Future Data Centers Drive Energy Demand Forecasts Higher Across States

The anticipated growth of future data centers is driving forecasts for energy demand to unprecedented levels. According to The Seattle Times, utilities are predicting they will need two to three times more electricity within a few years to accommodate massive new data centers that are integral to a rapidly expanding AI economy. This surge in demand raises significant concerns among lawmakers and regulators regarding the reliability of these utility forecasts. They question whether these projections are grounded in actual data center projects or if they are based on speculative developments that may never materialize. Consumer advocates have expressed concerns that regular ratepayers could be burdened with the costs associated with building unnecessary power plants and upgrading grid infrastructure, which could total billions of dollars.

Scrutiny of energy demand forecasts has intensified, particularly in the mid-Atlantic region, which includes parts of 13 states and Washington, D.C. Joe Bowring, head of Monitoring Analytics, highlights that there is a lack of clarity regarding what is speculative versus what is real in the energy forecasts. This ambiguity arises partly because developers often seek grid connections without having firm plans in place, and they sometimes submit requests across multiple utilities without disclosing this information, leading to inflated demand estimates.

In September, a member of the Federal Energy Regulatory Commission called for better data from grid operators to ensure that projected energy needs are based on viable projects. The Edison Electric Institute, a trade association for investor-owned utilities, supports these efforts to enhance forecasting accuracy. Aaron Tinjum, vice president of energy at the Data Center Coalition, which represents major tech companies and data center developers, echoed this sentiment, emphasizing the need for transparency and commercial readiness verification.

As states grapple with these forecasts, Texas has emerged as a focal point for data center development. Following a deadly winter storm in 2021 that caused widespread blackouts, Texas lawmakers were alarmed to learn from the Electric Reliability Council of Texas that peak demand could nearly double by 2030. This revelation prompted legislation requiring data center developers to disclose electricity requests made to other providers and to demonstrate substantial financial commitments to their projects. State Senator Phil King highlighted the uncertainty faced by regulators in determining the legitimacy of these power requests.

The implications of rising energy demand are already being felt. PPL Electric Utilities, servicing 1.5 million customers in Pennsylvania, anticipates that data centers will more than triple its peak electricity demand by 2030. CEO Vincent Sorgi reassured stakeholders that the projects are backed by significant financial commitments. However, this continued growth in energy demand has led to increases in electricity bills for consumers, as seen in Philadelphia where ratepayers have experienced rising costs attributed to wholesale electricity prices driven up by data center demand. State Representative Danilo Burgos voiced the need for more protections for ratepayers to ensure their interests are safeguarded amidst these developments. Overall, the situation underscores the complex interplay of energy policy, technology growth, and infrastructure planning as states navigate the future of energy demand driven by data centers.