Summary:
AI demand is projected to significantly increase electricity consumption in the U.S. by 2030.
Data centers could consume as much electricity as major industrialized economies.
The retirement of coal-fired plants is raising concerns about grid reliability.
PJM Interconnection warns about the growing reliability concerns as demand surges.
Utilities face a $100 billion+ challenge to upgrade infrastructure for future demand.
AI Demand Straining the U.S. Electric Grid
Artificial intelligence is expected to significantly increase power demand in the U.S., particularly from data centers. As these data centers grow in number and scale, they could consume as much electricity as some major industrialized economies by 2030.
According to an August report from Mizuho Securities, U.S. data centers could require up to 400 terawatt hours of electricity by 2030, surpassing the total electricity production of the United Kingdom in 2022. This surge in demand coincides with the rapid retirement of coal-fired power plants, raising concerns about the reliability of the power system.
Coal Retirement vs. Renewable Energy Transition
Utilities are facing a dilemma as they retire coal plants while trying to bring renewable energy sources, primarily solar and wind, onto the grid. However, the waiting list for these projects is lengthy, and renewables are often less reliable.
In July, PJM Interconnection, the largest grid operator in the U.S., warned that the reliability of the electric system is at risk as coal plants close faster than new power generation capacity can be built. Data center growth is accelerating, driven by the increasing number of requests and the size of each facility.
Electrification of the Economy
The demand for electricity is not only driven by data centers but also by the return of manufacturing to the U.S. Recent auction prices for new power capacity in the PJM power pool have surged over 800%, indicating rising demand against limited supply. PJM forecasts a 40% surge in electricity demand by 2039, while 21% of existing power generation capacity is at risk of retirement by 2030.
Investment in Infrastructure
Utilities in the PJM region have reported at least 50 gigawatts of potential data center demand. Despite having 290 gigawatts of renewable projects waiting to connect to the grid, only about 5% have been built in the past. The cost of building new infrastructure to meet this demand is projected to reach hundreds of billions of dollars.
Direct Connections to Power Sources
To address the growing demand, tech companies are exploring direct connections to large power resources, such as nuclear plants, instead of relying on the grid. However, this approach has faced regulatory challenges. Amazon Web Services recently purchased a data center campus powered directly by a nuclear plant, a move seen as controversial within the industry.
Utility executives warn that failing to meet rising demand could have dire consequences for the entire U.S. economy. The stakes are high, and a significant step-change in infrastructure investment is needed to ensure reliable power supply for future demands.
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