With data center electricity demand on the rise across the U.S., utilities should develop specialized tariffs to protect consumers and keep their grids green when these large load customers interconnect, the Southwest Energy Efficiency Project said Thursday in a report.
“While AI offers the potential for significant economic and social benefits, there are growing concerns with the rapid increases in electricity demand from data centers and how they will impact the power sector and state and utility climate goals,” SWEEP said.
Data centers today account for about 4.5% of U.S. electricity consumption, according to the analysis. But in its most recent report to Congress, the Lawrence Berkeley National Lab projected data centers could account for up to 12% of U.S. electricity use by 2028, SWEEP said.
EPRI recently surveyed 25 utilities nationally and found almost half have received requests for new data center facilities with loads larger than 1,000 MW. And “almost half of the utilities surveyed have received data center requests that exceed 50% of their current system peak demand,” SWEEP said.
The potential load additions “pose two types of threats to state greenhouse [gas] emission reduction goals,” SWEEP said: Utilities could add or utilize more fossil-fuel based generation, and they could struggle to add sufficient renewables to meet demand from the electrification of vehicles, buildings and industry, the report warned.
To address these risks, SWEEP recommends that utilities ensure new data center customers — and other new industrial or commercial customers with demands over 50 MW, or combined demands from several facilities of more than 100 MW — “commit to providing sufficient revenue, over a contract period such as 12 years, to cover the generation and transmission investments made on their behalf.”
Utilities should also “propose and attempt to get approval for tariffs that require new large data center customers, and other new large customers ... to purchase 100% of their electricity from renewable or net zero carbon generation resources,” SWEEP said.
The report calls for utilities to work with large data center customers to develop new demand response and energy efficiency programs. Conversely, utilities should not offer financial subsidies to data centers, such as discounted electric rates, it says. If incentives are offered, they “should be used for other types of new commercial or industrial facilities that help create many more new jobs and provide other benefits.”
SWEEP recommends that these large-load customers, “to demonstrate they are acting responsibly and in the public interest,” be required to report the amount of renewable energy they use annually; hourly consumption of electricity relative to renewable purchases and use; and water and energy efficiency metrics.
