Dive Brief:
- U.S. electricity demand could rise 128 GW over the next five years, driven by data centers and manufacturing growth primarily in six regions of the country, according to a report published Thursday by Grid Strategies. The “shocking” estimate represents a five-fold increase in load growth forecasts over the past two years, the firm said.
- “We are now looking at the latter half of this decade showing 3% annual average load growth. ... We haven't seen that kind of load growth since the 1980s,” Grid Strategies Vice President John Wilson said in a call with reporters.
- The report’s load growth estimates are based on annual planning reports submitted to the Federal Energy Regulatory Commission by electric balancing authorities, and updated with additional data from utilities and planning regions. The largest five-year load increases are expected in the PJM Interconnection and Electric Reliability Council of Texas footprints, which could combine to add 73 GW of demand by 2029, the report said.
Dive Insight:
The Grid Strategies report builds on a similar analysis completed by the firm a year ago, which at the time “got a lot of attention” because the extent of load growth potential was not well understood, President Rob Gramlich said.
“These days, of course, it's hard to go to any industry conference and not hear about rising power demand,” he said.
Data from FERC Form 714 in 2022 estimated five-year U.S. peak load growth of about 23 GW. That estimate jumped to 39 GW in 2023 and 67 GW this year, according to Grid Strategies. A review of other utility planning documents and analysis means 61 GW could be added to FERC’s 2024 five-year estimates, the firm concluded
“High-end sector forecasts suggest current load forecasts may not have caught up with growth,” the report warned. But there is also significant uncertainty around load forecasts. “The power industry does not have a clear understanding of how much demand will come from data centers,” Grid Strategies said.
“The official nationwide forecast of electricity demand shot up from 2.8% to 8.2% growth over the next five years,” the report said, pointing to FERC’s data. “But with an additional 61 GW of growth in preliminary updates, nationwide electric demand is forecast to increase by 15.8% by 2029.”
“While some of the additional growth merely reflects corrections to last year’s incomplete forecast update, major changes have occurred in several regions,” the report. In particular, Texas has “recently added about 37 GW to its 2029 forecast – resulting in an updated forecast of 43 GW in load growth through 2029.”
PJM’s 2029 peak load forecast increased from 153.3 GW to 165.7 GW in the past two years, for an 8.1% increase, the report noted. “However, since filing that forecast, PJM utilities have increased their forecast of large load additions for 2029 from 15 GW to 30 GW,” it said.
Other areas expecting large demand growth include Georgia Power’s territory, the Pacific Northwest region and the footprints of the Midcontinent Independent System Operator and Southwest Power Pool.
Data center load growth “is the single largest component of growth in utility load forecasts,” the report said. And “it appears that data center load growth will be concentrated in just a few areas,” including near Dallas, in ERCOT; Northern Virginia and Pennsylvania, in the PJM region; and near Atlanta, in Georgia Power’s footprint.
“So it is a very concentrated situation here, with a lot of load growth in very small regions, and the rest of the country seeing still substantial load growth by recent standards — but not this explosive load growth that we're now seeing,” Wilson said.
Manufacturing and data centers are the near-term drivers. While electrification efforts are adding to demand, the impacts are not expected to show up significantly until the 2030s, the report said.
Transportation electrification forecasts are challenged by uncertainty around adoption rates, electric vehicle policies and fleet electrification efforts, the report said.
Additionally, the uptake of hydrogen “could emerge as a major factor in future electric load forecasts,” the report said.
Regarding data centers, there are some concerns that the current boom, driven by computing power needed for artificial intelligence, represents a “bubble,” Grid Strategies observed. During the initial internet boom, “overbuilding in the 1990s contributed to bankruptcy by major independent power generators,” it noted.
“Data center developers may have such a large appetite for growth that their projects could use up any and all currently-unused grid capacity over the next five to ten years,” Grid Strategies said. “On the other hand, business revenues to cover the costs of the artificial intelligence investments have not yet been proven.”
