Data centers, particularly those fueling AI technologies, have experienced such tremendous expansion that they are straining utilities beyond what rising power demand necessitates.
Certain utilities in the eastern and southern regions of the U.S. are suggesting the expansion of new natural gas-fired capacity in addition to renewable sources to support the increased electricity consumption from data centers. Others have proposed postponing the retirement timeline for coal-fired capacity to ensure grid reliability.
Many tech firms desire sustainable energy to power their new data centers, but utilities are struggling to meet this demand. These utilities are unable to integrate new solar and wind power into the grid quickly enough to facilitate the timely commencement of new data center operations.
There is apprehension that unless substantial investments in transmission lines and grid upgrades are made soon, and on an annual basis, the future of data centers and the growth of EV and battery manufacturing in the U.S. economy would be compelled to decelerate.
“That’s the ultimate concern everybody has: that we’ll be short on power,” Rob Gramlich, founder of consulting firm Grid Strategies, told Bloomberg. Related: Biden Administration Halts Approvals of New LNG Export Projects
The U.S. requires at least $20 billion in investments every year in long-distance transmission lines, according to Gramlich, who noted that the present spending is essentially nonexistent.
Grid Strategies released a recent report in which it examined data from utilities’ regulatory findings. The analysis revealed that in the past year, grid planners almost doubled the 5-year load growth forecast, with primary factors being investment in new manufacturing, industrial, and data center facilities.
“The U.S. electric grid is unprepared for significant load growth,” Grid Strategies stated in the report, pointing out that a recent “surge in data center and industrial development caused sudden, shockingly large increases in 5-year load growth expectations.”
Dominion Energy – which serves Virginia’s Eastern Loudoun County, referred to as Data Center Alley and the world’s “largest data center market,” – has stated that “The major drivers of current and future growth include: migration to the cloud as companies outsource information technology functions, smartphone technology and apps, 5G technology, digitization of data, and artificial intelligence.”
In its 2023 integrated resource plan (IRP), Dominion Energy Virginia outlined a variety of potential resource additions by 2048, including up to 9 gigawatts (GW) of new natural gas-fired capacity due to reliability concerns.
Further west of Virginia, Kansas City-based utility Evergy stated in June 2023 that it would retire coal operations at its Lawrence Energy Center only in 2028, compared to previous plans for end-2023 retirement. At that time, one unit is expected to fully retire, while the remaining unit will continue to be available for operations with natural gas to meet customer needs during high electricity use periods.
“Our service area is experiencing some of its most robust electricity demand growth in decades, including very large projects like the Panasonic electric vehicle battery manufacturing factory and the Meta datacenter, as well as broad-based economic development in both Kansas and Missouri,” Evergy’s president and CEO David Campbell said.
NextEra Energy Resources president and CEO Rebecca Kujawa mentioned just this week during the Q4 earnings call that “Clearly, there’s an enormous amount of demand being driven across the U.S. economy by the growth in data centers, driven by a lot of things, of course, but specifically generative AI.”
“And that growth is pretty explosive at this point.”
So explosive is the growth that Boston Consulting Group (BCG) stated that data center electricity consumption accounted for 2.5% of the U.S. total (~130 TWh) in 2022 and is anticipated to triple to 7.5% (~390 TWh) by 2030.
“That’s the equivalent of the electricity used by about 40 million U.S. houses – almost a third of the total homes in the U.S.” mentioned BCG.
Globally, electricity consumption from data centers, AI, and the cryptocurrency sector could double by 2026, the International Energy Agency (IEA) said in its Electricity 2024 report this week.
After consuming an estimated 460 terawatt-hours (TWh) globally in 2022, electricity consumption from data centers could reach more than 1,000 TWh in 2026-approximately the same as Japan’s total electricity consumption.
Based on the pace of deployment and AI and crypto trends, the additional electricity consumption of data centers in 2026 compared to 2022 would be roughly equivalent to adding at least one Sweden or at most one Germany to demand, the IEA says.
By Tsvetana Paraskova for Oilprice.com
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