By Scott Flood
Last month, we examined the dramatic increases in demand for electric power and noted that America’s peak demand is forecast to grow by 38 gigawatts through 2029––the equivalent of adding another California-sized state to the nation’s power grid. At the same time, power producers plan to retire more than 110 gigawatts of baseload, or always-available, generation by 2033.
When demand outpaces supply of any commodity – corn, gasoline and electricity – prices tend to increase. In addition, there’s increasing concern about the potential for rolling brownouts and blackouts as power providers struggle to meet peak demands.
Local co-op members may not notice the impact of the supply/demand imbalance for some time, but it’s captured the attention of electric co-op directors and their staffs.
“The leadership at many electric co-ops is seeing unprecedented growth in demand,” explains Stephanie Crawford, NRECA regulatory affairs director. A decade ago, a huge commercial project might boost a co-op’s total load by 20 or 30 megawatts. “Now they’re getting multiple requests for projects in the hundreds of megawatts,” she adds.
AI, data centers driving demand
Artificial intelligence (AI) and cloud computing are key drivers of this added demand. As use of AI skyrockets and a greater share of computer applications and storage migrate to the cloud, all that data needs to be stored somewhere. Data centers, which are massive groups of high-capacity computer servers, provide the most efficient way to handle it.
According to the U.S. Energy Department, data centers can consume as much as 50 times the energy per floor space of other types of commercial buildings. A single large data center may use over 100 megawatts of power, enough to power 80,000 households. Data centers already account for nearly 2% of the nation’s electricity use, and the Electric Power Research Institute predicts that will grow to 9% by 2030.
“It’s not only a question of needing to build or obtain more capacity, but in many cases, also creates questions about the availability of transmission and distribution,” Crawford notes.
For electric co-ops, the efforts fall into two categories: increasing knowledge and building relationships. A generation ago, power supply discussions were a fairly straightforward and easily understood process for co-op directors, given the widespread availability of baseload generation. Today’s directors increasingly find themselves learning about sophisticated and challenging issues as they weigh decisions affecting their co-op’s operations and financial viability for years to come.
Co-ops have long emphasized relationship-building, and Crawford stresses the importance of doing that with the companies developing large projects such as data centers.
“Early and frequent conversations between the co-op and the entities seeking additional energy are critical,” she explains. “That has to include honest conversations about the costs and timelines involved.” For example, while a data center project might ultimately need a significant supply of megawatts, if its operations are phased in gradually over several years, the co-op may have additional time to prepare for the maximum load. They might consider creating a partnership with the project owner to develop new generation assets on the project’s site, reducing transmission concerns.
High tech and a faster pace
The large tech companies involved in deploying data centers and similar projects are highly sophisticated and well-resourced. They tend to be less interested in obtaining the lowest cost and more focused on reliability, Crawford explains. “What we’re hearing from co-ops is that the companies building data centers typically have done their homework before they start talking to co-ops. Many are anxious to develop their projects at a faster pace than the co-op may be accustomed to.”
While the developers may be ready to pay for the substantial infrastructure upgrades needed to serve their data centers, she notes that the conversations may end up focusing more on project timelines and data center obligations to remain as co-op member-consumers. In addition to supply chain issues related to transformers and other components that are in increasingly short supply, projects may face regulatory delays at all levels.
In addition to preparing for projects from organizations new to the co-op, Crawford notes the importance of co-op leaders keeping a finger on the pulse of their existing commercial accounts. “Being proactive and reaching out to understand how a commercial account’s energy needs may be changing in the coming years will inform conversations and decisions about timing, rate design and other factors, even if they’re not making specific requests yet. That will help the co-op serve emerging needs while protecting the reliability for all of its members.”
For more than four decades, business writer Scott Flood has worked with electric cooperatives to build knowledge of energy-related issues among directors, staff and members. Scott writes on a variety of energy-related topics for the National Rural Electric Cooperative Association, the national trade association representing nearly 900 electric co-ops.
