Contributed by Isaac Smith, Principal, PPM Consultants
In follow-up to a prior article I wrote on Artificial Intelligence (AI), Data Centers, and Electric Vehicles (EV), and what continues to be a seemingly insatiable appetite for all things AI, I did some research to see where things now stand with power demand, access, and generation. The updated energy demand forecast as well as some high-profile power generation purchase agreements were surprising to see, especially considering the prior article was written in January 2024.
The focal point of this article is the data center, as it is essentially driving more power demand than anything in history.
U.S. Data Center Power Demands and Trends
The U.S. remains a global leader in data center capacity, hosting half of the world’s 10,655 data centers as of early 2024. Notable regions include Northern Virginia, Dallas-Fort Worth, Phoenix, Chicago, and Silicon Valley. These facilities house servers, storage, and networking equipment that power the vast array of online services we rely on daily. Uninterrupted power is vital for any data center to meet the demands of today’s ever-increasing interconnected world.
AI data centers require 5-10 times more power than traditional data centers. Currently data centers represent approximately 3-4% of U.S. electricity consumption, but by 2030, the demand, largely fueled by AI, is expected to increase to 11-12% (in the prior article this increase was projected to be 7.5%). According to recent projections, which may underestimate the situation, the U.S. is expected to be the fastest-growing market for data centers, growing from 25 gigawatt (GW) of demand in 2024 to more than 80 GW of demand in 2030. To put this in perspective, 1 GW can power ~750,000 homes, so 80 GW of power could power ~60 million homes. That’s a truly mindboggling amount of electricity demand.
Sustainability Versus Power Demand
Research has shown that the biggest consideration for data center operators is access and time to power. It may come as a surprise that in most cases, connecting to the transmission grid is the limiting factor, not a lack of power generation. However, additional grid capacity is sometimes held by fossil fuel-fired power plants whereas the hyperscalers (Meta, Alphabet, Microsoft, and Amazon) have carbon reduction goals that conflict with available power.
While hyperscalers and utilities work to build out the renewable fleet to support sustainability commitments, there is a continuing need to supply not only new load for data centers but also the growing load from electrification in other industries such as transportation, as well as backfill for aging power plants that were set to retire prior to the recent increase in power demand. So while the carbon emission intensity for power grids is set to drop in the next ten years, due to its abundance and ability to be a “bridge fuel”, the generation from natural gas is actually expected to increase. As a result, sustainability commitments are often taking a back seat to meeting power demand. Furthermore, nearly all grid decarbonization timelines far exceed the targets set by the hypescalers, somewhat ironic considering their businesses are the main driver for the power demand increase.
Additionally, while the carbon emission intensity for power grids is set to drop in the next ten years, due to its abundance and ability to be a “bridge fuel”, the generation from natural gas is expected to increase.
Construction Timeline Constraints and Solutions
The timeline to build a data center is typically in conflict with that of the power infrastructure. Data centers can typically be completed in 18-24 months, whereas power development from renewable projects can take up to five years. This issue is forcing the hyperscalers to look outside the box solutions, such as Microsoft’s 20-year deal to purchase power from Three Mile Island Unit 1, that was shut down in 2019. Microsoft isn’t the first tech company to venture into nuclear to power its data centers, earlier this year, Amazon purchased a data center site right next to the Susquehanna nuclear power plant, also in Pennsylvania. While Amazon will purchase only part of the output of the Susquehanna plant, Microsoft will buy all the power that Three Mile Island produces.
Additionally, with the recent developments in smaller modular nuclear reactors, covered in a recent article by PPM’s Todd Perry, there are more power generation options now than ever. While nuclear has been forced to fight a negative narrative for years due to a few, very high-profile accidents, it may be Big Tech’s thirst for low-carbon power that gives it the boost its long needed to become a larger component of the U.S. energy fleet.
Conclusion
The increasing demand for electricity in the U.S. driven by data centers presents both challenges and opportunities. As the U.S. attempts to balance the move towards cleaner energy while also meeting the need for increased demand, the solution will undoubtedly be multi-faceted and include wind, nuclear, geothermal, wind and solar. The ever-growing power demand will provide both large-scale power consumers and producers opportunities to build power outside the grid, retrofit existing sites or facilities, and bring additional capacity, or provide supplemental power to complement the grid. If Industry and the applicable regulators can systematically address these challenges while using fiscally viable technological solutions, the U.S. can ensure a reliable, resilient, and environmentally conscious energy future.
Links to other articles or websites on this topic are provided below.
Data Center Power: Fueling the Digital Revolution
Homepage – U.S. Energy Information Administration (EIA)
Balancing Act: The Dual Influence of AI on Data Center Power and Sustainability
https://www.goldmansachs.com/insights/pages/us-data-center-power-demand.html