For years, electricity demand and coal consumption followed a predictable path based on population growth and the economy, rising on average 1% to 3% per year. The electrification of everything combined with the forecasts for the power requirements for artificial intelligence (AI) and the data centers that support the technology are disrupting conventional power demand projections. What was once linear, may now become parabolic.
In a recent commentary published by the International Energy Agency (IEA), What the data centre and AI boom could mean for the energy sector, the authors discussed the oncoming surge in electrical demand related to data centers and the electricity transition. It documents that annual investment in data center construction in the U.S. has doubled in the past two years and other major economies, such as China and the European Union, are also witnessing a similar increase in activity.
One large hyperscale data center, which will become more common, consumes 100 megawatts (MW) or more, with an annual electricity consumption equivalent to the electricity demand from around 350,000 to 400,000 electric cars. And global sales of electric cars are expected to reach 17 million in 2024. Obviously, the impact of this activity is more pronounced in the urban environment. According to the IEA commentary, power demand from data centers has already surpassed 10% of electricity consumption in at least five U.S. states. In Ireland, it now accounts for more than 20% of all electricity consumption.
A whitepaper, Gridlock: the demand dilemma facing the US power industry, published by Wood MacKenzie, discusses similar trends. The author identifies 51 GW of new data-center capacity announcements since January 2023. At the start of 2023, he noted the average size of a proposed data center was about 150 MW and that figure has since doubled to 300 MW. Most projects have been announced in traditional data-center hubs, but “a long tail of new markets is emerging.” The report lists six utilities with sizeable, large-load interconnection queues for data centers by 2030. He concludes with this: The last time the U.S. saw unexpected new demand growth for electricity at this level was during World War II. Between 1939 and 1944, manufacturing output tripled, and electricity demand rose 60%.
One way or another, this new demand for energy will usher in a new era for electricity. It could cause energy prices to soar, which would have a pronounced impact on the traditional customers (i.e., industrial, commercial and residential consumers). For sure, American utilities with existing coal-fired capacity will defer retirements. Utilities will think twice before dismantling an idled coal plant. Coal will keep the lights on and the data centers running. Enjoy this edition of Coal Age.
