Key Takeaways
The Biden Administration is pushing to increase electricity demand by forcing the electrification of everything.
New demand is also coming from industries ranging from AI to bitcoin mining to data centers.
The Biden Administration has promised to “end fossil fuels,” which provide affordable and reliable power for almost 60 percent of U.S. electricity generation.
The cost to the electric grid expansion will be enormous, as demand estimates range from 2 to 5 times above today’s levels, along with the challenges of going from reliable energy sources to one dominated by intermittent renewables such as wind and solar power.
The Biden Administration has spent over $1 trillion on creating new demand, but the supply side is lagging, in a grid that must be in balance in order to avoid brownouts and blackouts.
Costs will continue to fall on taxpayers and consumers as they are asked to pay for the trillions in new grid investments needed to pursue Biden’s U.N. climate commitments.
Elon Musk warned that transitioning to electric vehicles would double the demand for electricity. Yet, the Biden administration is not only pushing for transitioning gas vehicles to electric, but it also wants to replace natural gas stoves and gas heating with electric power as well. Those changes will result in an explosion of demand that the current U.S. electric grid is incapable of handling, mostly due to onerous regulation that is forcing many generators fueled with coal and natural gas to retire and be replaced with renewable energy. Those renewables consist mostly of wind and solar power that are intermittent and weather-driven technologies, which only generate power at a fraction of the time that fossil fuel or nuclear generators can operate. Biden’s climate agenda and the Inflation Reduction Act also incentivize “clean” technology with factories popping up in states where electric rates are the lowest, mostly in red states. Those factories are also increasing electric demand as are data centers.
Artificial intelligence (AI), for example, is adding to the construction of large warehouses of computing infrastructure that require more power than traditional data centers. Technology firms like Amazon, Apple, Google, Meta and Microsoft are looking for sites for new data centers as are many smaller tech firms. Crypto-mining, in which currencies like bitcoin are transacted and minted, is also driving data center growth. A study of electric use in Texas found that crypto’s electric demand threatens the ability to power other energy operations that could drive innovation and economic growth, such as factories that produce green hydrogen fuel or industrial charging depots that enable electrification of truck and bus fleets. A huge amount of electricity will be required to produce the green hydrogen championed by Biden and generous federal subsidies.
According to the Washington Post, Northern Virginia needs the equivalent of several large nuclear power plants to serve all the new data centers planned and under construction. Texas also faces the same issue despite having the most wind capacity in the country. An analysis by the consulting firm Wood Mackenzie found that the energy needed by crypto operations aiming to link to the grid in Texas would equal a quarter of the electricity used in Texas at peak demand. In Georgia, demand for industrial power is surging to record highs, with the projection of new electricity use for the next decade at 17 times what it was only recently. Georgia has brought online units 3 and 4 of the Vogtle nuclear power plant recently, which should help supply needed reliable power. Arizona Public Service, the largest utility in the state, is projecting it will be out of transmission capacity before the end of the decade absent major upgrades.
A question has arisen over who will pay for new power supplies and transmission lines, with regulators worrying that residential ratepayers could be stuck with the bill for costly upgrades. Utility executives are now lobbying to delay the retirement of fossil fuel plants and to construct more, though Biden’s regulatory policies do not allow for that construction and force coal plants into retirement. For example, soaring power demand is delaying coal plant closures in Kansas, Nebraska, Wisconsin and South Carolina. Utility companies fear they will not be able to supply the power that will be needed to charge the millions of electric cars and household appliances required to meet state and federal climate goals as well as the increased demand from the data centers and factories. China and India see the electric demand growth coming in their countries and are both building additional coal plants to supply not only their own needs to improve the lifestyle of their residents but also to manufacture the technologies needed by the West to meet politicians’ climate goals. For example, China is using its cheap coal generation to power the factories that make silicon for solar panels, for which it dominates the world market.
Electric Demand from EV Transition
Elon Musk’s prediction that he made in 2021 seems to becoming true. For example, airport officials are concerned about the amount of energy that will be needed to charge fleets of electric rental vehicles and ground maintenance trucks. An analysis shows electricity demand doubling by 2030 at both the Denver and Minneapolis airports. By 2040, they will need more than triple the electricity they are using now, according to the study, commissioned by car rental company Enterprise, Xcel Energy and Jacobs, a consulting firm. Since utilities are not expected to be able to provide all the generating capacity needed, airports are looking into dramatically expanding the use of clean-power “microgrids” they can build on-site.
Data Center Growth
According to the International Energy Agency (IEA), the nation’s 2,700 data centers used over 4 percent of the country’s total electricity in 2022. The agency’s projections expect that they will consume 6 percent by 2026 because appliance efficiency standards should keep other electric demand in check for the near term. Utility projections for the amount of power data centers will need over the next five years have nearly doubled and are expected to grow.
In the past, data centers were located in areas with major internet infrastructure, a large pool of tech talent, and attractive government incentives. As these locations are getting saturated, other communities are seeing data center developers flooding their markets, increasing land value and needing grid hookups. Columbus, Ohio; Altoona, Iowa; and Fort Wayne, Indiana are being aggressively pursued by data center developers. These areas need more electricity at a time when Biden has promised to “end fossil fuels” that generate almost 60 percent of the nation’s power.
The Demand Is Massive
Data center operators are hooking up to regional electricity grids at the same time that the Biden administration’s climate policies are enticing companies to build factories in the United States for the EV transition and the renewable energy explosion it seeks. Those factories include manufacturers of solar panels and electric car batteries, which are driven by lucrative federal incentives from the Inflation Reduction Act and Biden’s regulatory environment forcing their purchase by consumers. Companies announced plans to build or expand more than 155 factories in this country during the first half of the Biden administration, according to the Electric Power Research Institute. According to the Washington Post, factory-building has not accounted for such a large share of U.S. construction spending since the early 1990s. Vice President Harris has referenced “more than a trillion dollars” in taxpayer spending on the climate transition the Biden Administration is funding.
Future U.S. electric demand is expected to be so massive that the National Renewable Energy Laboratory projects that grid demand will triple and others project that the grid may have to quintuple to meet the demand for Biden’s energy transition.
Other Off-grid Opportunities Being Pursued
Because Biden’s EPA is promulgating regulations that are forcing fossil fuels to extinction in all sectors, utilities and other companies are looking to what the Biden administration believes are other “clean” technologies—geothermal, small modular nuclear units, and fuel cells–to support the demand. In Portland, Oregon, developers decided to power their data center in large part by off-the-grid, high-tech fuel cells that convert natural gas into low-emissions electricity and supplement it with whatever power they can obtain from the grid. In South Texas, those same developers are going off-grid drilling thousands of feet into the ground to produce geothermal energy.
Equinix, one of the world’s largest data center companies, has been experimenting with fuel cells as backup power, but they want to keep the power grid as their main source of electricity for new projects.
Microsoft and Google among other firms are hoping that energy-intensive industrial operations can ultimately be powered by small nuclear plants on-site. Microsoft also has a deal to buy power from a company trying to develop fusion power. But small, modular nuclear plants are not yet operational in the United States and fusion power does not even exist. Further, going off the grid also brings regulatory and land acquisition challenges. Microsoft plans to use AI to try to streamline the process of getting plants approved.
Big tech companies are also exploring ways AI can help make the grid operate more efficiently. They are developing platforms that during times of peak power demand can shift computer tasks and their associated energy consumption to the times and places where carbon-free energy is available on the grid.
Conclusion
Biden’s energy transition is steering Americans to rely on electricity to fuel their vehicles, heat their homes, cook their food and switch other household appliances to electricity that previously ran on fossil fuels. Utility companies are concerned that they will not be able to meet the skyrocketing demand from these initiatives as well as the demand from data centers, particularly if they have to meet that demand with intermittent renewables. Wind and solar power have increased their share of electricity production but have not come close to replacing the power that coal and natural gas currently generate, which is still almost 60 percent of U.S. electric generation.
Further, building the transmission lines and transfer stations needed for the energy transition and renewable energy involves huge land acquisitions, exhaustive environmental reviews and negotiations to determine who should pay those costs. The amount of new transmission lines installed in the United States dropped sharply since 2013, when 4,000 miles were added. Now, the nation has problems bringing online even 1,000 new miles a year.
Some states and utility planners are worried about the electric demand from data centers and crypto operations, but those demands will pale compared to Biden’s forced transition to electricity from fossil fuels as the ability to build reliable power has been sorely curtailed by Biden’s regulations and climate policies. The cost of Biden’s energy transition is enormous and the new expenditure must be paid for by taxpayers and consumers.
