The Numbers Aren’t Adding Up

At the Federal Energy Regulatory Commission’s annual Reliability Technical Conference on Oct. 16, the nation’s top grid reliability expert sounded like a doctor delivering grim news. Despite the many warnings, despite countless reports and congressional testimony, the reliability of the nation’s grid is going from bad to worse.

North American Electric Reliability Corp. (NERC) CEO Jim Robb told attendees, “We have a very simple math problem: the trend lines for electricity supply and demand are moving in the wrong direction to sustain reliability.”

Robb debunked the idea that there are any quick or easy fixes. He underscored that surging power demand means interstate transmission and energy storage can’t solve the math problem alone. He said, “while a lot of people would like to say we can solve this problem through transmission, we can solve this problem through batteries … we need generation in this country.” He added, we also have a mismatch between the intermittent generation being added and the dispatchable generation lost. “Replacement generation lacks the abundant reliability characteristics of the retiring resources,” he said. 

At the heart of the math problem keeping Robb and so many grid operators and utilities up at night is the incredible demand coming from electrification and the rapid emergence of hyperscale data centers. New analysis from the consulting group Wood Mackenzie, titled “Gridlock: the demand dilemma facing the US power industry,” puts the scale of the challenge into ever-more concerning focus.
 
Wood Mackenzie found that announced new data-center capacity exceeds the highest growth forecasts of industry analysts with 51 gigawatts of new capacity announcements since January 2023. And astonishingly, the analysts cautioned that is likely only a sample of total project development. 
 
The analysis also pointed to utility interconnection queues as providing a picture of data center demand. Listing just six utilities, Wood Mackenzie noted 93 GW of data center interconnection capacity, nearly four times the total capacity of 2023.

It’s Not Just Data Centers

 
Importantly, Wood Mackenzie didn’t just focus on data centers and their impact on demand. Battery, semiconductor and solar manufacturing are also driving the surge in demand stressing the grid.
 
The analysis found 55 battery manufacturing plants that are either operating, under construction or in development, a massive jump from the six operating in the U.S. in 2021. This capacity – which is highly regionally concentrated – will add the around-the-clock power demand equal to three cities. And double that power demand – enough to power six cities – is now expected to come from solar manufacturing. Semiconductor manufacturing will also add significant new demand. “In sum, we expect energy-intensive large loads from battery, solar and semiconductor manufacturing to add up to 15,000 MW of high-load-factor demand over the next few years,” said Wood Mackenzie. That’s power demand equal to that of 10 million homes.
 
Of course, as the analysts caution, this isn’t the only large-scale manufacturing coming to American grids. Nor is it even potentially the largest secondary source of new demand growth. Surging power demand from electric vehicles (EVs) will also reshape the power demand load on grids across the country. Today, demand for electricity from EVs is less than 1% of electricity demand in all regions of the country. But by 2030, with millions of new EVs on the road, it could account for as much as 8% of electricity demand in California and similarly significant shares in other states.
 
Explosive power demand growth is here. Just how much and precisely from where is to be determined, but the projections are only going up at whiplash-inducing speed.
 
Unfortunately, grid operators and reliability regulators have had their hands tied to manage it. The market is screaming for more capacity – specifically accredited, dispatchable capacity – but the U.S. Environmental Protection Agency’s (EPA) regulatory agenda is instead forcing plant closures. EPA is mandating precisely the opposite of what the experts in charge of the nation’s power supply – and electricity markets – say is needed to the keep the lights on and our economy humming. As NERC’s Jim Robb said, this is a very simple math problem. EPA has just made it all but impossible to solve.