Tech companies are scouring the country for electricity to power artificial intelligence are increasingly finding that there is a waiting list.
In many places across the country, high-voltage electrical wires are running out of space, their connection points blocked by AI data centers, new factories or charging infrastructure for electric vehicles.
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A mad rush to block available energy ensued.
The tech industry is moving from market to market looking for places that can connect campuses that would consume up to a gigawatt of power, about as much as San Francisco uses. Some requests are four to five times larger.
But the cables are so cluttered that some potential data center customers— who require much more power than other users — are being told they may have to wait until the next decade to get the power they want. Others receive less energy than expected.
In Salt Lake City, the data center industry says there is a moratorium on larger projects, with the market closed to new business. Utility PacifiCorp says “significant levels of transmission and generation” may be needed for larger projects and that it is evaluating requests while avoiding spreading costs to other customers.
In Santa Clara, California, one of the tech industry’s local utilities, Silicon Valley Power, stopped fulfilling electrical service requests for additional data centers. SVP said it faced transmission and power generation constraints that it could not resolve until the early 2030s.
In Virginia, the world’s largest data center market, Dominion Energy said it is temporarily rationing electricity to some new data centers until new transmission lines can be completed, although service public adds about 15 data centers per year.
The growing pains are also sparking fights over how to finance potential grid improvements, which could cost billions of dollars.
In central Ohio, the Midwest’s largest power line will run out of transmission capacity in 2028. American Electric Power, which owns the line, proposed a new, higher electricity rate for data centers and cryptocurrency miners, which would see them as clients. for a decade. Companies are reluctant.
“The amount of infrastructure needed to make this happen is immense,” said Marc Reitter, president and COO of AEP Ohio. “We need certainty.”
Thirst for power
AI is a rapidly growing source of information tech company spending who say they are on the cusp of the biggest boom since the Internet, with implications for national security and the economy. But a search on a generative AI platform like ChatGPT can use at least 10 times more energy than a Google search. Data centers could consume up to 9% of U.S. electricity by 2030, according to the Electric Power Research Institute.
AI arrives in tandem with other new strains on the grid: manufacturing plants boosted by tax policies under the Inflation Reduction Act, and a push in some states for more electric power for transport, heating and heavy industry. This is the first significant growth in demand this century for the electricity sector.
For example, Phoenix has become a key market for data centers and is in the midst of a manufacturing boom. Utility Arizona Public Service is proposing to build 800 miles of new or upgraded transmission lines over the next decade because its existing transmission capacity will be “used up” before 2030.
Transportation constraints are the first critical point many utilities report, as this type of upgrade can take several years. But some are calling for increased electricity production. Goldman Sachs estimates that about 47 gigawatts of new power generation capacity will be needed to support growth in U.S. data center power demand through 2030.
Fitch Ratings analysts say utilities also risk overestimating data center demand and overbuilding, given the inconsistent way the industry assesses future demand.
Electricity for three New York
In the heart of Ohio, American Electric Power’s 765-kilovolt bulk transmission system provides a reliable power base that has been drawn into new data centers. The amount of electricity used in the region will roughly double by 2028, which the AEP can handle.
After 2028, AEP says it has three New York City data centers asking to connect to the network, but no way to discern which ones are serious customers or just shopping across multiple marketplaces. More than a year ago, it stopped new requests for services from data centers.
AEP’s Reitter said long-term contracts and higher rates would protect customers such as homeowners and other businesses in case tech companies leave later.
Companies of all kinds oppose this idea.
The Ohio Manufacturers’ Association wants a study on transportation constraints and opposes AEP’s request because it would avoid the usual rate-setting process, including studies that delve into the cost of providing a new service.
Google argued in its regulatory filings that it has invested $6.7 billion in data centers in central Ohio and wants state regulators to study the best ways to manage the growth, managing any rate changes as part of a formal rate case. The trade group Data Center Coalition, of which Google and other technology companies are members, suggested a minimum commitment of eight years, less than the AEP’s request of ten years.
The Ohio Consumers’ Counsel, meanwhile, argued that residential customers “should not be forced to subsidize utility investments to accommodate data centers operated by multibillion- or trillion-dollar companies.”
Akshat Kasliwal of PA Consulting Group, which advises technology and power companies, said AEP’s problem is that it needs to invest in transmission to add more data centers. But if it charges higher rates to cover that cost, data centers could move elsewhere after the money is spent, leaving other customers to pay the price.
Purchase or payment contracts
Other utilities are also looking for ways to protect their customers from costly network investments that data centers later decide they don’t need.
Xcel Energy has a peak demand of about 22 gigawatts across its entire multistate system, but about 6.7 gigawatts of new data center demands, primarily in Colorado and Minnesota. Leaders say the system will require transmission improvements and new power generation, as well as a way to be fair to all customers.
Chief Financial Officer Brian Van Abel said during an August earnings conference call that the company would consider things such as take-or-pay contracts that require data centers to pay for a minimum amount energy, regardless of the quantity used.
Arizona Public Service tests the seriousness of a project by telling new large customers that it imposes minimum thresholds on invoices to cover the cost of necessary investments.
“Some customers may be moving away from those commitments,” said Ted Geisler, president of APS, “and that’s a good indicator to us that they may not yet be as committed as others.”
Andy Cvengros, chief executive of real estate services company JLL, said utilities are becoming wiser in the face of speculative demands for electricity from everyone, whether they are farmers with land along ‘a transport line or private equity investors. Requests are not always accompanied by solid projects with tenants behind them.
“Companies that didn’t exist 24 months ago are now asking for 100 megawatts of electricity,” Cvengros said. “What is the real demand? »
Write to Jennifer Hiller at jennifer.hiller@wsj.com