For the first time in years, the U.S. is growing a deep appetite for more electricity, driven by a hodgepodge of data centers, increased manufacturing, building electrification and electric vehicles.
Demand curves, which only recently drooped slightly, into the coming decades have changed course seemingly overnight. And that reversal comes at a time when a large number of coal and older natural gas powerplants — the grid’s old workhorses — have retired or announced plans to do so, stirring up concerns that our bright electric future might be throttled or even foiled.
But Costa Samaras, director of Carnegie Mellon University’s Scott Institute for Energy Innovation, is decisively optimistic that the country’s electric grid — grids, actually — will meet the moment.
“We’ve done this before,” he explained.
Electricity demand was in a state of perpetual steep rise for decades until the 2008 recession. That was followed by a dozen years of plateaued consumption capped by the pandemic. The past two years have seen demand rise again.
As is true now, a combination of large policy moves and technological leaps drove spikes in the past.
When FDR signed the Rural Electrification Act in 1936, only 10% of U.S. farms had electricity. By the mid-1950s, nearly all did.
The first affordable air conditioning technology for homes became available around 1950. According to the U.S. Department of Energy, by the late 1960s, most new construction had central air conditioning. By the 1970s, most U.S. homes had central air or window units and today nearly 90% of dwellings in the U.S. have air conditioning, with many areas closer to 100%.
That’s a sizable chunk of demand. Cooling accounts for about 12% of all electricity demand, according to an analysis of data from the Energy Information Administration.
Data centers, by comparison, made up 2% of electricity consumption in 2022, the EIA calculated. Even doubling or tripling that number isn’t going to break the grid, Mr. Samaras said.
“It’s an important issue that we have to have a handle on. (But) it’s not a nationwide crisis,” he said.
Instead, he sees the data center wave expected in the next few years as kind of trial run for a much bigger albeit more gradual trend of electrifying everything.
“If every car and SUV turned into EV overnight, we’d need another 25% annual electricity generation,” he estimated.
But that wouldn’t happen overnight.
Duquesne Light, which is a big proponent of electric vehicles and beneficial electrification — a phrase that means replacing fossil fuels with kilowatts in a way that drives down emissions and costs — estimated that it has about 5,000 electric vehicle chargers in its territory now, which at peak demand require about 20 megawatts. That’s about 0.7% of Duquesne Light’s summer peak.
Flipping the curves
Changes are coming quickly.
Just last year, the curve of that peak demand for the Downtown-based utility which serves customers in Allegheny and Beaver Counties was expected to settle into a very slow, very slight decline. This year it looks more like a Nike swoosh. The reversal is even more drastic for other utilities, where data centers are expected to make a big dent.
The forecast is developed by PJM Interconnection Inc., a Valley Forge-based nonprofit that coordinates the flow of electricity between power suppliers and utilities in 13 states, including Pennsylvania. In other words, it runs the largest grid in the country.
It’s PJM’s job to manage transmission planning for this region and to do that, it needs to know how much power will be coming and going out.
Over the past decade, much of the concern has been on the coming side of the equation. With the large number of thermal powerplant retirements chopping off a fifth of its installed capacity, PJM was left to figure out how to compensate for that lost power with renewables. There are many more green megawatts waiting to come onto the grid than there are fossil fuel ones lost, but solar generation is intermittent and a grid configured to rely on constant power needs time to adjust.
Now, the expected rise in demand for electricity is putting another strain on the equation.
Data centers in particular, are major power guzzlers that want to run 24/7.
And unlike the generation side of the equation, where new power coming onto the grid or old power resources leaving it are known entities with years of advanced warning, new demand is often speculative and harder to plan for. Data center developers are scoping out many areas at once, which makes it difficult for utilities to time their infrastructure projects to accommodate that growth.
Several utilities, including Akron-based FirstEnergy Corp., asked PJM to upgrade its forecast for their transmission zones based on projected data center demand.
During a call with analysts in April, FirstEnergy’s CEO Brian Tierney marveled about his trip to Frederick, Md., where Quantum Loophole is building a massive gigawatt-scale data center campus. For perspective, the Beaver Valley Nuclear Power Station has a maximum capacity of 1.7 gigawatts.
The campus is in FirstEnergy’s territory. It’s one of several data center projects that compelled PJM to approve $5 billion in transmission upgrades in December.
Mr. Tierney was happy about that approval, which yielded some $800 million in work for FirstEnergy. But that’s only one side of the equation, he said.
“You can't just have a robust wire system. You have to have a commodity to put on the wires,” he said. “An increasingly talked-about issue is, will there be enough commodity to put on the wires in the face of the load growth that we're facing and the coal unit retirements that we're facing as well.”
Mr. Tierney even suggested that if Pennsylvania, which doesn’t allow utilities to own generation, would reverse course out of desperation and ask the company to build new powerplants whose costs could be recovered from ratepayers, FirstEnergy would be open to it.
FirstEnergy owns West Penn Power, Penn Power and two other major utility territories in Pennsylvania. Mr. Tierney said all indications point to data centers coming to the Keystone State.
Off the grid
But not all will be using grid power. With their requirement for large and steady flows of uninterruptible power, some data center developers are securing their own supply.
Amazon signed a novel agreement with Talen Energy, the operator of the Susquehanna nuclear plant, to take a portion of its power for its massive new data center campus. There’s even talk of reviving shuttered nuclear plants, such as Three Mile Island, for data center power supply.
More likely, and more immediately, some of these large new users will skip over the electric utility and go straight for natural gas.
“Utilities can’t keep up with the demand,” said Mike Brady, CEO of IMG Energy Solutions, a North Shore-based company that develops small natural gas plants and solar facilities.
IMG is currently pursuing a massive data center project in the western U.S. which requires 200 megawatts of power.
“A lot of people are coming to us and saying, ‘We can’t get an interconnection for five to 10 years,’ if they can get it (at all),” he said. “There’s a panic and the panic has gotten people to (think about) natural gas.”
Energy forecasters warn that long-term prognosticating isn’t about getting it right. It’s about creating a narrative and testing if that story holds up with each update, while adding or subtracting elements as needed.
The Energy Information Administration, a federal agency that collects a lot of the data that informs utility and other forecasts, puts out its own annual outlook.
Last year, it predicted that electricity demand would grow at about 1% annually over the next several decades. But this year, the EIA said it wouldn’t publish a forecast as it recalibrates its models with all the variables up in the air. To name just a few, it cited electric vehicle charging, battery storage, industrial heat pumps, hydrogen development, and plastic recycling.
PJM warned last year of “the potential for an asymmetrical pace within the energy transition,” where thermal powerplants retire and demand grows at a faster clip than new generation can be developed to pick up the slack.
Mr. Samaras says the problem is real but solvable.
“We’re entering this period where we’ve set up these incentives to do electrification,” he said.
Yes, the grid will need more wires, more generation, more planning.
But it has happened before, Mr. Samaras said.
Anya Litvak: alitvak@post-gazette.com
First Published: July 14, 2024, 9:30 a.m.
Updated: July 14, 2024, 12:06 p.m.