Tuesday, January 14, 2025

Can the U.S. Power Grid Handle the Data Center Boom?

By Haley Zaremba - Jan 13, 2025

The US power grid is under stress due to aging infrastructure and changing energy consumption patterns.

The rise of renewable energy and electric vehicles presents challenges for grid management and infrastructure.

Increased energy demand from data centers and rising electricity costs are putting a strain on consumers and utilities.




The United States power grid is under enormous stress. Ageing infrastructure coupled with rapidly changing supply and demand patterns are pushing the grid to its limits, threatening national energy security. All of this volatility is leading to price shocks and punishing electric bills for households across the country, with rising energy prices outpacing inflation.

The rapid rise of renewable energy and increased adoption of electric vehicles are changing the inflows and outflows of energy to the grid. Renewable energies such as solar and wind power are variable, meaning that their production levels depend on external and uncontrollable variables such as the weather, the seasons, and the time of day. This means that renewable energy production patterns are often exactly inverted from demand patterns – to oversimplify the situation: homes turn on the lights after the sun sets on solar panels. What is more, rooftop solar has complicated energy grid flows, as consumers are now sending excess energy back into the grid, making previously one-way flows more complex.

Increased electrification of the economy means that we will be relying on electrical grids for far more of our daily energy needs. There has been much hand-wringing over whether the grid will be able to keep up with an influx of residential energy demand for the purpose of charging electric vehicles. Experts ensure that the grid will be able to keep up with increased EV adoption, but concerns are well-founded – it will represent a definite challenge for infrastructure that is already old and under-funded.

In order to bring the grid up-to-speed for the emerging ‘new normal’ of the domestic energy landscape, the United States Department of Energy estimates that the country will need 47,300 gigawatt-miles of new power lines by 2035, representing a 57% expansion of the current grid. Meeting that target will necessitate a two-fold increase in today’s rate of construction.

And now there’s a whole new variable which is ramping up demand and will likely place even more pressure and urgency on ramping up domestic energy grids to record capacities – the runaway demand coming from data centers, in large part due to the proliferation of artificial intelligence. Thanks to the currently insufficient levels of grid infrastructure, data centers are already facing years-long bottlenecks for connecting to the grid in the United States. The Register reports that “utility companies in the US are being flooded with power delivery requests for sites marked for data center construction, but that they are unable to fulfill many of these until the 2030s.”

All of this presents a major challenge for United States electric utilities, which need to walk a tightrope in order to balance the delivery of affordable and reliable power while also maintaining and upgrading massive amounts of fixed infrastructure on a massive scale. As a result, U.S. energy prices are sharply on the rise, increasing about 5% annually – even higher than the already blistering rates of inflation. “While electricity generation costs have gone down thanks to technology like solar and wind, transmission and distribution costs have driven bills higher,” reports PV Magazine.

The PV report is based off of a report from Lawrence Berkeley National laboratory, which finds that “since 2019, collected revenues [for retail energy] increased by more than 20%, whereas retail sales remained fairly flat, indicating that recent increases in retail electricity prices have been driven principally by rising revenues (costs).” This is in spite of the fact that production costs have fallen in connection with the proliferation of renewable energies.

As a result of this price hike at the electricity meter, many consumers in the United States are hurting. But the problem is not limited to the United States – similar issues plague Europe, which is dealing with ever-increasing levels of energy poverty. England and Wales, for example, have seen a 20% increase in consumers seeking help to pay their energy bills in the last year.

By Haley Zaremba for Oilprice.com

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