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Surging power demand from new data centers is reaching unprecedented — and potentially unrealizable — heights.
Over the next five years, U.S. utilities expect to see new electricity demand equal to 15 times New York City’s peak load, the majority of which will come from data centers.
So finds a report released Tuesday by Grid Strategies tracking the growth in power demand for data centers being built and planned to feed tech giants’ artificial intelligence ambitions. The consultancy’s tally of utility load forecasts indicates that peak grid demand will boom to 166 gigawatts by 2030, a sixfold increase from what was forecast three years ago.
“These are just phenomenal numbers for an industry that was built over the past couple of decades to handle much lower load growth,” said John Wilson, Grid Strategies’ vice president and the report’s lead author.
Data centers make up roughly 90 gigawatts of that forecasted load growth, a reflection of the hundreds of billions of dollars that tech giants are pouring into AI, as well as smaller but still substantial investments in crypto-mining operations, enterprise cloud computing, telecommunications, and other IT services.
Back in late 2023, Grid Strategies offered an early warning about how data centers were causing power demand to spike. It has also cautioned that outsize plans for growth in key U.S. data center hot spots are threatening to exceed the physical capacity of power plants and power grids. These factors could result in higher costs for consumers and more carbon emissions as utilities plan to ramp up fossil-fuel use to serve new demand.
But Grid Strategies and others have also counseled that utilities might be exaggerating things.
For one, there’s lots of double-counting going on; data center developers often pitch the same project in multiple utility jurisdictions while searching for the best deal. For another, the gold-rush quality of the data center boom is leading developers to make speculative proposals for projects that may never materialize.
For its new report, Grid Strategies compared utility forecasts with alternative methods of projecting data center load growth, such as industry analysis of technological bottlenecks, and found that utilities may be overstating data center demand by as much as 40%.
That discrepancy indicates how utility forecasts need to better reflect underlying uncertainties, Wilson said. This is particularly important for the rising number of data centers being planned that will use a gigawatt or more of power — the equivalent of a small city’s total power demand.
“The fact that these facilities are city-sized is a huge deal,” Wilson said. “That has huge implications if these facilities get canceled, or they get built and don’t have long service lives.”
Utilities are using their sky-high forecasts to justify massive investments in power plants and grid infrastructure around the United States.
Those forecasts, in turn, have already driven up utility bills in some regions, including those for many of the more than 67 million people served by PJM Interconnection, the country’s biggest energy market. For PJM, future data center forecasts have driven capacity costs — the prices paid to power plants and other grid resources to meet peak grid demand — from $2.2 billion in 2023 to $14.7 billion in 2024 and to $16.1 billion in this summer’s capacity auction.
PJM customers in heavily impacted states like New Jersey are taking notice. Popular anger at rising bills helped propel Democratic gubernatorial candidates who pledged to combat increasing power costs to outsize wins in New Jersey and Virginia elections earlier this month.
Many utilities aim to meet this surging demand by building new fossil-gas-fired power plants, which could not only increase costs for customers but also slow down the transition to clean energy. Across much of the Southeast and the Midwest, in particular, utilities aim to build gigawatts’ worth of these power plants, which emit carbon dioxide as well as toxic air pollution.
In Virginia, home of the world’s largest data center hub, Dominion Energy is proposing gigawatts of new gas-fired power that, critics warn, could make it impossible for the utility to meet a state-mandated phaseout of fossil fuel use by 2045. The utility argues that the plants are needed to maintain reliability in the face of data center growth.
Meanwhile, in Georgia, major utility Georgia Power is seeking regulator permission to build gigawatts of gas-fired power capacity to meet load forecasts swollen by proposed data centers. Opponents fear that the plants will balloon already fast-rising utility bills, and this month voters overwhelmingly elected to the state’s Public Service Commission two Democratic challengers who ran on a platform of constraining unchecked utility spending.
Elsewhere, state lawmakers, regulators, and data center developers are seeking ways to accommodate growth without overwhelming the grid and utility customers.
In Texas, the country’s second-hottest data center market outside of Virginia, “large load” forecasts within the territory served by the Electric Reliability Council of Texas (ERCOT) have nearly quadrupled over the past year, representing a potential doubling of its peak demand. The state legislature passed a law this spring that requires new data centers to disconnect at moments of peak grid stress, although the rules for how that will happen are still being worked out by ERCOT and state regulators.
Other states are also passing laws and instituting regulations aimed at forcing data center developers to bear the cost of new power plants and grid infrastructure. And some data center companies are promising to shift when they use power in order to relieve peak grid strains that drive much of the costs that utilities face. PJM, for its part, is considering new rules aimed at requiring new data centers to reduce their impact on the region’s capacity costs, although consumer and environmental advocates say the grid operator’s proposed plans don’t go far enough.
The Grid Strategies report also highlights that U.S. utilities and grid operators haven’t yet committed to expanding the transmission grid at the scale needed to support the growing electrification of vehicles, buildings, and industries — however the data center demand plays out. “Even conservative growth trajectories outpace recent years and would require substantial grid expansion to accommodate,” it notes.
Ultimately, Wilson suggested that utilities, lawmakers, and regulators will need to make sure the cost of meeting whatever demand does materialize is not shifted to everyday customers.
“We’ve got a gigantic amount of additional load over the next five years to manage from a supply-chain, planning, and construction standpoint,” he said. “These are questions that regulators and intervenors should be asking, and not just trusting the utilities, who say, ‘This is the way we’ve always done it.’”
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