Amid explosive demand, America is running out of power

https://www.washingtonpost.com/business/2024/03/07/ai-data-centers-power/

Vast swaths of the United States are at risk of running short of power as 
electricity-hungry data centers and clean-technology factories proliferate 
around the country, leaving utilities and regulators grasping for credible 
plans to expand the nation’s creaking power grid.

In Georgia, demand for industrial power is surging to record highs, with 
the projection of electricity use for the next decade now 17 times what it 
was only recently. Arizona Public Service, the largest utility in that 
state, is also struggling to keep up, projecting it will be out of 
transmission capacity before the end of the decade absent major upgrades.

Northern Virginia needs the equivalent of several large nuclear power 
plants to serve all the new data centers planned and under construction. 
Texas, where electricity shortages are already routine on hot summer days, 
faces the same dilemma.

The soaring demand is touching off a scramble to try to squeeze more juice 
out of an aging power grid while pushing commercial customers to go to 
extraordinary lengths to lock down energy sources, such as building their 
own power plants.

“When you look at the numbers, it is staggering,” said Jason Shaw, 
chairman of the Georgia Public Service Commission, which regulates 
electricity. “It makes you scratch your head and wonder how we ended up in 
this situation. How were the projections that far off? This has created a 
challenge like we have never seen before.”

A major factor behind the skyrocketing demand is the rapid innovation in 
artificial intelligence, which is driving the construction of large 
warehouses of computing infrastructure that require exponentially more 
power than traditional data centers. AI is also part of a huge scale-up of 
cloud computing. Tech firms like Amazon, Apple, Google, Meta and Microsoft 
are scouring the nation for sites for new data centers, and many lesser-
known firms are also on the hunt.

The proliferation of crypto-mining, in which currencies like bitcoin are 
transacted and minted, is also driving data center growth. It is all 
putting new pressures on an overtaxed grid — the network of transmission 
lines and power stations that move electricity around the country. 
Bottlenecks are mounting, leaving both new generators of energy, 
particularly clean energy, and large consumers facing growing wait times 
for hookups.

The situation is sparking battles across the nation over who will pay for 
new power supplies, with regulators worrying that residential ratepayers 
could be stuck with the bill for costly upgrades. It also threatens to 
stifle the transition to cleaner energy, as utility executives lobby to 
delay the retirement of fossil fuel plants and bring more online. The 
power crunch imperils their ability to supply the energy that will be 
needed to charge the millions of electric cars and household appliances 
required to meet state and federal climate goals.


The nation’s 2,700 data centers sapped more than 4 percent of the 
country’s total electricity in 2022, according to the International Energy 
Agency. Its projections show that by 2026, they will consume 6 percent. 
Industry forecasts show the centers eating up a larger share of U.S. 
electricity in the years that follow, as demand from residential and 
smaller commercial facilities stays relatively flat thanks to steadily 
increasing efficiencies in appliances and heating and cooling systems.

Data center operators are clamoring to hook up to regional electricity 
grids at the same time the Biden administration’s industrial policy is 
luring companies to build factories in the United States at a pace not 
seen in decades. That includes manufacturers of “clean tech,” such as 
solar panels and electric car batteries, which are being enticed by 
lucrative federal incentives. Companies announced plans to build or expand 
more than 155 factories in this country during the first half of the Biden 
administration, according to the Electric Power Research Institute, an 
industry think tank. Not since the early 1990s has factory-building 
accounted for such a large share of U.S. construction spending, according 
to the group.

Utility projections for the amount of power they will need over the next 
five years have nearly doubled and are expected to grow, according to a 
review of regulatory filings by the research firm Grid Strategies.

Chasing power
In the past, companies tried to site their data centers in areas with 
major internet infrastructure, a large pool of tech talent, and attractive 
government incentives. But these locations are getting tapped out.


Communities that had little connection to the computing industry now find 
themselves in the middle of a land rush, with data center developers 
flooding their markets with requests for grid hookups. Officials in 
Columbus, Ohio; Altoona, Iowa; and Fort Wayne, Ind. are being aggressively 
courted by data center developers. But power supply in some of these 
second-choice markets is already running low, pushing developers ever 
farther out, in some cases into cornfields, according to JLL, a commercial 
real estate firm that serves the tech industry.

Grid Strategies warns in its report that “there are real risks some 
regions may miss out on economic development opportunities because the 
grid can’t keep up.”

“Across the board, we are seeing power companies say, ‘We don’t know if we 
can handle this; we have to audit our system; we’ve never dealt with this 
kind of influx before,’” said Andy Cvengros, managing director of data 
center markets at JLL. “Everyone is now chasing power. They are willing to 
look everywhere for it.”

“We saw a quadrupling of land values in some parts of Columbus, and a 
tripling in areas of Chicago,” he said. “It’s not about the land. It is 
about access to power.” Some developers, he said, have had to sell the 
property they bought at inflated prices at a loss, after utilities became 
overwhelmed by the rush for grid hookups.

Rethinking incentives
It is all happening at the same time the energy transition is steering 
large numbers of Americans to rely on the power grid to fuel vehicles, 
heat pumps, induction stoves and all manner of other household appliances 
that previously ran on fossil fuels. A huge amount of clean energy is also 
needed to create the green hydrogen championed by the White House, as 
developers rush to build plants that can produce the powerful zero-
emissions fuel, lured by generous federal subsidies.

Planners are increasingly concerned that the grid won’t be green enough or 
powerful enough to meet these demands.

Already, soaring power consumption is delaying coal plant closures in 
Kansas, Nebraska, Wisconsin and South Carolina.

In Georgia, the state’s major power company, Georgia Power, stunned 
regulators when it revealed recently how wildly off its projections were, 
pointing to data centers as the main culprit.

The demand has Georgia officials rethinking the state’s policy of offering 
incentives to lure computing operations, which generate few jobs but can 
boost community budgets through the hefty property taxes they pay. The top 
leaders of Georgia’s House and Senate, both Republicans, are championing a 
pause in data center incentives.

Georgia regulators, meanwhile, are exploring how to protect ratepayers 
while ensuring there is enough power to meet the needs of the state’s 
most-prized new tenants: clean-technology companies. Factories supplying 
the electric vehicle and green-energy markets have been rushing to locate 
in Georgia in large part on promises of cheap, reliable electricity.

When the data center industry began looking for new hubs, “Atlanta was 
like, ‘Bring it on,’” said Pat Lynch, who leads the Data Center Solutions 
team at real estate giant CBRE. “Now Georgia Power is warning of 
limitations. ... Utility shortages in the face of these data center 
demands are happening in almost every market.”

A similar dynamic is playing out in a very different region: the Pacific 
Northwest. In Oregon, Portland General Electric recently doubled its 
forecast for new electricity demand over the next five years, citing data 
centers and “rapid industrial growth” as the drivers.

That power crunch threw a wrench into the plans of Michael Halaburda and 
Arman Khalili, longtime data center developers whose latest project 
involves converting a mothballed tile factory in the Portland area. The 
two were under the impression only a couple of months ago that they would 
have no problem getting the electricity they needed to run the place. Then 
the power company alerted them that it would need to do a “line and load 
study” to assess whether it could supply the facility with 60 megawatts of 
electricity — roughly the amount needed to power 45,000 homes.

Going off the grid
The Portland project Halaburda and Khalili are developing will now be 
powered in large part by off-the-grid, high-tech fuel cells that convert 
natural gas into low-emissions electricity. The technology will be 
supplemented by whatever power can be secured from the grid. The partners 
decided that on their next project, in South Texas, they’re not going to 
take their chances with the grid at all. Instead, they will drill 
thousands of feet into the ground to draw geothermal energy.

Halaburda sees the growth as good for the country and the economy. “But no 
one took into consideration where this is all going,” he said. “In the 
next couple of years, unless there is a real focus on expanding the grid 
and making it more robust, we are going to see opportunities fall by the 
wayside because we can’t get power to where it is needed.”

Companies are increasingly turning to such off-the-grid experiments as 
their frustration with the logjam in the nation’s traditional electricity 
network mounts. Microsoft and Google are among the firms hoping that 
energy-intensive industrial operations can ultimately be powered by small 
nuclear plants on-site, with Microsoft even putting AI to work trying to 
streamline the burdensome process of getting plants approved. Microsoft 
has also inked a deal to buy power from a company trying to develop zero-
emissions fusion power. But going off the grid brings its own big 
regulatory and land acquisition challenges. The type of nuclear plants 
envisioned, for example, are not yet even operational in the United 
States. Fusion power does not yet exist.

The big tech companies are also exploring ways AI can help make the grid 
operate more efficiently. And they are developing platforms that during 
times of peak power demand “can shift compute tasks and their associated 
energy consumption to the times and places where carbon-free energy is 
available on the grid,” according to Google. But meeting both their zero-
emissions pledges and their AI innovation ambitions is becoming 
increasingly complicated as the energy needs of their data centers grow.

“These problems are not going to go away,” said Michael Ortiz, CEO of 
Layer 9 Data Centers, a U.S. company that is looking to avoid the logjam 
here by building in Mexico. “Data centers are going to have to become more 
efficient, and we need to be using more clean sources of efficient energy, 
like nuclear.”

Officials at Equinix, one of the world’s largest data center companies, 
said they have been experimenting with fuel cells as backup power, but 
they remain hopeful they can keep the power grid as their main source of 
electricity for new projects.

The logjam is already pushing officials overseeing the clean-energy 
transition at some of the nation’s largest airports to look beyond the 
grid. The amount of energy they will need to charge fleets of electric 
rental vehicles and ground maintenance trucks alone is immense. An 
analysis shows electricity demand doubling by 2030 at both the Denver and 
Minneapolis airports. By 2040, they will need more than triple the 
electricity they are using now, according to the study, commissioned by 
car rental giant Enterprise, Xcel Energy and Jacobs, a consulting firm.

“Utilities are not going to be able to move quickly enough to provide all 
this capacity,” said Christine Weydig, vice president of transportation at 
AlphaStruxure, which designs and operates clean-energy projects. “The 
infrastructure is not there. Different solutions will be needed.” 
Airports, she said, are looking into dramatically expanding the use of 
clean-power “microgrids” they can build on-site.

The Biden administration has made easing the grid bottleneck a priority, 
but it is a politically fraught process, and federal powers are limited. 
Building the transmission lines and transfer stations needed involves huge 
land acquisitions, exhaustive environmental reviews and negotiations to 
determine who should pay what costs.

The process runs through state regulatory agencies, and fights between 
states over who gets stuck with the bill and where power lines should go 
routinely sink and delay proposed projects. The amount of new transmission 
line installed in the United States has dropped sharply since 2013, when 
4,000 miles were added. Now, the nation struggles to bring online even 
1,000 new miles a year. The slowdown has real consequences not just for 
companies but for the climate. A group of scientists led by Princeton 
University professor Jesse Jenkins warned in a report that by 2030 the 
United States risks losing out on 80 percent of the potential emission 
reductions from President Biden’s signature climate law, the Inflation 
Reduction Act, if the pace of transmission construction does not pick up 
dramatically now.

While the proliferation of data centers puts more pressure on states to 
approve new transmission lines, it also complicates the task. Officials in 
Maryland, for example, are protesting a plan for $5.2 billion in 
infrastructure that would transmit power to huge data centers in Loudoun 
County, Va. The Maryland Office of People’s Council, a government agency 
that advocates for ratepayers, called grid operator PJM’s plan 
“fundamentally unfair,” arguing it could leave Maryland utility customers 
paying for power transmission to data centers that Virginia aggressively 
courted and is leveraging for a windfall in tax revenue.

Tensions over who gets power from the grid and how it gets to them are 
only going to intensify as the supply becomes scarcer.

In Texas, a dramatic increase in data centers for crypto mining is 
touching off a debate over whether they are a costly drain on an overtaxed 
grid. An analysis by the consulting firm Wood Mackenzie found that the 
energy needed by crypto operations aiming to link to the grid would equal 
a quarter of the electricity used in the state at peak demand. Unlike data 
centers operated by big tech companies such as Google and Meta, crypto 
miners generally don’t build renewable-energy projects with the aim of 
supplying enough zero-emissions energy to the grid to cover their 
operations.

The result, said Ben Hertz-Shargel, who authored the Wood Mackenzie 
analysis, is that crypto’s drain on the grid threatens to inhibit the 
ability of Texas to power other energy-hungry operations that could drive 
innovation and economic growth, such as factories that produce zero-
emissions green hydrogen fuel or industrial charging depots that enable 
electrification of truck and bus fleets.

But after decades in which power was readily available, regulators and 
utility executives across the country generally are not empowered to 
prioritize which projects get connected. It is first come, first served. 
And the line is growing longer. To answer the call, some states have 
passed laws to protect crypto mining’s access to huge amounts of power.

“Lawmakers need to think about this,” Hertz-Shargel said of allocating an 
increasingly limited supply of power. “There is a risk that strategic 
industries they want in their states are going to have a challenging time 
setting up in those places.


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