Power Demand Up as Data Centres Grow in US

The electricity demand for the US data centres, which reportedly accounted for 20 GW to 25 GW of hourly average demand, or 4% to 5% of US electricity consumption in 2023, is expected to grow due to the need to power the adoption of artificial intelligence (AI) and complex large language models used by ChatGPT and similar bots.

The adoption of AI software powered by large language models is expected to be one of the fastest adoption curves the market has ever seen, on a par with mobile phones. And the race is on to add more data-centre capacity and computational power fast. In fact, the US lead In data centres 10 Times over China and European Countries.

Tech company executives fret that if they don’t move fast enough, they will miss out on one of the greatest business opportunities of all time, international data and analytics firm Wood Mackenzie said.

According to a report in Financial Times, the number of new data centres announced in the US in the first half of 2024 totalled a capacity of nearly 24 GWs, more than the entire amount announced in 2023. The states of Georgia, Texas, and Virginia are leading the charge of this growth, with Virginia still holding the title of data centre hub of the US, the report said.

Analyst Growth Estimates

As this is a new technology, there is a large amount of uncertainty over what future demand for data-centre capacity will be. Analyst and consultants tracking the technology sector have forecast electricity demand growth from data centres to range from 10%-20% per year through 2030 and 10%t growth would add about 13 GW of demand over the next five years and 20% would add 35 GW. 

Major tech companies in the US such as Amazon, Meta, Google and Microsoft are forecasting average annual capex increases of 16% per year through 2025, within the mid-range of analyst estimates.

“The pace of announced new data-centre capacity exceeds the highest growth forecasts of industry analysts, however. We have identified 51 GW of new data-centre capacity announcements since January 2023, although this is probably only a sample of total project development,” Wood Mackenzie said.

At the start of 2023, the average size of a proposed data centre was about 150 MW of demand. That has since doubled to 300 MW. Notably, while most projects have been announced in traditional data-centre hubs, a long tail of new markets is emerging. With access to electricity potentially a scarce resource, many data centres are looking further afield.

According to Wood Mackenzie report, Oncor recently said that it has 59 GW of data centres seeking to connect to its system and Xcel Energy has a pipeline of 6.7 GW of data-centre projects.

Likewise, AEP has 15 GW of new load, primarily driven by data centres, wanting to connect to its system by 2030; its peak demand last year was 35 GW while PG&E is planning to bring online 3.5 GW of data-centre demand by 2029.

PP&L has signed deals to add more than 3 GW of data-centre capacity and Dominion Energy has customer requests from more than 6 GW of data centres.

“These companies alone add up to 93 GW of capacity, nearly four times the total US data-centre capacity of 2023. While many of these requests will not materialise, they illustrate the challenge utilities face in processing and responding to interconnection requests and figuring out how much growth to plan for,” Wood Mackenzie said.