Analysis by Energy Workforce President Tim Tarpley
In what may be one of the most influential long-term drivers of market demand to OFS and the rest of the energy markets for years to come, projections for capacity increases to the grid from AI data centers continue to grow. As these demand forecasts grow, so does the concern of whether or not the US grid can satisfy these growing demand forecasts and whether or not permitting and financing frameworks will be able to support the build-out that will be necessary.
Ocient, a software company for large data analytics programs, conducts an annual survey of more than 500 tech leaders called “Beyond Big Data,” and the results were released last week. Of note, more than half of the respondents said energy consumption at data centers is a top concern, and nearly a third said they were switching or upgrading their data warehousing to reduce energy consumption and energy costs. The report surmised that the overall data center energy needs are expected to grow by about 20% annually. The situation becomes even more pronounced when you look at the EIA Short-Term Energy Outlook. Under the high case scenario, EIA finds that between 2023-2028 Data centers alone will account for 44% of new energy demand. To keep up and ensure that demand will not outpace supply, Utilities will have to boost annual generation by up to 26% by 2028. This demand will not just be in the United States. Worldwide estimates are that some $2 trillion in new energy generation resources will be required just to satisfy new AI demand.
This explosive energy demand has created somewhat of an arms race with tech companies who, on the one hand, need to find solutions to the dramatic energy needs of their new technologies while at the same time following pledges, they have made to power a greater share of their operations for low carbon energy. Just last month Microsoft cut a deal to reopen Pennsylvania’s Three Mile Island nuclear reactor to provide power to its growing number of data centers on the east coast. In addition, many are looking to clean natural gas power generation with CCS as another option that could built quicker and with fewer regulatory hurdles. This option, both with CCS and without, may become a big driver for gas demand in the coming years. Flare gas in the Permian and other basins may quickly emerge as a low-cost option to bring additional megawatts into the grid. Energy Workforce companies have been leaders in many technologies that could make this a reality.
Permitting reform and regulatory certainty will be a critical element in supporting the US in building out of this generation’s capacity. Natural gas will need to move freely from production points to generation capacity. We can expect this discussion to dominate the energy debate next year as the US election cycle wraps up and a new administration and Congress are sworn in.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
