Fed Funding Grid Support, But Consumers on the Line

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Catering to the demand surge from data centers and manufacturing, American Electric Power Company Incorporated (AEP) (Columbus, Ohio) said Thursday it secured a $1.6 billion loan guarantee from the federal government to overhaul some 5,000 miles worth of power lines across the U.S. Midwest.

"This loan saves our customers money and improves reliability while supporting economic growth in our states," said Bill Fehrman, the chief executive officer of AEP. "The funds we will save through this program enable us to make additional investments to enhance service for our customers."

Through AEP Transmission, a subsidiary, the company will work with money provided by the U.S. Department of Energy to upgrade transmission lines in Indiana, Michigan, Ohio, Oklahoma and West Virginia.

AEP said demand is surging across the region, with commitments of up to 24 gigawatts (GW) coming by the end of the decade. Upgrades across the region will primarily support data centers, artificial intelligence (AI) and manufacturing.

AEP has a vast footprint in the region, with nearly 300 entities in just Michigan and Ohio alone. Subscribers to Industrial Info's Global Market Intelligence (GMI) Power Project Database can learn more about AEP in a detailed profile.

Data centers are gobbling up domestic power. Investments in U.S. data centers reached $40.4 billion in the second quarter, the U.S. Department of Commerce reported last month. That's 321% higher than during the first quarter of 2020, the period for which federal records on data centers began.

The Department of Energy, meanwhile, said it expects demand from data centers to more than triple by 2050. In early October, the federal government unveiled initiatives meant to increase thermal coal production for power, with Interior Secretary Doug Burgum saying support was necessary to win the "artificial intelligence arms race."

Coal, nevertheless, is fading from the power sector. A bid to acquire more than 100 million tons of coal from public land in Montana was rejected by the federal government because of bids for less than a penny per ton. A mineral leasing act mandates that awards are given based on "fair market value."

"Despite an increase in natural gas prices in 2026, we forecast coal consumption in the electric power sector to fall by 3% compared with 2025 as generation from utility-scale solar facilities increases," according to the latest monthly report from the U.S. Energy Information Administration (EIA).

Demand from regional manufacturers may be overstated. The Institute for Supply Management in an October 3 report found its Purchasing Manager's Index (PMI), which tracks 18 manufacturing sectors, registered 49% in September, a slight increase from 48.7% in August, though anything under 50% marks a decline in sentiment.

Survey respondents said U.S. President Donald Trump's tariff policies are impacting their business operations, with a respondent from the electrical equipment sector saying orders "are depressed for heavy machinery, because tariffs are so impactful to high-end capital equipment."

While federal loans are tailored to AI, data centers and manufacturing, the government found recently that more people are heating their homes with electricity rather than natural gas. With ample supplies of natural gas, however, prices are moderate. For electricity, the government said it expects U.S. households will pay about 4% more for their utility bills than they did last year.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).