Data centers, especially those powering AI technologies, have seen such explosive growth that they are taxing utilities beyond what soaring power demand is calling for.
Some utilities in the eastern and southern parts of the U.S. are proposing build-outs of new natural gas-fired capacity alongside renewables to support the growth in electricity consumption coming from data centers. Others have planned to delay the timeline for retiring coal-fired capacity to ensure grid reliability.
Many tech companies want clean energy to power their new data centers, but utilities are struggling to keep up with this demand. These utilities cannot hook up new solar and wind power to the grid fast enough to allow a timely start to new data center operations.
There is concern that unless huge investments in transmission lines and grid upgrades are made soon, and every year, the U.S. economy of the future of data centers and EV and battery manufacturing growth would be forced to slow up.
“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. needs at least $20 billion in investments annually in long-distance transmission lines, according to Gramlich, who noted that the current spending is basically zero.
Grid Strategies published a report last month in which it analyzed data from utilities’ regulatory findings. The analysis found that over the past year, grid planners nearly doubled the 5-year load growth forecast, the key drivers being investment in new manufacturing, industrial, and data center facilities.
“The U.S. electric grid is not prepared for significant load growth,” Grid Strategies said in the report, noting 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, dubbed Data Center Alley and the world’s “largest data center market,” – has said that “The big 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 detailed last year a range of possible 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 said in June 2023 that it would retire coal operations at its Lawrence Energy Center only in 2028, compared to earlier plans for end-2023 retirement. At that time, one unit is expected to fully retire, while the remaining unit will remain available for operations with natural gas to meet customer needs during times of high electricity use.
“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 said just this week on 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) says that data center electricity consumption accounted for 2.5% of the U.S. total (~130 TWh) in 2022 and is expected 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.” said 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-roughly the same as Japan’s total electricity consumption.
Depending 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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Eugen Boglaru is an AI aficionado covering the fascinating and rapidly advancing field of Artificial Intelligence. From machine learning breakthroughs to ethical considerations, Eugen provides readers with a deep dive into the world of AI, demystifying complex concepts and exploring the transformative impact of intelligent technologies.