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Storm Front - As Data Centers Proliferate, Utilities Turn to Gas-Fired Power to Meet Demand

The growing number of energy-intensive data centers coming online across the U.S. is spurring utilities to ramp up their plans for adding new sources of power generation — including a slew of gas-fired plants — and also complicating their efforts to rely more on renewable resources and decarbonize the power grid. The push to quickly develop new energy infrastructure is also running into well-documented issues with permitting such projects. In today’s RBN blog, we discuss the proliferation of massive data centers — many of them catering to the surge in interest in artificial intelligence (AI) — and what that means for utilities and power-related demand for natural gas. 

U.S. electricity consumption totaled 4.07 trillion kilowatt-hours (kWh) in 2022, the highest on record and 14 times greater than in 1950, according to the Energy Information Administration (EIA). As shown in Figure 1 below, electricity use increased in all but 11 years between 1950 and 2022, although the recent trends tell a more complex story — eight of those year-over-year decreases have occurred since 2007 thanks to efforts to improve energy efficiency and reduce power usage. But things are changing, and quickly.

U.S. Electricity Retail Sales to End-Use Sectors, 1950-2022

Figure 1. U.S. Electricity Retail Sales to End-Use Sectors, 1950-2022. Source: EIA

The EIA expects the U.S. to set new power-demand records in 2024 and 2025, and fast-rising demand from AI-focused data centers, electric vehicles (EVs) and the “electrification of everything” strongly suggest that we’re in for an extended period of power-generation development. The EIA sees U.S. energy consumption steadily increasing through 2050, with electricity playing an increasingly large role. As shown in Figure 2 below, total energy consumption, including electricity use, increases by as much as 15% from 2022 to 2050 across the reference and side cases in the EIA’s Annual Energy Outlook 2023 (AEO2023). The largest increases, in percentage terms, are in the industrial sector (blue-gray line), where energy consumption increases as much as 32%, and in the transportation sector (red line), where energy consumption increases as much as 8%. Changes in energy consumption in the residential (orange line) and commercial (black line) sectors are smaller and the least sensitive to change. 

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