U.S. Clean Energy Transition Hindered by AI Expansion | OilPrice.com
Author: Paraskova Tsvetana
Tsvetana is a writer for Oilprice.com with over a decade of experience covering news for websites such as iNVEZZ and SeeNews.
Comprehensive Insights
By Paraskova Tsvetana – Jan 26, 2024, 6:00 PM CST
- AI data centers pose a significant challenge to utilities.
- To address the rising electricity demand from data centers, utilities in the eastern and southern U.S. regions are considering expanding natural gas-fired capacity in conjunction with renewable energy sources.
- The demand for clean energy, particularly from tech firms powering new data centers, is outpacing the capabilities of current services.
The rapid expansion of data centers, especially those supporting AI technologies, is straining utilities as they struggle to meet the escalating electricity requirements.
In response to the surge in electricity consumption from data centers, some utilities in the eastern and southern U.S. are proposing the development of additional natural gas-fired capacity alongside renewable energy sources. Other utilities are revising their plans to retire coal-fired facilities to ensure grid reliability.
Services are finding it challenging to match the demand for clean energy, which is crucial for powering new data centers sought after by tech companies. The integration of solar and wind power into the grid is not keeping pace with the need to support timely operations of these new data centers.
The growth of data centers and the production of electric vehicles and batteries in the U.S. is projected to decelerate unless substantial investments are made in transmission lines and grid enhancements on an annual basis.
Rob Gramlich, the founder of consulting firm Grid Strategies, emphasized the pressing issue, stating, “The biggest concern we all share is the potential energy shortfall.” Additionally, the Biden Administration has recently halted certifications for new LNG import projects.
Gramlich stressed the necessity for the U.S. to invest a minimum of $20 billion annually in long-distance transmission infrastructure, highlighting the current lack of significant expenditure in this area.
A recent report by Grid Strategies analyzed regulatory outcomes related to infrastructure and indicated that investments in new industrial, production, and data center facilities led grid planners to double their 5-year load growth projections compared to the previous year.
The report highlighted a surge in data center and industrial development as the primary drivers behind the substantial increase in load growth forecasts and warned that the U.S. electric grid is ill-prepared for such significant growth in demand.
Dominion Energy, serving Eastern Loudoun County in Virginia, known as Data Center Alley and the world’s largest data center market, outlined potential resource additions by 2048 in its 2023 integrated resource plan (IRP), including the addition of up to 9 gigawatts (GW) of new natural gas-fired capacity due to reliability concerns.
In a move towards cleaner energy, Evergy, based in Kansas City, announced in June 2023 that it would cease coal operations at its Lawrence Energy Center by 2028, deviating from its initial plan to retire the facility by the year’s end. While one unit is expected to be fully decommissioned, the other unit will transition to natural gas operations to meet peak electricity demands.
David Campbell, president and CEO of Evergy, highlighted the substantial growth in power demand in the service area, driven by major projects like the Nikon electric vehicle battery manufacturing plant and the Meta data center, alongside overall economic development in Kansas and Missouri.
Rachel Kujawa, president and CEO of NextEra Energy Resources, underscored the significant impact of data center growth on the U.S. market during a recent earnings call, attributing the surge in demand to various factors, notably the rise of artificial intelligence.
The pace of growth in this sector is remarkable.
Boston Consulting Group (BCG) estimates that data center electricity consumption will represent 2.5% of the total U.S. energy consumption (130 TWh) in 2022, with projections indicating a threefold increase to 7.5% (3190 KWH) by 2030.
BCG stated, “Nearly a third of all homes in the United States, or about 40 million U.S. homes, use energy equivalent to that.”
The International Energy Agency (IEA) released the Electricity 2024 report, projecting a potential doubling of global electricity consumption from data centers, AI, and the cryptocurrency sector by 2026.
The IEA forecasts that data center electricity consumption could surpass 1,000 TWh in 2026, equivalent to Japan’s total electricity consumption, after consuming an estimated 460 terawatt-hours (TWH) globally by 2022.
The additional electricity demand from data centers in 2026 could mirror the energy needs of a country like Sweden or Germany, depending on the pace of deployment and the evolution of AI and cryptocurrency trends.
By Paraskova Tsvetana for Oilprice.com
