There is a “terrific opportunity for the U.S. utility industry to be intentional in how data center demand is met, setting an important precedent for handling future load growth in a way that better supports the grid,” a new report from CoBank said.
“There is a unique opportunity to invest in the broad array of solutions starting with consumer efficiency and demand management and working upstream to provide ample, reliable and secure power in an age of rising electricity demand,” CoBank said in the report, “Could Data Centers be the Catalyst for Modernizing the U.S. Electric Grid?,” The report was released on Sept. 24.
“It is important to realize that even if the demand growth for data centers flattens or even reverses, it will set utilities on the right path for preparing for the subsequent wave of electricity growth driven by strong industrial policies and electrification of everything,” the report said.
“That said, establishing priorities will remain critical, requiring the collective grid -- from the consumer to the distribution system and beyond -- to collaborate on solutions to avoid unintended consequences and optimally capture long-term benefits,” the report said.
“With data centers, we have a very well-capitalized sector that’s willing to make significant investments in the grid. They have also demonstrated the flexibility to embrace creative solutions that increase efficiency and manage their demand loads,” said Teri Viswanath, lead energy economist for CoBank.
The mass development of data centers might be arriving at just the right time to make critical investments in the grid and more efficiently use existing infrastructure, Viswanath posits, as well as to catalyze a new era of energy efficiency. “Sizeable investment from these well-capitalized consumers could potentially break the gridlock currently stalling the massive infrastructure enhancement needed, potentially rewiring the industry in a manner that has broader benefits,” CoBank said in a news release related to the report.
CoBank believes that the emerging mega-loads from gigawatt data center campuses will ultimately test the ability of utility-suppliers to keep pace in this new age of rising electricity demand. “It is the trend toward building larger data centers with greater performance requirements – along with the sheer number of facilities in development – that places a novel burden on the industry,” it said.
Data center energy use in the country has already doubled over the past three years, with researchers from the U.S. Department of Energy’s Lawrence Berkeley National Laboratory expecting the segment to grow sharply by 2027, the report noted.
The lab’s preliminary guidance, issued ahead of its soon-to-be released detailed national analysis on behest of the DOE, suggests that data center electricity use has risen from 175 terawatt hours in 2021 to about 375 TWh presently, CoBank said.
“Emerging power requirements for artificial intelligence, however, will likely push consumption past 500 TWh by 2027. Based on these estimates, the electricity demand from the nation’s data centers would double in just four years, going from an estimated 4% of total electricity generated annually in 2023 to roughly 8% in 2027,” the report said.
CoBank is a cooperative bank that serves industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states.
The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 77,000 farmers, ranchers and other rural borrowers in 23 states around the country.
