U.S. Grid Data Centers Face Demand Surge | Shale Magazine

The United States government has been exploring possible ways to overhaul the country’s transmission system for several years to no avail. Now, with the imminent rollout of several large-scale data centers threatening to make the country’s energy demand soar within the next decade, more needs to be done to prepare U.S. electricity infrastructure for the shift. 

The U.S. grid is highly fragmented, with different states and regions controlling various sections of the country’s transmission network, each of whom have varying opinions on how best to manage the grid. Much of the infrastructure is outdated and requires modernizing to connect new renewable energy projects from non-traditional energy-producing regions. In addition, much of the country’s transmission network needs expanding and upgrading to prepare for the anticipated growth in electricity demand in the coming decades. 

U.S. Energy Demand to Soar 

Tech companies have invested heavily in the development of giant data centers, capable of powering advanced technologies, such as artificial intelligence (AI), in recent years, with many more expected to follow. The country’s 5,400 data centers now consume enough electricity to power an estimated 13 million homes, accounting for around 3% of U.S. electricity consumption. 

Meanwhile, the building of new data centers is far outpacing the development of new electrical energy supply and transmission, which could lead demand to outstrip supply. Estimates suggest that data centers could contribute up to 9% of the country’s power demand by the end of the decade. 

Companies such as Amazon, Google, Meta, and Microsoft as well as private equity and infrastructure investors, have announced hundreds of billions of dollars in near-term AI investments. In January, the CEOs of OpenAI, Oracle, and SoftBank unveiled plans to invest $500 billion in AI data centers over the next four years, with support from President Donald Trump. 

In reference to the anticipated growth in energy demand, Facebook’s CEO Mark Zuckerberg said, “I actually think before we hit [computing constraints], we’ll run into energy constraints.” Meanwhile, OpenAI’s CEO Sam Altman said, “I think we still don’t appreciate the energy needs of [AI]. We need [nuclear] fusion, or we need, like, radically cheaper solar plus storage, or something, at massive scale — a scale that no one is really planning for.”

Grid Struggles

In July, the U.S. Department of Energy (DoE) published a Report on Evaluating U.S. Grid Reliability and Security. The analysis shows that existing generation retirements and delays in adding new firm capacity will likely lead to a surge in power outages and a growing gap between electricity demand and supply, particularly as more data centers are built. This threatens U.S. energy security and highlights the clear need for grid expansion and modernization. 

The U.S. federal government has previously been unable to carry out the necessary modernization of the U.S. transmission system due to the grid’s fractured nature, with Infrastructure investments being managed by a multitude of local, state, and regional regulators, making it impossible to overhaul the system as a whole. This means that individual states are trying to tackle the problem, largely in isolation. 

PJM Interconnection, the largest power grid operator in the U.S., is currently battling to provide a stable electricity supply in the face of a growing energy demand from data centers continues as its power plants age. Electricity bills in the state are expected to increase by around 20% this summer in parts of the PJM’s territory, which covers 13 states including Illinois, Tennessee, Virginia, and New Jersey. 

PJM has lost over 5.6 GW of power over the last decade, as power plants closed and not enough new projects were developed to fill the gap. While new projects totaling around 46 GW have been approved, which would be enough to power 40 million homes, local opposition, supply chain disruptions, and financing issues have prevented much of them from being developed. Meanwhile, PJM expects 32 GW of increased demand on its system by 2030. 

In Arizona, the state utility, Arizona Public Service, expects data centers to contribute around half of all new power demand by 2038. In Texas, data centers could account for the equivalent of half of all new customers by the end of the decade. Meanwhile, since 2023, Georgia Power has tripled its demand forecast over the coming decade. 

Addressing the Problem

In addition to investing heavily at the state and federal levels in enhancing the U.S. transmission network, the introduction of strict regulations on data centers will be vital to managing demand. 

Establishing rigorous federal regulations on data centers could help to reduce the burden on the grid. For example, in April, Illinois filed a bill that would require firms operating data centers in the state to report their annual water and energy consumption to the Illinois Power Agency beginning next spring or face a possible fine of $10,000 for non-compliance.

The fruits of stricter regulation can already be seen in some regions, as tech companies begin to improve practices. For example, in August, Google signed agreements with Indiana Michigan Power and Tennessee Power Authority to decrease its AI data center power consumption during times of high demand on the grid. 

“It allows large electricity loads like data centers to be interconnected more quickly, helps reduce the need to build new transmission and power plants, and helps grid operators more effectively and efficiently manage power grids,” Google said in a blog post.

Stay In The Know with Shale

While the world transitions, you can count on Shale Magazine to bring me the latest intel and insight. Our reporters uncover the sources and stories you need to know in the worlds of finance, sustainability, and investment.

Subscribe to Shale Magazine to stay informed about the happenings that impact your world. Or listen to our critically acclaimed podcast, Energy Mixx Radio Show, where we interview some of the most interesting people, thought leaders, and influencers in the wide world of energy.

Subscribe to get more posts from Felicity Bradstock