Yves here. It would be clearly be preferable if data center energy hogs proved to be less greedy in their needs than they now anticipate.
By Tsvetana Paraskova, a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. Originally published at OilPrice
- U.S. utilities are raising capital investments in view of meeting data center power demand.
- Current estimates of data center electricity requirements may not be accurate in a few years.
- The huge difference between requested capacity and capacity in advanced stages makes forecasts of power demand growth difficult.
There is no doubt that AI advancements and data centers will be sucking up more electricity in the coming years, and power demand in the United States will grow after a decade of stagnation. What’s in doubt is how much additional power-generating capacity the AI boom will need and how electric utilities will navigate through the complex supply-demand balances in various regions.
U.S. power utilities have announced billions of U.S. dollars in capital plans for the next few years and are getting a lot of requests from Big Tech for new power capacity in certain areas.
But these requests do not paint an accurate—or full—picture of the power needs of the technology giants because companies tend to inquire about data center power supply with at least three utilities in different areas. Of these three requests for new power capacity, only one will become a project for which agreements will be signed.
In addition, current estimates of data center electricity requirements may not be accurate in a few years as economic hurdles could slow construction, and next-generation AI could need fewer chips and less power for cooling.
Utilities Boost Spending Plans
U.S. utilities are raising capital investments in view of meeting data center power demand, and are noting that requests for interconnection and transmission have spiked over the past year.
For example, Dallas-based Oncor Electric Delivery Company announced in February a new five-year capital plan of approximately $36.1 billion for the 2025 to 2029 period, up by about $12 billion from the 2024-2028 plan. A total of $2 billion of the increase in spending comes from the interconnection of generation and large commercial and industrial (LC&I) customers with executed agreements.
Oncor and its subsidiaries operate the largest transmission and distribution system in Texas, delivering electricity to more than 4 million homes and businesses.
Oncor’s LC&I interconnection queue of customer requests, including requests without signed agreements, exceeded 137 gigawatts (GW) as of December 31, 2024. This was a 250% surge over the amount of potential load in the queue at the end of 2023.
However, the power utility noted that its capital plan only includes expected spend for major transmission projects for which all regulatory approvals have been obtained.
“Additionally, with regard to LC&I customers seeking interconnection at the transmission level, like data centers, the capital plan only includes those projects for which customers have executed an agreement with Oncor,” the company said.
Apart from the $36-billion capital plan, Oncor has identified about $12 billion in potential additional incremental capital opportunities over the 2025-2029 period, including potential updates to the System Resiliency Plan and additional transmission interconnection projects from LC&I customers who have submitted transmission requests but not yet signed agreements.
Other U.S. utilities also noted the surge in data center requests. Pennsylvania-based PPL said in its Q4 earnings presentation that Pennsylvania and Kentucky continue to attract data center interest.
In Pennsylvania, PPL has as many as 48 GW of active data center requests for the period 2026 – 2034. But those in advanced stages – projects that have signed agreements with developers – are 9 GW. This new capacity in advanced stages is more than double PPL’s current regulated generation capacity of 7.5 GW.
Uncertainties Abound
The huge difference between requested capacity and capacity in advanced stages makes forecasts of power demand growth difficult. Analysts and utilities cannot reliably say how much new capacity is needed, considering that one data center project pitches electricity supply requests with different utilities in different states.
As a result of this, “counting data center project proposals to forecast load growth can result in the overestimation of data centers likely to be built in a specific service territory,” a report by Koomey Analytics and the Bipartisan Policy Center said in February.
“Only national or regional level tracking of these projects can give an accurate picture, but such tracking currently does not exist, at least in a publicly available form,” the authors, including Koomey Analytics president Jonathan Koomey, wrote.
Then there is the economic uncertainty, which has just spiked with recession odds raised to above 50% following the Trump Administration’s tariffs announced last week. Inflation, interest rates, and rattled and distorted supply chains could delay some data center construction projects, analysts say.
Costs to build a data center have surged from last year, James Richmond, CEO of energy management system provider e2Companies, told Reuters.
Even before the latest tariff announcement of across-the-board tariffs on nearly all countries, CBRE, a commercial real estate services provider, said that the tariffs in March on Mexico and Canada can have “a material impact on the cost of commercial real estate construction.” The tariffs would raise construction costs for commercial projects by between 3% and 5%, “which could persuade developers to put some projects on hold.”
The U.S. trade policy could defer some spending on data center construction as Big Tech would be looking to procure semiconductors while they are still tariff-free, according to analysts.
“Capital expenditure by tech giants will get reshuffled: Expect major players in AI infrastructure and consumer tech to reallocate short-term spending away from expansion and toward procurement hedging or sourcing shifts,” Abhishek Singh, partner at research firm Everest Group, told Reuters last week.
With all these uncertainties, analysts and U.S. utilities continue to struggle with reliable estimates of how much and how fast new power capacity could be available to meet rising demand from AI.
Thank you, Yves.
My employer is prioritising this sector. Late last year, it funded new centers near London and Milan.
I suppose the question needs to be asked how the looming tariffs effect the cost of the components needed for these data centers. Actually more than that because you are also talking about the raw materials needed to manufacture all that gear and then there is the on-site equipment used to build those data centers and if they of foreign make & import. Then there is the elephant in the room in the form of predictability. A few years ago you could have corporations planning all these centers as they had a good idea of the years ahead but the present climate is so volatile that you cannot even predict from week to week. So it may be better not to build it all all until things shake out.
I live in Prince William County, VA, soon to be the “data center capital of the world,” with twice the number of adjacent Loudoun County, currently the “world champion.” When built out these hypercenters will use more electricity than greater NY City. Electricity rates will double over the next several decades. Because of depression era laws designed to electrify rural America, new electrical infrastructure needed because of the data center explosion will be paid by the general ratepayers & not the data center Prince William was the site of Manassas 1 & 2 civil war battles, and is an important colonial/Revolutionary War historical site)
What’s going on with North Anna Unit Three?
From the power side of things, large gas turbines are 2-5 yrs from time or order to delivery because of backlogs. Powerlines are probably going to need upgrades, that takes years.
Solar and batteries, are or will be a lot more expensive due to tariffs from the Biden and now Trump. The latest numbers I e got show FOB China at $.10 for solar and $.35 in the US and that’s before the new sanctions from Trump. Coal, probably not. Nuclear, I will be quite surprised if the the SMR come online as quickly as discussed by some companies.
Other options include reciprocating ( diesel engines converted to gas).
I don’t really know how they expect to power these huge point source loads in the timeframe they could be built on.
The other part I just remembered are big transformers.
They might be the biggest problem getting in a timely manner. Huge wait times.
There are a few reasons why. They take special steel which is mostly imported, from China. The industry didn’t prepare for the large growth from all sectors: renewables, civilian sector growth, industrial sector growth. I understand them getting behind as electric usage has been pretty flat for a long time. Also turns out there is a lack of the special testing equipment needed for the larger transformers, super expensive. But definitely idiots in the government to not understand all the components that need to be produced to allow for the integration of renewables alone let alone the increase in energy demand due to govt policies. A few billion in subsidies or low interest loans would have taken care of that.
Yep, as a reminder check out IEEE Spectrum’s February cover article: https://spectrum.ieee.org/transformer-shortage
Considering the very rapid improvements in the efficiency of AI software and hardware, it is only natural that MicroSoft and others are cutting back on plans for massive AI computing facilities. MicroSoft probably has some of the best intelligence on this trend, and so is among the first to cut back in affected areas.
I am not sure how this state bill will work out after the people with briefcases visit the state capitol:
Georgia Senate committee passes bill to protect residents from data center costs
February 25th, 2025
Opposition says PSC rules fix problem, but others say commission plan is full of loopholes.
ATLANTA – Legislation prohibiting Georgia Power from passing on the costs of providing electricity to data centers to residential and small business customers cleared a state Senate committee Tuesday.
An 8-5 vote of the Senate Regulated Industries Committee sent the bill to the Senate Rules Committee to schedule a floor vote.
Senate Bill 34 comes in the wake of six Georgia Power rate increases in less than two years that have driven up what homeowners and small businesses pay by 37%. At the same time, the rapid growth of power-hungry data centers in Georgia is behind a demand for 3,300 megawatts of additional electric generating capacity, exponentially more than Georgia Power’s typical growth rate of about 100 megawatts per year.
“The consumers are paying for this additional power that’s being consumed by the data centers,” Sen. Chuck Hufstetler, R-Rome, the bill’s chief sponsor, told committee members Tuesday. “I want something in place that doesn’t let history repeat itself.”
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Georgia Power to argue new long-term plan to PSC after legislature stalls consumer-friendly bills
March 18th, 2025
Company says 80% of increased demand to come from data centers
The Georgia Public Service Commission is scheduled to begin hearing testimony later this month from Georgia Power officials about how the state’s largest utility plans to spend billions of dollars to meet its skyrocketing energy demand, primarily due to the projected growth of large data centers supporting artificial intelligence.
But wait, there’s more!
Delayed PSC races heat up as candidates take aim at Georgia Power rate hikes, data center growth
April 4, 2025
Several candidates are vying to defeat a pair of incumbent Republican Georgia Public Service commissioners in an election that challengers say will become a referendum on rising Georgia Power bills.
Consumer watchdogs worry that the state’s largest utility will continue to raise rates on residential customers as it girds for a wave of data center growth that will spike demand for electricity over the next decade.
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The challengers said they’ll be campaigning as the best candidate to fight on behalf of the public in Georgia Power cases that the current five member Republican commissioners have routinely given the green light to increase utility costs and fossil fuels.
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This is the latest I could find on the status of the Georgia Senate bill:
(Paywalled) Legislative session ends with few wins for Georgia environmentalists
April 7, 2025
After early action on issues like mining near the Okefenokee and data centers, several closely watched measures fizzled under the Gold Dome.
When Georgia’s General Assembly gaveled out Friday night, it marked the end of a session that saw significant legislation pass concerning trans women in sports, “religious liberty” and the state’s legal landscape.
What it did not produce was many wins for environmentalists and consumer advocates concerned about Georgia’s natural treasures, the proliferation of data centers or rising power bills.
There is still hope that some measures could pass next year — any bills introduced this session are theoretically alive for legislators to consider when they reconvene in 2026.