A seismic change has erupted in the ever more digitized economy, creating a tidal wave of future data center growth that may overwhelm the ability of power utilities to keep the grid afloat.
Serving that surging data center demand, which may double in only a few years, threatens to outpace utility power generation sooner than expected and maybe in only four years, according to a new report by global management consulting firm Bain & Co.
The rise of artificial intelligence and its energy-hungry training models is starting to feel pretty real.
“These facilities need eye-popping amounts of power. Serving a 1-gigawatt data center requires the capacity of about four natural gas plants or around half of a large nuclear plant,” the Bain & Co. report reads.
Meeting this challenge could cost utilities and other power generators some $2 trillion in investment for new capacity, whether it’s gas-fired, solar, wind, battery storage or even restoring retired nuclear power plants. Microsoft and Constellation Energy cut just such a deal recently, a long-term nuclear power purchase agreement that will enable the energy company to restart the closed Three Mile Island Unit 1. Amazon Web Services signed an agreement with Talen Energy to connect into power from the nearby Susquehanna Nuclear Power Plant in Pennsylvania.
Bain & Co is not adrift alone in this aggressive forecast of future data center growth. Goldman Sachs earlier this year forecast that new data center capacity could grow by nearly 50 GW as this decade closes, while utility AEP revealed it has 15 GW of load commitment from new data center customers just in its service territory.
The truth is that utilities probably cannot do it alone; after all, only six years ago they were anticipating flat load growth for the foreseeable future. And these data giants are not waiting for them, as evidenced by Google’s agreement to work with advanced reactor firm X-energy, and Oracle’s plan to also pursue nuclear power to energize new data centers.
Microgrid firms are stepping up with alternative energy deals, such as Enchanted Rock’s work to supply Microsoft with renewable natural gas generation for a facility. Such challenges on the utility side opens an opportunistic void for independent energy project developers.
“Utility executives face a high wire balancing act. Data center demand is the most significant catalyst of load growth in decades and harnessing it could fund energy transition investments and potentially reduce residential rates,” reads the Bains & Co. summary. “At the same time, how can utilities ensure reliability, protect affordability, finance the required capital, meet sustainability commitments, and move at the necessary pace?”
The collision course of demand and supply, energy-wise, will require utilities to revamp operating models, the report advised. This also means that utilities should consider working closer with other industry partners such as independent project developers.
