At least 38 GW of peak demand growth is expected through 2028, driven by the development of data centers and industrial and manufacturing facilities, according to a new report from Grid Strategies.
The report, The Era of Flat Power Demand is Over, cited forecasts from grid planners, who have doubled the five-year load growth forecast over the past year. The nationwide forecast of electricity demand jumped from 2.6% to 4.7% growth over the next five years, according to FERC filings – and these forecasts are likely an underestimate, Grid Strategies said. Recent updates have tacked on several GW to that forecast, and next year’s will likely show an even steeper growth rate.
Per the report, the main drivers of this increase are investments in new manufacturing, industrial, and data center facilities. Since 2021, commitments for industrial and manufacturing facilities have totaled about $481 billion, and more than 200 manufacturing facilities have been announced this past year. Data center growth is forecasted to exceed $150 billion through 2028.
Additional drivers include: federal legislation encouraging ‘domestic content,’ electrification of transportation and buildings, emerging investments in hydrogen fuel plants, and increases in the frequency and severity of extreme weather events.
Three regions are projected to experience the most load growth since the Inflation Reduction Act (IRA) was announced, representing over $100 billion in new investment:
- Southeast, especially Georgia and the Carolinas
- MISO, especially Michigan and Indiana
- Southwest, especially Arizona and Nevada
Perhaps unsurprisingly, Grid Strategies says our power grid is not yet ready for such significant growth. The U.S. installed 1,700 miles of new high-voltage transmission miles per year on average in the first half of the 2010’s but dropped to only 645 miles per year on average in the second half of the decade. Low transfer capability between regions is a key risk for reliability if load growth outpaces deployment of new generation in some regions, the report added.
Transmission investments will ultimately need to increase to keep up with demand, but investor-owned utility investment in transmission serving new load has actually decreased over the past three years, according to data from Edison Electric Institute. In 2021, expansion-related transmission capital expenditures were forecast at $9.2 billion but declined to $8.8 billion for 2023.
Some regions may even miss out on economic development opportunities because the grid can’t keep up, Grid Strategies warned.
Federal hydrogen production incentives, like the recent $7 billion Hydrogen Hub funding, could also lead to “substantial” new demand over coming years, the report suggested, but hydrogen production is not
currently a driver of growth in 5-year peak demand forecasts in most regions.
Since the forecasts used in this report were filed to FERC, several updates have led Grid Strategies to conclude that its estimate of 38 GW is likely an understatement. Utilities including Puget Sound Electric, Duke Energy, Georgia Power Company, and Tennessee Valley Authority have stated that
their load expectations have grown even higher.
Additionally, the report said some planning area forecasts, like MISO, don’t clearly explain how large load development will impact peak demand. In contrast, Georgia Power and PJM’s latest load forecasts reflect increases in industrial and data center investment, respectively. Utilities like Arizona Public Service and Portland General Electric are factoring in the impacts of higher temperatures and extreme weather events on future load. These practices are not universal, so when other utilities adopt similar practices, load forecasts will increase, the report said.
The full report can be read here.
Originally published in Power Grid International.