US electricity demand is booming after years of stagnation, driven by emerging technologies such as artificial intelligence and electric vehicles and prompting warnings over the stability of the power grid.
Retail sales of electricity will total nearly 4bn kilowatt-hours this year, a record, the government’s energy analysis agency forecast this week. The North American Electric Reliability Corporation, a regulatory body, has sharply increased projections for peak power demand for the next decade, reversing steady or falling growth rates from previous years.
Expectations of greater power consumption come as extreme weather tests power networks around the country. A deep freeze due to sweep across the central US this weekend has put grid operators on high alert from Ohio to Texas.
Utilities are also being forced to change how they meet demand as power plants switch away from coal and nuclear fuels to natural gas and intermittent solar and wind energy.
Jim Robb, Nerc’s chief executive, told the Financial Times that projected demand growth over the next 10 years is now nearly double what it was five years ago.
“The explosion in data centres is very, very real . . . a lot of utilities are having issues keeping up with that demand,” said Robb, whose organisation is focused on improving the reliability of the bulk power system in North America.
Robb said electricity networks stretching down the centre of the country from Minnesota to Louisiana already faced “high risk” of outages, particularly during severe weather events. Some utilities were delaying connecting industrial and data centre customers due to reliability concerns, a trend that risks undermining Biden administration policies aimed at repatriating manufacturing from overseas, he added.
US power demand rose gradually for almost two decades as efficiency gains offset the effects of population and economic growth. But that trend is now poised to change as more energy technologies run on electricity. Demand is getting an extra boost from the Inflation Reduction Act, the climate and tax law passed in 2022 that provides subsidies to attract inward investment and accelerate the energy transition.
Grid Strategies, a US consultancy, said that nationwide forecasts for electricity demand growth over the next five years had “shot up” from 2.6 per cent in 2022 to 4.7 per cent 2023, in a report based on an analysis of utility filings to the Federal Energy Regulatory Commission.
“This is likely an underestimate of demand,” said John Wilson, co-author of the report titled The Era Of Flat Power Growth Is Over, adding that some utilities have publicly expressed higher demand expectations than they have reported in filings to regulators.
Wilson said the largest driver of increased electricity demand was $481bn in industrial projects that have been announced since 2021, including the manufacture of chips and batteries. Another big driver is anticipated construction of $150bn in new data centres by 2028 and clean technologies such as electric heat pumps, water heaters and cars.
Nerc forecasts peak winter electricity demand growth of 11.6 per cent in the decade between 2024 to 2033, compared with growth of 5.4 per cent between 2019 and 2028. Summer peaks over the same time periods are now forecast to rise by 9.2 per cent, compared with 5.2 per cent in the earlier forecast.
One of the most visible examples of the rise in electricity demand is “data centre alley” in northern Virginia, home of the world’s largest concentration of internet servers. Incentives offered by the state government have attracted more than 250 data centres supporting operations run by Amazon, Microsoft, Google and other web giants.
Peak power required by the industry doubled between 2018 and 2022 to 2,767 megawatts, according to Dominion Energy, the main utility in the region.
Increased use of AI applications is forcing data centres to install infrastructure to accommodate power-intensive server clusters. Some larger AI requirements are driving densities to 50-100kW per rack, as much as 10 times standard centres, according to a report by commercial property group Jones Lang LaSalle.
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