_found:                
                # check if node has selection variable
                if node['selection_var'] is not None: 
                    node['selected'] = node['selection_var'].varValue

First it iterates through all edges and assigns continuous decision variables if the edge capacity is greater than 0. Furthermore, if fixed costs of the edge are greater than 0 a binary decision variable is defined as well. Next, it iterates through all nodes and assigns binary decision variables to nodes with fixed costs. The total number of continuous and binary decision variables is counted and printed at the end of the method.

Defining objective

After all decision variables have been initialized the objective function can be defined:

    def _assign_objective_function(self):
        """
        define objective function
        """
        objective = 0
 
        # add edge costs
        for _, _, edge in super().edges.data():
            if edge['selection_var'] is not None: objective += edge['selection_var'] * edge['fixed_cost']
            if edge['flow_var'] is not None: objective += edge['flow_var'] * edge['variable_cost']
        
        # add node costs
        for _, node in super().nodes.data():
            # add node selection costs
            if node['selection_var'] is not None: objective += node['selection_var'] * node['fixed_cost']

        self.prob += objective, 'Objective',

The objective is initialized as 0. Then for each edge fixed costs are added if the edge has a selection variable, and variable costs are added if the edge has a flow variable. For all nodes with selection variables fixed costs are added to the objective as well. At the end of the method the objective is added to the LP object.

Defining constraints

All constraints are defined in the method below:

  def _assign_constraints(self):
        """
        define constraints
        """
        # count of contraints
        constr_count = 0
        # add capacity constraints for edges with fixed costs
        for origin_name, destination_name, edge in super().edges.data():
            # get capacity
            capacity = edge['capacity'] if edge['capacity'] < float('inf') else self.max_flow
            rhs = capacity
            if edge['selection_var'] is not None: rhs *= edge['selection_var']
            self.prob += edge['flow_var'] <= rhs, f"capacity_{origin_name}-{destination_name}",
            constr_count += 1
            
            # get origin node
            origin_node = super().nodes[origin_name]
            # check if origin node has a selection variable
            if origin_node['selection_var'] is not None:
                rhs = capacity * origin_node['selection_var'] 
                self.prob += (edge['flow_var'] <= rhs, f"node_selection_{origin_name}-{destination_name}",)
                constr_count += 1

        total_demand = total_supply = 0
        # add flow conservation constraints
        for node_name, node in super().nodes.data():
            # aggregate in and out flows
            in_flow = 0
            for _, _, edge in super().in_edges(node_name, data=True):
                if edge['flow_var'] is not None: in_flow += edge['flow_var']
            
            out_flow = 0
            for _, _, edge in super().out_edges(node_name, data=True):
                if edge['flow_var'] is not None: out_flow += edge['flow_var']

            # add node capacity contraint
            if node['capacity'] < float('inf'):
                self.prob += out_flow = demand - supply
                rhs = node['demand'] - node['supply']
                self.prob += in_flow - out_flow >= rhs, f"flow_balance_{node_name}",
            constr_count += 1

            # update total demand and supply
            total_demand += node['demand']
            total_supply += node['supply']

        if self.verbose:
            print(f"Constraints: {constr_count}")
            print(f"Total supply: {total_supply}, Total demand: {total_demand}")

First, capacity constraints are defined for each edge. If the edge has a selection variable the capacity is multiplied with this variable. In case there is no capacity limitation (capacity is set to infinity) but there is a selection variable, the selection variable is multiplied with the maximum flow that has been calculated by aggregating the demand of all nodes. An additional constraint is added in case the edge’s origin node has a selection variable. This constraint means that flow can only come out of this node if the selection variable is set to 1.

Following, the flow conservation constraints for all nodes are defined. To do so the total in and outflow of the node is calculated. Getting all in and outgoing edges can easily be done by using the in_edges and out_edges methods of the DiGraph class. If the node has a capacity limitation the maximum outflow will be constraint by that value. For the flow conservation it is necessary to check if the node is either a source or sink node or a transshipment node (demand equals supply). In the first case the difference between inflow and outflow must be greater or equal the difference between demand and supply while in the latter case in and outflow must be equal.

The total number of constraints is counted and printed at the end of the method.

Retrieving optimized values

After running the optimization, the optimized variable values can be retrieved with the following method:

    def _assign_variable_values(self, opt_found):
        """
        assign decision variable values if optimal solution found, otherwise set to None
        @param opt_found: bool - if optimal solution was found
        """
        # assign edge values        
        for _, _, edge in super().edges.data():
            # initialize values
            edge['flow'] = None
            edge['selected'] = None
            # check if optimal solution found
            if opt_found and edge['flow_var'] is not None:                    
                edge['flow'] = edge['flow_var'].varValue                    

                if edge['selection_var'] is not None: 
                    edge['selected'] = edge['selection_var'].varValue

        # assign node values
        for _, node in super().nodes.data():
            # initialize values
            node['selected'] = None
            if opt_found:                
                # check if node has selection variable
                if node['selection_var'] is not None: 
                    node['selected'] = node['selection_var'].varValue 

This method iterates through all edges and nodes, checks if decision variables have been assigned and adds the decision variable value via varValue to the respective edge or node.

Demo

To demonstrate how to apply the flow optimization I created a supply chain network consisting of 2 factories, 4 distribution centers (DC), and 15 markets. All goods produced by the factories have to flow through one distribution center until they can be delivered to the markets.

Supply chain problem

Node properties were defined:

Node definitions

Ranges mean that uniformly distributed random numbers were generated to assign these properties. Since Factories and DCs have fixed costs the optimization also needs to decide which of these entities should be selected.

Edges are generated between all Factories and DCs, as well as all DCs and Markets. The variable cost of edges is calculated as the Euclidian distance between origin and destination node. Capacities of edges from Factories to DCs are set to 350 while from DCs to Markets are set to 100.

The code below shows how the network is defined and how the optimization is run:

# Define nodes
factories = [Node(name=f'Factory {i}', supply=700, type='Factory', fixed_cost=100, x=random.uniform(0, 2),
                  y=random.uniform(0, 1)) for i in range(2)]
dcs = [Node(name=f'DC {i}', fixed_cost=25, capacity=500, type='DC', x=random.uniform(0, 2), 
            y=random.uniform(0, 1)) for i in range(4)]
markets = [Node(name=f'Market {i}', demand=random.randint(1, 100), type='Market', x=random.uniform(0, 2), 
                y=random.uniform(0, 1)) for i in range(15)]

# Define edges
edges = []
# Factories to DCs
for factory in factories:
    for dc in dcs:
        distance = ((factory.x - dc.x)**2 + (factory.y - dc.y)**2)**0.5
        edges.append(Edge(origin=factory, destination=dc, capacity=350, variable_cost=distance))

# DCs to Markets
for dc in dcs:
    for market in markets:
        distance = ((dc.x - market.x)**2 + (dc.y - market.y)**2)**0.5
        edges.append(Edge(origin=dc, destination=market, capacity=100, variable_cost=distance))

# Create FlowGraph
G = FlowGraph(edges=edges)

G.min_cost_flow()

The output of flow optimization is as follows:

Variable types: 68 continuous, 6 binary
Constraints: 161
Total supply: 1400.0, Total demand: 909.0
Model creation time: 0.00 s
Optimal solution found: 1334.88 in 0.23 s

The problem consists of 68 continuous variables which are the edges’ flow variables and 6 binary decision variables which are the selection variables of the Factories and DCs. There are 161 constraints in total which consist of edge and node capacity constraints, node selection constraints (edges can only have flow if the origin node is selected), and flow conservation constraints. The next line shows that the total supply is 1400 which is higher than the total demand of 909 (if the demand was higher than the supply the problem would be infeasible). Since this is a small optimization problem, the time to define the optimization model was less than 0.01 seconds. The last line shows that an optimal solution with an objective value of 1335 could be found in 0.23 seconds.

Additionally, to the code I described in this post I also added two methods that visualize the optimized solution. The code of these methods can also be found in the repo.

Flow graph

All nodes are located by their respective x and y coordinates. The node and edge size is relative to the total volume that is flowing through. The edge color refers to its utilization (flow over capacity). Dashed lines show edges without flow allocation.

In the optimal solution both Factories were selected which is inevitable as the maximum supply of one Factory is 700 and the total demand is 909. However, only 3 of the 4 DCs are used (DC 0 has not been selected).

In general the plot shows the Factories are supplying the nearest DCs and DCs the nearest Markets. However, there are a few exceptions to this observation: Factory 0 also supplies DC 3 although Factory 1 is nearer. This is due to the capacity constraints of the edges which only allow to move at most 350 units per edge. However, the closest Markets to DC 3 have a slightly higher demand, hence Factory 0 is moving additional units to DC 3 to meet that demand. Although Market 9 is closest to DC 3 it is supplied by DC 2. This is because DC 3 would require an additional supply from Factory 0 to supply this market and since the total distance from Factory 0 over DC 3 is longer than the distance from Factory 0 through DC 2, Market 9 is supplied via the latter route.

Another way to visualize the results is via a Sankey diagram which focuses on visualizing the flows of the edges:

Sankey flow diagram

The colors represent the edges’ utilizations with lowest utilizations in green changing to yellow and red for the highest utilizations. This diagram shows very well how much flow goes through each node and edge. It highlights the flow from Factory 0 to DC 3 and also that Market 13 is supplied by DC 2 and DC 1.

Summary

Minimum cost flow optimizations can be a very helpful tool in many domains like logistics, transportation, telecommunication, energy sector and many more. To apply this optimization it is important to translate a physical system into a mathematical graph consisting of nodes and edges. This should be done in a way to have as few discrete (e.g. binary) decision variables as necessary as those make it significantly more difficult to find an optimal solution. By combining Python’s NetworkX, Pulp and Pydantic libraries I built an flow optimization class that is intuitive to initialize and at the same time follows a generalized formulation which allows to apply it in many different use cases. Graph and flow diagrams are very helpful to understand the solution found by the optimizer.

If not otherwise stated all images were created by the author.

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Oil edged down as US President Donald Trump’s renewed pledge to drive down the price of crude overshadowed his push for tighter Iranian sanctions. West Texas Intermediate dipped 0.6% to settle below $71 a barrel, extending a three-day slump that brought futures near oversold territory on the relative strength index. Prices swung wildly during the session, first giving up gains after Trump reiterated a campaign promise to boost oil production, then rebounding as much as 1.2% after the US Treasury sanctioned an international network for facilitating the shipment of Iranian crude oil to China.  Prices then faded again on the prospect that tighter Iranian sanctions may have a more immediate and material effect on supplies as relaxed US enforcement allowed Iran to boost oil exports by about 1 million barrels a day in recent years. By contrast, skepticism abounds that Trump’s proposed overhaul of energy policy will spur US fossil fuel producers to boost output and abandon their focus on capital discipline and shareholder returns. “We remain strongly of the view that President Trump could ultimately prove to be a bearish influence on the oil market,” Citigroup analysts including Francesco Martoccia wrote in a note. “Specifically, Trump has consistently highlighted lower energy prices as the central solution to US inflation, interest rate, debt, and cost-of-living issues, and that this is a core issue for which he was elected.” Since Trump returned to office last month, crude futures have been subjected to several sharp intraday swings, buffeted by his tariff threats and other trade moves. Thursday’s fluctuations mirrored a volatile day in the equity and municipal bonds markets, with participants parsing mixed signals ahead of Friday’s jobs report.  Trump frequently moved crude prices by several dollars in his first term with social media posts and other pronouncements, a pattern that has begun to re-emerge over the last

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ADNOC’s TA’ZIZ lets EPC contract for methanol plant

Abu Dhabi Chemicals Derivatives Co. RSC Ltd. (TA’ZIZ)—a joint venture of Abu Dhabi National Oil Co. (ADNOC) and Abu Dhabi Developmental Holding Co. PJSC (ADQ)—has let a contract to Samsung E&A Co. Ltd. to build the UAE’s first methanol plant at the TA’ZIZ chemicals and transition fuels ecosystem (TCTFE) under development in the Ruwais industrial complex of Al Ruwais Industrial City, in Abu Dhabi’s Al Dhafra region (OGJ Online, Jan. 5, 2023). As part of a Jan. 31 contract, Samsung E&A will deliver engineering, procurement, and construction (EPC) services for the grassroots natural gas-to-methanol plant that will be equipped with a nameplate production capacity of 1.8 million tonnes/year (tpy), according to a series of separate early February releases from the service provider, TA’ZIZ, and ADNOC. Samsung E&A said its scope of work under the $1.7-billion, 44-month contract award will include integration of the service provider’s proprietary technologies involving modularization and automation. Chemicals production  To be powered by clean energy from the regional grid, the planned methanol project—slated to become one of the most energy efficient and low-emissions plant of its kind—is scheduled to begin production in 2028 to help meet growing domestic and international demand for methanol as a cleaner fuel and chemical building block in industrial applications such as adhesives, solvents, pharmaceuticals, and construction materials, ADNOC and its TA’ZIZ methanol project strategic partner Proman AG said in various releases dating back to 2022. Upon announcing the EPC contract, Mashal Saoud Al-Kindi—TA’ZIZ’s chief executive officer—said advancing the methanol project at the TCTFE marks a major step in realizing TA’ZIZ’s vision of driving the UAE’s industrial growth by creating a world-scale integrated chemicals ecosystem in Al Dhafra region. “The [methanol] plant will enhance the UAE’s position as a leader in sustainable chemicals production and strengthen TA’ZIZ’s role in enabling ADNOC’s global

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WoodMac: US oil tariffs on Canada, Mexico would impact North American crude flows

US oil tariffs enacted by the Trump administration on Canada and Mexico would lead to a ‘significant shift in crude flows in North America,’ as higher prices push a portion of US imports into overseas markets, Wood Mackenzie said in a recent report. The proposed US tariffs of 10% and 25% on Canadian and Mexican oil products, respectively, would alter crude flows for all three countries. Higher ensuing prices would ultimately affect demand in the US, although the impact is expected to be softer than a more disruptive 25% tariff on Canadian oil, according to the report. “A wide range of scenarios are still at play, as the implementation of tariffs has been delayed by a month,” said Dylan White, principal analyst, North American Crude Markets, Wood Mackenzie. “The uncertainty surrounding US policy is likely to continue; ongoing talks could lead to a lifting of tariffs or could spiral into steeper penalties on oil imports. As the tariffs currently stand, the North American market will see several impacts.” Tarriff impacts on Mexico In a scenario where a 25% tariff is imposed on Mexican oil, Wood Mackenzie forecasts that Mexican exports are likely to redirect from the US to alternative markets in Europe and Asia. This shift could affect about 600,000 b/d of oil imports from Mexico into the US. However, the potential impact might be alleviated by the closure of the Lyondell Houston refinery and the commissioning of Pemex’s Dos Bocas refinery, the report noted. “Backfill options for heavy barrels in the US crude slate, especially in the US West Coast and US Gulf Coast, would need to come from waterborne imports via Latin American and Middle East countries,” said White. “Iraq, in particular, flexes the largest alternate pool of heavy crude exports. However, these imports are generally cost disadvantaged compared

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FERC delay on ISO-NE interconnection plan could lock out 3 GW from capacity auction: Flatiron

The Federal Energy Regulatory Commission’s failure to act soon on ISO New England’s interconnection reform proposal may prevent up to 3 GW of resources from participating in the grid operator’s next capacity auction, according to Flatiron Energy Development. “Failure to act by the commission could result in sharply higher capacity rates and therefore less affordable electricity for the region, while increasing the risk of a resource shortfall,” Flatiron said in a Wednesday filing at FERC. Further delay by FERC “may exacerbate concerns about acute winter resource adequacy challenges,” the utility-scale storage developer said. In mid-May, ISO-NE filed proposals to reform its grid interconnection rules in response to FERC’s landmark Order 2023, which set new interconnection requirements — including shifting to a first-ready, first-served cluster study process instead of first-come, first-served reviews of interconnection requests. ISO-NE asked FERC to approve the proposals by Aug. 12, 2024. The proposals were widely supported by ISO-NE stakeholders and the region’s states. FERC, however, hasn’t acted on the proposals. The New England States Committee on Electricity, which represents the region’s governors, has urged FERC to make a decision on ISO-NE’s interconnection reform proposal. “Near-term action on the widely supported filing is necessary to help alleviate the interconnection queue backlogs and uncertainty that continues to exist in New England,” NESCOE said in a Nov. 25 letter to FERC. In response, former FERC Chairman Willie Phillips said Jan. 21 that the agency would act on the proposals “as expeditiously as possible.” FERC needs to make a decision by the end of March to allow new resources to participate in ISO-NE’s upcoming auction, which has been delayed to 2028, according to Flatiron. A decision is needed so project developers can meet deadlines that would be set under ISO-NE’s proposed transition to a new interconnection review process, the Boulder,

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Puerto Rico utility LUMA plans to add 1 GW renewables, 700 MW storage

Puerto Rico utility LUMA Energy on Thursday announced plans to add almost 1 GW of renewable energy and more than 700 MW of energy storage in its bid to transition away from fossil fuels and strengthen the island’s fragile electric grid. The new capacity represents more than $4 billion in private investment, creating over 4,200 construction jobs and 139 permanent jobs, according to the Renewable Energy Producers Association, or APER, the group’s Spanish acronym. LUMA’s agreement with Linxon US and its partner AtkinsRéalis Caribe calls for the development of nine “energy interconnection points” as part of Puerto Rico’s Tranche 1 energy transition efforts, the utility said. Puerto Rico is aiming to eliminate coal-fired generation by 2028 and develop a 100% renewable energy grid by 2050. The island’s electric system was destroyed by Hurricane Maria in 2017, resulting in a full rebuild and the development of a plan to modernize and decarbonize the power grid. The new renewable generation is “expected to potentially save customers millions of dollars by reducing reliance on fossil fuels and mitigating price volatility. It will also help decrease outages related to energy generation,” LUMA said. Puerto Rico’s electric grid experienced over 100 load shed events last year due to insufficient or sudden generation failures, the utility noted, citing data submitted to the Puerto Rico Energy Bureau. The new renewables and storage will make the island’s electric grid cleaner, more resilient and more affordable, LUMA President and CEO Juan Saca said in a statement. “We are stabilizing the electrical grid and ensuring a more resilient and sustainable system for generations to come,” he added. APER Executive Director Julián Herencia said the group expects the new resources will pass Puerto Rico’s interconnection process “without delays, finally ending the service interruptions caused by a lack of generation we have all endured

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Circling Back: What Now for Quantum Loophole and the Quantum Frederick Data Center Campus?

Quantum Loophole and TPG Real Estate Partners (TREP) have recently resolved a legal dispute concerning the management of the Quantum Frederick Project, a 2,100-acre data center campus in Frederick County, Maryland. As part of the settlement, Quantum Loophole has stepped back from active involvement in the project, with Catellus Development Corporation, a TPG affiliate, assuming full managerial responsibilities. The dispute began in September 2024 when TPG filed a lawsuit seeking to remove Quantum Loophole from its role as manager of the project, citing concerns over the company’s experience with large-scale infrastructure development and alleged misrepresentations. Quantum Loophole responded with its own lawsuit against TPG, alleging breach of contract and fiduciary duty.  In December 2024, both parties agreed to dismiss all litigation, reaching an amicable resolution. Quantum Loophole will no longer be actively involved in the Quantum Frederick Project but plans to pursue other data center developments across the United States. Background Quantum Loophole, founded in 2019 and based in Austin, Texas, had positioned itself as a pioneering force in the data center industry, with its Ecoscale model combining land, water, power, and fiber to build data center campuses. Specializing in the development of gigawatt-scale data center campuses, the company development model addresses the scalability, connectivity, and cost-efficiency challenges faced by today’s large-scale deployments. By offering master-planned data center communities, Quantum Loophole wants to enable hyperscalers, enterprises, and colocation providers to expedite their go-to-market capabilities. Off to a Promising Start In 2021, Quantum Loophole announced the acquisition of over 2,100 acres in Frederick County, Maryland, marking the inception of the Quantum Frederick project. Strategically located approximately 20 miles north of Northern Virginia’s internet ecosystem, this development aimed to revolutionize data center site selection by providing a holistic approach that considers community, environmental, and governmental factors. Central to this vision was the construction

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Vantage Data Centers Leaders Reflect On Ohio Campus Plans, North American Industry Surge

Recorded last December, for this episode of the Data Center Frontier Show Podcast, DCF Editor in Chief Matt Vincent spoke with Vantage Data Centers‘ North American President Dana Adams, and Kaitlin Monaghan, Vantage Data Centers’ North American Public Policy Director. As president of Vantage Data Centers’ North America business, Dana Adams oversees market development, sales, construction and operations across the United States and Canada. With nearly 18 years of experience in the data center sector, Adams has a track record of successfully leading high-growth companies and diverse teams at scale. Prior to joining Vantage, Adams was the Chief Operating Officer for AirTrunk, the hyperscale data center giant serving the Asia-Pacific region. She was responsible for scaling operations, service delivery and customer success from one to five countries and established other critical business capabilities, including award-winning people, culture and sustainability programs, as the company grew from $3 to $10 billion. Earlier in her career, Adams served as vice president and general manager at Iron Mountain where she helped drive nearly $2 billion in growth through global acquisitions and development projects. In addition, she held several leadership positions at Digital Realty, including vice president of portfolio management, where she oversaw $3 billion in data center assets. Considered to be one of the most influential female executives in the industry, Adams was recognized by Data Economy on its power women list in 2019. She was a finalist in the 2020 and 2022 PTC awards as an outstanding female executive, an Infrastructure Masons (IM) 2022 award recipient and was recently featured by InterGlobix Magazine as an Inspiring Woman in Leadership. Adams earned a bachelor’s degree from Boston College and a Master of Business Administration from Simmons University. Kaitlin Monaghan serves as the Director of Public Policy, North America, for Vantage Data Centers. In this role,

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How AI’s Transformative Impact on Data Centers Is Driving Unprecedented Industry Growth, Innovation, and Global Expansion

Newly released research and market analysis illuminates how, as artificial intelligence (AI) continues its rapid expansion across industries, the data center sector is engaged in a step-change evolution to meet its growing demands. JLL’s 2025 Global Data Center Outlook in many ways sets the stage for understanding how AI is reshaping the market, highlighting unprecedented demand, rising infrastructure challenges, and the need for innovative sustainability solutions. The latest findings from Dell’Oro Group reinforce the viability of these trends. Meanwhile, London-based global property consultancy Knight Frank’s recent forecast provides a comparative view of growth and obstacles in EMEA markets. The AI-Driven Surge in Data Center Demand JLL’s research predicts that an estimated 10 gigawatts (GW) of new data center capacity will break ground globally in 2025, with 7 GW expected to reach completion. This growth reflects a baseline compound annual growth rate (CAGR) of 15% through 2027, with a potential to reach 20%.  However, JLL notes that rapid expansion presents challenges, including supply-demand imbalances and electricity transmission constraints in key global markets. “The pace of AI innovation is not slowing down, and the data center industry must continue to adapt,” said Jonathan Kinsey, JLL’s EMEA Lead and Global Chair, Data Centre Solutions. “AI’s transformative power demands have already reshaped our world, yet its most significant and enduring effect may lie in how we rise to meet the substantial energy demands required to fuel this technological revolution.” JLL’s findings underscore the impact of AI on data center infrastructure, with next-generation workloads requiring higher power densities and advanced cooling solutions. The analysis notes that current rack densities range from 40 kW to 130 kW per rack, and future chips could push this figure to an astounding 250 kW per rack. The increasing heat generated by high-performance GPUs makes liquid cooling essential, with immersion

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Data Center Jobs: Electrician and Engineering Jobs Available in Major Markets

Each month Data Center Frontier, in partnership with Pkaza, posts some of the hottest data center career opportunities in the market. Here’s a look at some of the latest data center jobs posted on the Data Center Frontier jobs board, powered by Pkaza Critical Facilities Recruiting. VP of Engineering – Critical Facilities Ashburn, VA This position is preferred to be on the East Coast near Ashburn, VA, however, will consider any and all candidates that are managing at this level for hyperscale clients and preferably near a major city anywhere in the U.S.  Our client is a global MEP engineering design / build company that specializes in turnkey critical facilities implementation. They provide design, commissioning, consulting, integration and management expertise in the critical facilities space. They have a mindset to provide reliability, energy efficiency, sustainable design and LEED expertise when providing these consulting services for enterprise, colocation and hyperscale companies. This career-growth minded opportunity offers exciting projects with leading-edge technology and innovation as well as competitive salaries and benefits. Data Center Construction Project Manager – Colo Ashburn, VA This position is also available on the client side in Totowa, NJ, as a PM, APM and as a Project Engineer. This position is also available for a GC or as an owner’s rep in: New Albany, OH; Dallas, TX; Abilene, TX; Charlotte, NC; Chicago, Il; Montreal, QC; Ashburn, VA; Phoenix, AZ and Kansas City, MO.  This opportunity is working directly with a leading mission-critical data center developer / wholesaler / colo provider. This company provides turnkey data center solutions custom-fit to the requirements of their client’s ever-changing mission-critical facility’s operational needs. They accomplish this by providing reliability of mission-critical facilities for many of the world’s largest organizations (hyperscale and enterprise customers). This opportunity provides a career-growth minded role with exciting projects with leading-edge technology and innovation

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Linux containers in 2025 and beyond

The upcoming years will also bring about an increase in the use of standard container practices, such as the Open Container Initiative (OCI) standard, container registries, signing, testing, and GitOps workflows used for application development to build Linux systems. We’re also likely see a significant rise in the use of bootable containers, which are self-contained images that can boot directly into an operating system or application environment. Cloud platforms are often the primary platform for AI experimentation and container development because of their scalability and flexibility along the integration of both AI and ML services. They’re giving birth to many significant changes in the way we process data. With data centers worldwide, cloud platforms also ensure low-latency access and regional compliance for AI applications. As we move ahead, development teams will be able to collaborate more easily through shared development environments and efficient data storage.

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Let’s Go Build Some Data Centers: PowerHouse Drives Hyperscale and AI Infrastructure Across North America

PowerHouse Data Centers, a leading developer and builder of next-generation hyperscale data centers and a division of American Real Estate Partners (AREP), is making significant strides in expanding its footprint across North America, initiating several key projects and partnerships as 2025 begins.  The new developments underscore the company’s commitment to advancing digital infrastructure to meet the growing demands of hyperscale and AI-driven applications. Let’s take a closer look at some of PowerHouse Data Centers’ most recent announcements. Quantum Connect: Bridging the AI Infrastructure Gap in Ashburn On January 17, PowerHouse Data Centers announced a collaboration with Quantum Connect to develop Ashburn’s first fiber hub specifically designed for AI and high-density workloads. This facility is set to provide 20 MW of critical power, with initial availability slated for late 2026.  Strategically located in Northern Virginia’s Data Center Alley, Quantum Connect aims to offer scalable, high-density colocation solutions, featuring rack densities of up to 30kW to support modern workloads such as AI inference, edge caching, and regional compute integration. Quantum Connect said it currently has 1-3 MW private suites available for businesses seeking high-performance infrastructure that bridges the gap between retail colocation and hyperscale facilities. “Quantum Connect redefines what Ashburn’s data center market can deliver for businesses caught in the middle—those too large for retail colocation yet underserved by hyperscale environments,” said Matt Monaco, Senior Vice President at PowerHouse Data Centers. “We’re providing high-performance solutions for tenants with demanding needs but without hyperscale budgets.” Anchored by 130 miles of private conduit and 2,500 fiber pathways, Quantum Connect’s infrastructure offers tenants direct, short-hop connections to adjacent facilities and carrier networks.  With 14 campus entrances and secure, concrete-encased duct banks, the partners said the new facility minimizes downtime risks and reduces operational costs by eliminating the need for new optics or extended fiber runs.

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Microsoft will invest $80B in AI data centers in fiscal 2025

And Microsoft isn’t the only one that is ramping up its investments into AI-enabled data centers. Rival cloud service providers are all investing in either upgrading or opening new data centers to capture a larger chunk of business from developers and users of large language models (LLMs).  In a report published in October 2024, Bloomberg Intelligence estimated that demand for generative AI would push Microsoft, AWS, Google, Oracle, Meta, and Apple would between them devote $200 billion to capex in 2025, up from $110 billion in 2023. Microsoft is one of the biggest spenders, followed closely by Google and AWS, Bloomberg Intelligence said. Its estimate of Microsoft’s capital spending on AI, at $62.4 billion for calendar 2025, is lower than Smith’s claim that the company will invest $80 billion in the fiscal year to June 30, 2025. Both figures, though, are way higher than Microsoft’s 2020 capital expenditure of “just” $17.6 billion. The majority of the increased spending is tied to cloud services and the expansion of AI infrastructure needed to provide compute capacity for OpenAI workloads. Separately, last October Amazon CEO Andy Jassy said his company planned total capex spend of $75 billion in 2024 and even more in 2025, with much of it going to AWS, its cloud computing division.

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John Deere unveils more autonomous farm machines to address skill labor shortage

Join our daily and weekly newsletters for the latest updates and exclusive content on industry-leading AI coverage. Learn More Self-driving tractors might be the path to self-driving cars. John Deere has revealed a new line of autonomous machines and tech across agriculture, construction and commercial landscaping. The Moline, Illinois-based John Deere has been in business for 187 years, yet it’s been a regular as a non-tech company showing off technology at the big tech trade show in Las Vegas and is back at CES 2025 with more autonomous tractors and other vehicles. This is not something we usually cover, but John Deere has a lot of data that is interesting in the big picture of tech. The message from the company is that there aren’t enough skilled farm laborers to do the work that its customers need. It’s been a challenge for most of the last two decades, said Jahmy Hindman, CTO at John Deere, in a briefing. Much of the tech will come this fall and after that. He noted that the average farmer in the U.S. is over 58 and works 12 to 18 hours a day to grow food for us. And he said the American Farm Bureau Federation estimates there are roughly 2.4 million farm jobs that need to be filled annually; and the agricultural work force continues to shrink. (This is my hint to the anti-immigration crowd). John Deere’s autonomous 9RX Tractor. Farmers can oversee it using an app. While each of these industries experiences their own set of challenges, a commonality across all is skilled labor availability. In construction, about 80% percent of contractors struggle to find skilled labor. And in commercial landscaping, 86% of landscaping business owners can’t find labor to fill open positions, he said. “They have to figure out how to do

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2025 playbook for enterprise AI success, from agents to evals

Join our daily and weekly newsletters for the latest updates and exclusive content on industry-leading AI coverage. Learn More 2025 is poised to be a pivotal year for enterprise AI. The past year has seen rapid innovation, and this year will see the same. This has made it more critical than ever to revisit your AI strategy to stay competitive and create value for your customers. From scaling AI agents to optimizing costs, here are the five critical areas enterprises should prioritize for their AI strategy this year. 1. Agents: the next generation of automation AI agents are no longer theoretical. In 2025, they’re indispensable tools for enterprises looking to streamline operations and enhance customer interactions. Unlike traditional software, agents powered by large language models (LLMs) can make nuanced decisions, navigate complex multi-step tasks, and integrate seamlessly with tools and APIs. At the start of 2024, agents were not ready for prime time, making frustrating mistakes like hallucinating URLs. They started getting better as frontier large language models themselves improved. “Let me put it this way,” said Sam Witteveen, cofounder of Red Dragon, a company that develops agents for companies, and that recently reviewed the 48 agents it built last year. “Interestingly, the ones that we built at the start of the year, a lot of those worked way better at the end of the year just because the models got better.” Witteveen shared this in the video podcast we filmed to discuss these five big trends in detail. Models are getting better and hallucinating less, and they’re also being trained to do agentic tasks. Another feature that the model providers are researching is a way to use the LLM as a judge, and as models get cheaper (something we’ll cover below), companies can use three or more models to

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OpenAI’s red teaming innovations define new essentials for security leaders in the AI era

Join our daily and weekly newsletters for the latest updates and exclusive content on industry-leading AI coverage. Learn More OpenAI has taken a more aggressive approach to red teaming than its AI competitors, demonstrating its security teams’ advanced capabilities in two areas: multi-step reinforcement and external red teaming. OpenAI recently released two papers that set a new competitive standard for improving the quality, reliability and safety of AI models in these two techniques and more. The first paper, “OpenAI’s Approach to External Red Teaming for AI Models and Systems,” reports that specialized teams outside the company have proven effective in uncovering vulnerabilities that might otherwise have made it into a released model because in-house testing techniques may have missed them. In the second paper, “Diverse and Effective Red Teaming with Auto-Generated Rewards and Multi-Step Reinforcement Learning,” OpenAI introduces an automated framework that relies on iterative reinforcement learning to generate a broad spectrum of novel, wide-ranging attacks. Going all-in on red teaming pays practical, competitive dividends It’s encouraging to see competitive intensity in red teaming growing among AI companies. When Anthropic released its AI red team guidelines in June of last year, it joined AI providers including Google, Microsoft, Nvidia, OpenAI, and even the U.S.’s National Institute of Standards and Technology (NIST), which all had released red teaming frameworks. Investing heavily in red teaming yields tangible benefits for security leaders in any organization. OpenAI’s paper on external red teaming provides a detailed analysis of how the company strives to create specialized external teams that include cybersecurity and subject matter experts. The goal is to see if knowledgeable external teams can defeat models’ security perimeters and find gaps in their security, biases and controls that prompt-based testing couldn’t find. What makes OpenAI’s recent papers noteworthy is how well they define using human-in-the-middle

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