Why is Electricity Demand About to Spike?

The world has changed quite a bit in the last 20 years but one thing that’s remained relatively constant is electricity demand. Thanks to increased efficiency, in the past decade, utility growth estimates for electricity demand were in the meager 0.5% range.

With the drive to electrify everything it was predictable that demand would increase. But other – less predictable – factors have come into play. A major new one: artificial intelligence. Along with the growth in cloud computing and telecommunications, AI is spurring a spike in the growth of data centers.

Virginia’s Loudoun County which has evidently been dubbed “Data Center Alley” have already experienced power shortfalls that has caused utility Dominion Energy to sound the alarm for the need to initiate a multibillion-dollar grid expansion. Good luck with getting that done in a timely fashion.

The situation is getting so precarious that some data centers are contemplating running backup diesel generators to compensate for unexpected demand.

In all, by 2027, over 60% of the new data centers are expected to crop up in the following independent system operator regions: MISO (midcontinent), PJM (MidAtlantic), CASIO (California), and in the Southeast.

Grid operators are estimating that by 2028 peak demand for electricity will increase by 38 gigawatts. The problem: building data centers and factories only takes a few years. Building a new power plant typically takes four or more years. Building new transmission capacity takes a decade or more.

You don’t have to be a math major to see that those lead times are not favorable for an orderly transition to a fully electrified society, particularly when you inject energy hogs like AI, cryptocurrency, and even pot-growers into the mix.

And remember, this is occurring while we’re simultaneously attempting to close 24/7 coal and other fossil fuel power plants and replace them with intermittent sources of renewable energy.

A word of advice to mothers: don’t let your sons and daughters grow up to be utility operators. Planning a manned flight to Mars may be a less stressful occupation.

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