A new report released by the Institute for Energy Economics and Financial Analysis (IEEFA) has found that utilities and gas pipeline companies across southeastern US states are planning major infrastructure buildouts, largely due to data center demand.
The report focused on Virginia, North Carolina, South Carolina, and Georgia and noted that utilities in these states plan to build more than 20GW of natural gas power plants by 2040.
In total, the major utilities in these states have forecasted an additional 32.6GW of new electrical load over the next 15 years.
Utilities - including Georgia Power, Santee Cooper, and Dominion Energy - have dramatically increased load forecasts within the last 12-18 months, citing unexpected projected growth in large commercial and industrial loads.
Data center demand is the major driver, especially in Virginia, South Carolina, and Georgia. The report found that, in these states, data centers are responsible for between 65 percent and more than 85 percent of projected growth.
For example, Georgia Power’s load forecast for the mid-2030s has increased by 9.4GW from the 2022 forecast. Overall, the utility has planned to add more than 11.4GW to its current load by the mid-2030s, an increase of more than 70 percent. It has stated that 80 percent of this increase in demand is tied to data centers.
Pipeline operators are also expected to expand significantly. The report notes that operators in these states are proposing or constructing more than 3.3 billion cubic feet per day of new pipeline capacity. Of the new capacity, 75 percent will be taken up by electrical utilities.
However, IEEFA warns of a significant risk of overbuilding power plants and pipelines in response to the projected increase in energy demand from data centers. As utilities are already financially incentivized to overbuild, there is a risk of the projected data center demand materializing, driven by questions about the growth and economic viability of the artificial intelligence sector.
The report notes that utilities' growth forecasts do not match those set by the Electric Power Research Institute (EPRI), a US nonprofit organization focusing on the electricity and transmission market.
For example, Dominion’s forecast of data center growth from 2023 to 2030 is 3.263GW, and Northern Virginia Electric Cooperative’s is 5.835GW, for a total of 9.098GW, seven percent higher than the higher-end EPRI forecast.
As a result, the report warns that if projected data center demand fails to materialize, the subsidization of the electrical infrastructure buildout will worsen, increasing the burden on ratepayers.
Finally, the report contends that focusing on gas infrastructure buildout to serve the data center market risks slowing the energy transition. IEEFA argued that the load growth is not only unprecedented but incompatible with the rapid transition to clean energy required to meet the climate target of net zero by 2050.
