TOPIC #3
Large Loads
Surging demand and energy needs from new manufacturing, data centers, and cryptocurrency mining present both challenges and opportunities.
Here Come the "Roaring Twenties" for the Electric Industry
After a decade of slowing, electricity peak demand and energy growth rates in North America are increasing at a pace not seen in decades, if ever.
- NERC forecasts aggregated summer peak demand will rise by 79 GW and aggregated winter peak demand will rise by 91 GW from 2024 to 2033 (see Figure 3.1).
- As for near-term energy demands, recent FERC filings reflect a 158 TWh increase in the energy demand forecasted for 2028 (see Figure 3.2 on next page). PJM recorded the largest forecasted energy increase through 2028 (35.2 TWh). Portland General Electric expects the largest percentage increase (21.2%)
Across numerous markets, a common driver behind the dramatic change in demand and energy forecasts is the rapid expansion and planned addition of large loads. These large loads can be organized into three primary categories: new domestic manufacturing, data centers, or cryptocurrency mining.
Often described as “historic” or “unprecedented,” the surge in demand and energy needs is pushing stakeholders to identify solutions and deploy resources with a unique sense of urgency.
Figure 3.1: Forecasted 10-Year Summer and Winter Peak Growth
Source: NERC
KEY TAKEAWAYS
New and planned large loads are a key driver behind the sharp increase in peak demand and energy growth forecasts.
Demand from new manufacturing, data centers, and cryptocurrency mining far exceeds the incremental demand from electric vehicles and other beneficial electrification measures.
Federal policies encouraging domestic manufacturing, the emergence of AI, and the ban of cryptocurrency mining in China contribute to the growth.
Stakeholders are responding to large load growth with a variety of actions, ranging from accelerating the deployment of new generation to managing or slowing growth of large loads through public policy mechanisms.
New and planned large loads are a key driver behind the sharp increase in peak demand and energy growth forecasts.
Demand from new manufacturing, data centers, and cryptocurrency mining far exceeds the incremental demand from electric vehicles and other beneficial electrification measures.
Federal policies encouraging domestic manufacturing, the emergence of AI, and the ban of cryptocurrency mining in China contribute to the growth.
Stakeholders are responding to large load growth with a variety of actions, ranging from accelerating the deployment of new generation to managing or slowing growth of large loads through public policy mechanisms.
Figure 3.2: Planning Areas with Greatest Increase in Projected 2028 Energy Demand
Source: Grid Strategies
Economic Growth Surges with Boom in Domestic Manufacturing
Efforts to expand domestic manufacturing—a key priority of the Biden administration—were bolstered in August 2022 with the passage of the CHIPS and Science Act and Inflation Reduction Act.
Both laws include significant tax credits for domestic manufacturing—a driving force behind a boom in manufacturing construction spending.
Monthly construction spending on manufacturing has nearly tripled since the end of 2020 (see Figure 3.3). Most notable is the explosive growth in computer, electronic, and electrical manufacturing facilities (see Figure 3.4).
In terms of investment, recent manufacturing announcements by sector include the following:
- Semiconductors and electronics: $235 billion
- Electric vehicles and batteries: $161 billion
- Clean energy manufacturing: $75 billion
- Biomanufacturing and heavy industry: $46 billion
Forecasting unprecedented economic growth—often exceeding historical experience—will remain a challenge for electric utilities and grid planners.
Figure 3.3: Value of Manufacturing Construction (Jan. 2002-Dec. 2023) (in $ Millions)
Source: U.S. Census Bureau
Figure 3.4: Value of Manufacturing Construction by Industry (Jan. 2018-Dec. 2023) (in $ Millions)
Source: U.S. Census Bureau
Rapidly Expanding Data Center Clusters Can Create Challenges
Electric demand from U.S. data centers is currently 23 GW (see Figure 3.5) and forecast to grow to more than 30 GW by 2030. New data centers and advances in artificial intelligence (AI) are driving the increase in demand (see Figure 3.6).
Utilities report that training AI models can consume five to seven times more energy than traditional servers. In addition, inference processes (i.e., making decisions or calculations) can consume two to three times more energy.
In many cases, data centers are clustered in specific regions.
- Dominion Energy serves Loudon County, Virginia, the largest data center market in the world. The utility has connected 81 data centers, totaling 3.5 GW in capacity, to their system since 2019.
- In the Southeast, large load projects in Georgia Power’s service territory increased from ~100 MW a year to 2,200 MW in 2022. Data centers account for ~80% of the forecasted growth.
- The Western Electricity Coordinating Council nearly doubled its 10-year load forecast to account for data center growth in the Northwest. Some balancing authorities could see 50% to 200% load growth.
Hyperscale data centers, which provide cloud services, can exceed 100 MW in demand.
Figure 3.5: Estimated Electricity Demand from Data Centers in U.S. Power Markets (in MWs)
Note: Data as of October 12, 2023.
Source: S&P Global Market Intelligence, 451 Research
Figure 3.6: Operating and Planned Data Centers in the United States
Sources: S&P Global Market Intelligence; 451 Research; S&P Global Commodity Insights
Cryptocurrency Miners Plug in and Become Flexible Load
Cryptocurrency mining uses specialized computing resources to add blocks to a proof-of-work (PoW) blockchain—a process that validates transactions and awards miners newly minted cryptocurrency.
Cryptocurrency mining is increasing in the United States largely due to miners relocating after China banned the practice in 2021.
The Energy Information Administration (EIA) estimates cryptocurrency mining represents 0.6% to 2.3% of annual U.S. electricity consumption. This estimate is based on 131 known facilities, including 52 facilities with known locations (see Figure 3.7).
When selecting a location, cryptocurrency miners may minimize the price paid for electricity by:
- Locating near existing and underutilized power plants
- Directly connecting to a power generating source, avoiding costs associated with connecting to legacy electricity systems
- Locating at sites with very low-cost or stranded energy sources (e.g., natural gas wells with waste methane)
Figure 3.7: Location of U.S. Cryptocurrency Mining Operations
Notes: Data as of January 2024. Number in brackets represents the number of facilities.
Source: U.S. Energy Information Administration
Cryptocurrency miners can also serve as flexible loads and provide valuable grid services.
- As a demand response resource, mining operations can offer high availability, low cost, and quick response times. Curtailment can even occur “machine by machine,” allowing demand response to the kilowatt.
- Riot, a large cryptocurrency miner in Texas, operates as a flexible load and, as a result, only paid 2.2 cents per kilowatt-hour in 2023. The company earned more than $70 million in power credits and lowered transmission costs by participating in multiple demand response programs and providing ancillary services.
In January 2024, the EIA announced an “emergency” data request from cryptocurrency mining companies. The data request was withdrawn after legal challenges; however, the EIA plans to publish in the Federal Register a new notice of proposed data collection with a 60-day comment period.
Balancing Act: Connecting and Managing Large Loads
Stakeholders are responding to large load growth with a variety of actions, ranging from adding new generation resources to managing the growth of new large loads.
With high load factors, new large loads can increase the efficiency of the electric system. To ensure their development, electric utilities are revising integrated resource plans and seeking rapid resource deployment.
- Arizona Public Service expects to add more than 6,000 MW of solar and wind power, coupled with battery storage, by 2027.
- Following an upward revision to their load forecast, Duke Energy called for additional natural gas combined-cycle capacity and introduction of offshore wind capacity.
- Meanwhile, Georgia Power requested an exception to the traditional RFP process to ensure timely procurement of resources to meet near-term load demands.
In some cases, utilities may consider delaying retirements until new and duty-suitable resources come online. Longer term, with both emissions reduction commitments and the round-the-clock load profile of many large loads, nuclear power might be considered.
Independent power producers view large loads as a growth opportunity.
- NRG Energy noted in an earnings call that they are “one of the largest competitive providers of power to hyperscalers and other data center managers.”
- Elsewhere, Vistra Corp. has considered providing behind-the-meter services for data centers at nuclear and gas plants.
- Most recently, Amazon Web Services announced acquisition of a data center adjacent to Talen Energy’s Susquehanna nuclear plant, with expected offtake of 480 MW.
States are turning to policy mechanisms to manage growth of large loads.
- New York implemented a two-year moratorium on cryptocurrency PoW operations, and future projects will need an environmental impact statement before being permitted.
- In Georgia, data center operators are exempt from state’s sales tax. Lawmakers are considering a suspension of the exemption to manage growth.
Technology advancements may also mitigate demand and energy requirements. Independent power producers view large loads as a growth opportunity.
- In 2023, the Department of Energy announced $40 million in funding for 15 projects to develop high-performance, energy-efficient cooling solutions for data centers.
- Cryptocurrencies can transition to alternative consensus mechanisms. In 2022, Ethereum moved from a PoW model to a "proof-of-stake" model. The change resulted in a 99% decrease in energy consumption.
IMPLICATIONS
The emergence of large loads is a challenge that continues to grow in scope and scale across the United States. However, after years of flat growth, this may be a “good news” story for utilities that generate revenues on a volumetric basis.
Grid operators and electric utilities are having to adjust plans in real time in effort to meet these expanding demand and energy needs. Those regions dealing with this growth will need for new generation capacity in both larger quantities and on faster timelines. In addition, it will be critical to encourage, when possible, large loads to flexibly operate to maintain reliability.
CONTACT OUR EXPERTS
On Large Loads
RECENT INSIGHTS
Available at scottmadden.com
ScottMadden posts energy and utility industry-relevant content and publications on a regular basis. The list below is a sample of recent insights prepared by our consultants.
