Dash for data centers creates revenue risks for power developers
July 1 – Surging development of U.S. data centers has hiked power demand forecasts but predictions vary widely, creating risks for developers.
The U.S. is set for “explosive” demand growth over the next five years, Chris McKissack, CEO of battery energy storage systems (BESS) developer Fullmark Energy, told Reuters Events.
The U.S. Department of Energy forecasts 20 GW of new data center load by 2030 and predicts data centers will consume 6.7%-12% of total U.S. power production by 2028, up from 4.4% in 2023. This represents a huge margin of error for just three years in the future.
Rebecca Carroll, Senior Director of Market Analytics at energy advisors Trio, said.
The U.S. power market is facing “a moment of peak uncertainty,
Developers require accurate forecasts to secure long-term power purchase agreements (PPAs) that provide revenue certainty and attract investors.
Prior to the AI boom, U.S. power demand was stable for two decades and demand forecasts were traditionally based on demographic, economic and industrial growth forecasts. Long lead times for new industrial loads aided generation planning but data centers are being developed faster than new power plants as consumers and companies clamber to use chatbots and large language models.
A Reuters survey of 13 U.S. electric utilities in April found that nearly half had received inquiries from data centers for more power than their peak demand or existing generation capacity. Oncor Electric, which serves Dallas, received requests to connect an additional 119 GW, close to four times its existing demand.
Grid operators and large utilities have responded by requiring more information from data centers and some jurisdictions including Texas are increasing upfront fees for grid connection, Carroll told Reuters Events.
Facing uncertain power demand and prices, power plant developers are adapting PPA strategies and using a wide range of hedging instruments to mitigate revenue risk.
Data rush
The pace of demand growth will vary hugely between regions. Data center operators typically favor sites with competitive clean energy supply, transmission availability and low development costs, and development is soaring in Texas and northern Virginia, where end-users can benefit from some of the lowest power prices in the United States.
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Dash for data centers creates revenue risks for power developers, source
