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.
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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