U.S. electricity consumption is growing fastest in Texas and “one of the main sources of growing demand for power is large-scale computing facilities such as data centers and cryptocurrency mining operations,” the U.S. Energy Information Administration recently reported.
In EIA’s latest Short-Term Energy Outlook, the federal agency said it expects electricity demand from customers identified by the Electric Reliability Council of Texas as large flexible load will total 54 billion kilowatthours in 2025, up almost 60% from expected demand in 2024.
“This expected demand from LFL customers would represent about 10% of total forecast electricity consumption on the ERCOT grid next year,” EIA said.
In mid-2022, ERCOT developed a program for approving proposed LFL customers (those with an expected peak demand capacity of 75 megawatts or greater) to ensure grid reliability, EIA pointed out.
ERCOT’s LFL Task Force publishes periodic status updates that indicate how much capacity has been approved and is expected in upcoming years.
Certain large-load facilities, primarily cryptocurrency mining facilities but also data centers and some industrial factories, have entered into voluntary curtailment agreements with ERCOT to temporarily reduce their power consumption during periods of particularly high system demand or low generator availability.
As part of the program, LFL facilities can participate in ERCOT’s energy and ancillary service markets. This flexibility in large-load operations can help mitigate some of the effects that strong growth in electricity demand is having on the ERCOT system.
EIA noted that it uses the information from ERCOT about current and future LFL demand in developing STEO forecasts of regional electric load. "We assume that by the end of 2025 ERCOT will have approved operations of 9,500 MW of LFL demand capacity, which would be 73% more than is currently approved (5,479 MW of which 1,570 MW was approved over the past 12 months)," EIA said.
According to EIA, historically, LFL customers have consumed about 65% of their total approved capacity. In the STEO, we assume that LFL demand is constant throughout the day at this percentage, so the expected 2025 capacity and its utilization translate to an assumed total LFL of 54 billion kWh next year. This new electricity consumption from large computing and industrial facilities contributes to our forecast that ERCOT’s load across all customers will grow by 5% between 2024 and 2025.
"Although much planned capacity for large-load customers is awaiting approval from ERCOT, when or if the capacity will be brought online remains uncertain. ERCOT’s status update from early September indicates that projects representing about 26,500 MW of LFL capacity have applied to become operational by the end of 2025. This amount includes about 2,000 MW of capacity for projects that have not yet submitted plans and more than 12,000 MW of capacity for projects that currently have plans under review by ERCOT. Given the typical approval timeline, these projects are unlikely to come online by the end of next year," EIA said.
To analyze the potential effects of different levels of future large-load electricity demand on power generation and wholesale prices in ERCOT, it modeled two scenarios with different assumptions about 2025 LFL capacity and compared the results with the September STEO forecast as a base case.
In all three cases, it was assumed that LFL facilities will be demand-responsive, reducing part of their electricity consumption during hours when potential wholesale power prices exceed $100 per megawatthour. "The actual level of curtailment observed could vary greatly from these assumptions depending on whether the large-load customer believes the incentives are worthwhile," EIA said.
Delays in the large-load approval process or in developers’ plans could reduce new large-load power demand in 2025, the federal agency said.
In EIA's low-growth scenario, "we assume that no additional LFL capacity comes online next year beyond what we expect to be operational at the end of 2024 (6,500 MW). This assumption would translate into about 37 billion kWh of LFL electricity consumption in 2025 (32% lower than the baseline forecast of 54 billion kWh)," it said.
"Conversely, it’s possible that ERCOT could quickly begin approving projects in the LFL queue at a faster pace. Our high-growth scenario assumes that about 14,200 MW of LFL capacity will be operational by the end of next year, leading to a forecasted 81 billion kWh of electricity consumption from LFL customers in 2025 (50% higher than the baseline STEO assumption)."
In EIA's baseline September STEO, it forecasts that the grid operator's electricity load across all types of customers will grow by 5% from 464 billion kWh in 2024 to 487 billion kWh in 2025.
"In contrast, in our low-growth scenario, overall ERCOT load would grow by only 1% next year, and in our high-growth scenario, ERCOT load would grow by 10%. For both the low- and high-growth scenarios, we assume all other factors (such as generator fuel costs and non-LFL) remain the same as in the baseline forecast."
ERCOT set up its LFL program for large-load customers to help manage the impact of potentially strong growth in demand, EIA noted.
"By requiring approval of the projects and encouraging curtailment of demand when needed, the LFL process intends to minimize the risk of wholesale power prices spiking to levels of $1,000/MWh or more," EIA said.