Released December 02, 2024 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The phrase "power crisis" was not uttered by speakers at the recent "Energy and the Economy" conference sponsored by the Dallas and Kansas City Federal Reserve Banks, but several speakers used artful synonyms, such as "shortfall" or "imbalance," to describe a future where electric demand overwhelms electric supply in certain U.S. electric markets by 2030.
Stacey Doré, chief strategy & sustainability officer for competitive generator Vistra Corporation (NYSE:VST) (Irving, Texas), told conference attendees that two major wholesale electricity markets--PJM and ERCOT--each face electric generation shortfalls of about 40,000 megawatts (MW) each by 2030.
Most of the new generation that developers plan to build over the next six years is intermittent: solar and wind, she said. Some new hydro is scheduled to be operating by then, she said. But very little of the planned new-build generation will burn natural gas.
PJM has a peak load of about 150,000 MW currently, Doré said, and it foresees demand growth of about 20,000 MW by 2030. Subtracting planned plant retirements of about 25,000 MW by 2030 leaves a shortfall of about 40,000 MW by yearend 2030, she told attendees at the ninth "Energy and the Economy" conference on November 13. PJM is one of the largest organized wholesale electric markets in the U.S., providing electricity to an estimated 65 million people across 13 states and the District of Columbia.
The top-line story is the same, though the numbers are different, for the Electric Reliability Council of Texas (ERCOT), the grid manager serving most of the Lone Star State. ERCOT currently has about 85,000 MW of peak demand, and is expecting about 35,000 of new demand by 2030. Subtracting the generating units that are scheduled to retire by 2030 leaves a shortfall of about 40,000 MW, she said.
A significant percentage of generators in ERCOT will be 40 years old or more by 2030, she added, which makes them more vulnerable to unscheduled outages.
In her remarks at the conference, Doré said the new electric load is a "once-in-a generation opportunity that we should welcome. We should not fear it." Efforts to slow load growth through re-regulation should be opposed because "they send a negative signal to investors. The temptation to re-regulate should be resisted."
She said there was "virtually unanimous agreement that gas-fired generation needs to be on the agenda" to meet future electric demand. But that consensus has not, as yet, been translated into concrete action.
"There's a lot of advanced technologies on the horizon," she acknowledged, "but they are not yet cost-competitive with new gas-fired plants."
Grid managers, the federal government and state utility commissions have for years enacted policies that favor renewable energy, but "those technologies may not be appropriate to meet future electric demand," the Vistra executive told the Federal Reserve conference. "Reliability is becoming an issue around the U.S. Interconnection queues (that) are overloaded with solar and wind, but there is virtually no new gas-fired generation in those queues."
She estimated that it would take about 9,000 MW of solar generation to replicate the reliability performance of a 1,000-MW gas-fired power plant. The 9,000 MW of solar would cost considerably more to build than a 1,000-MW gas plant, and would require much more land as well.
She recounted that when Vistra officials met with "large load" customers, "they had zero interest in building new gas-fired generation," so beholden were they to their sustainability pledges.
"We can solve this resource adequacy challenge" as long as gas-fired generation is part of the new-build resource portfolio, she said.
Several other speakers at the conference, which was attended by about 250 people and livestreamed to about 1,000 others, said robust demand growth from "large loads," including, but not limited to, data centers, were driving the projected shortfall between electric supply and demand.
"The era of flat power demand growth is over," proclaimed Rob Gramlich, founder and president of Grid Strategies LLC (Washington, D.C.). Five-year projections of U.S. electric demand growth conducted by the North American Electric Reliability Corporation (NERC) (Atlanta, Georgia) and the U.S. Energy Information Administration (EIA) have risen steadily in recent years, from 0.58% per year in 2022 to 0.93% in 2023 to 1.58% per year in this year's projections.
Gramlich told conference attendees that even the newest projections may end up underestimating actual electric demand growth, which he pegged at 2% per year over the next five years. Surging electric demand growth is coming from the roughly $630 billion of near-term investments made by customers with "large loads," such as data centers, hydrogen electrolyzer manufacturing facilities, semiconductor chip fabrication plants, electric vehicle (EV) assembly plants, EV battery manufacturers and other manufacturing projects.
While a lot of attention has centered on the role that data centers, particularly those equipped with artificial intelligence (AI), could play in driving up electric demand, Gramlich told Fed conference attendees that future generations of AI chips will become more energy-efficient, shaving their projected impact on electric demand.
However, he cautioned that projections of AI-driven electric demand growth from various consulting firms have consistently underestimated those facilities' actual load. "There remains significant uncertainties around the size of growth that will come from data centers and the extent of constraints," he said. "The extent of data center efficiency improvements could significantly impact power demand. The degree to which data centers can be flexibly sited is unclear. The extent of the flexibility of data center loads remain untested."
Flexible siting refers to a data center's willingness to consider a remote location, where there are excess renewable energy resources or transmission capacity, he said. But proximity to population centers remains crucial for other data centers.
The number of calculations that AI-equipped data centers make per second "are really exploding," Gramlich told the conference. "Ultimately, the number of calculations per second performed by data centers, and thus their electric demand, may outweigh efficiency gains."
Several speakers at the "Energy and the Economy" conference also discussed the need to streamline federal, state and local permitting and siting process, to bring more generation of all types to market. For more on that, see November 22, 2024, article, Conference: Permitting, Siting Reforms Needed to Meet Future Energy Needs.
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 over 200,000 current and future projects worth $17.8 Trillion (USD).
Stacey Doré, chief strategy & sustainability officer for competitive generator Vistra Corporation (NYSE:VST) (Irving, Texas), told conference attendees that two major wholesale electricity markets--PJM and ERCOT--each face electric generation shortfalls of about 40,000 megawatts (MW) each by 2030.
Most of the new generation that developers plan to build over the next six years is intermittent: solar and wind, she said. Some new hydro is scheduled to be operating by then, she said. But very little of the planned new-build generation will burn natural gas.
PJM has a peak load of about 150,000 MW currently, Doré said, and it foresees demand growth of about 20,000 MW by 2030. Subtracting planned plant retirements of about 25,000 MW by 2030 leaves a shortfall of about 40,000 MW by yearend 2030, she told attendees at the ninth "Energy and the Economy" conference on November 13. PJM is one of the largest organized wholesale electric markets in the U.S., providing electricity to an estimated 65 million people across 13 states and the District of Columbia.
The top-line story is the same, though the numbers are different, for the Electric Reliability Council of Texas (ERCOT), the grid manager serving most of the Lone Star State. ERCOT currently has about 85,000 MW of peak demand, and is expecting about 35,000 of new demand by 2030. Subtracting the generating units that are scheduled to retire by 2030 leaves a shortfall of about 40,000 MW, she said.
A significant percentage of generators in ERCOT will be 40 years old or more by 2030, she added, which makes them more vulnerable to unscheduled outages.
In her remarks at the conference, Doré said the new electric load is a "once-in-a generation opportunity that we should welcome. We should not fear it." Efforts to slow load growth through re-regulation should be opposed because "they send a negative signal to investors. The temptation to re-regulate should be resisted."
She said there was "virtually unanimous agreement that gas-fired generation needs to be on the agenda" to meet future electric demand. But that consensus has not, as yet, been translated into concrete action.
"There's a lot of advanced technologies on the horizon," she acknowledged, "but they are not yet cost-competitive with new gas-fired plants."
Grid managers, the federal government and state utility commissions have for years enacted policies that favor renewable energy, but "those technologies may not be appropriate to meet future electric demand," the Vistra executive told the Federal Reserve conference. "Reliability is becoming an issue around the U.S. Interconnection queues (that) are overloaded with solar and wind, but there is virtually no new gas-fired generation in those queues."
She estimated that it would take about 9,000 MW of solar generation to replicate the reliability performance of a 1,000-MW gas-fired power plant. The 9,000 MW of solar would cost considerably more to build than a 1,000-MW gas plant, and would require much more land as well.
She recounted that when Vistra officials met with "large load" customers, "they had zero interest in building new gas-fired generation," so beholden were they to their sustainability pledges.
"We can solve this resource adequacy challenge" as long as gas-fired generation is part of the new-build resource portfolio, she said.
Several other speakers at the conference, which was attended by about 250 people and livestreamed to about 1,000 others, said robust demand growth from "large loads," including, but not limited to, data centers, were driving the projected shortfall between electric supply and demand.
"The era of flat power demand growth is over," proclaimed Rob Gramlich, founder and president of Grid Strategies LLC (Washington, D.C.). Five-year projections of U.S. electric demand growth conducted by the North American Electric Reliability Corporation (NERC) (Atlanta, Georgia) and the U.S. Energy Information Administration (EIA) have risen steadily in recent years, from 0.58% per year in 2022 to 0.93% in 2023 to 1.58% per year in this year's projections.
Gramlich told conference attendees that even the newest projections may end up underestimating actual electric demand growth, which he pegged at 2% per year over the next five years. Surging electric demand growth is coming from the roughly $630 billion of near-term investments made by customers with "large loads," such as data centers, hydrogen electrolyzer manufacturing facilities, semiconductor chip fabrication plants, electric vehicle (EV) assembly plants, EV battery manufacturers and other manufacturing projects.
While a lot of attention has centered on the role that data centers, particularly those equipped with artificial intelligence (AI), could play in driving up electric demand, Gramlich told Fed conference attendees that future generations of AI chips will become more energy-efficient, shaving their projected impact on electric demand.
However, he cautioned that projections of AI-driven electric demand growth from various consulting firms have consistently underestimated those facilities' actual load. "There remains significant uncertainties around the size of growth that will come from data centers and the extent of constraints," he said. "The extent of data center efficiency improvements could significantly impact power demand. The degree to which data centers can be flexibly sited is unclear. The extent of the flexibility of data center loads remain untested."
Flexible siting refers to a data center's willingness to consider a remote location, where there are excess renewable energy resources or transmission capacity, he said. But proximity to population centers remains crucial for other data centers.
The number of calculations that AI-equipped data centers make per second "are really exploding," Gramlich told the conference. "Ultimately, the number of calculations per second performed by data centers, and thus their electric demand, may outweigh efficiency gains."
Several speakers at the "Energy and the Economy" conference also discussed the need to streamline federal, state and local permitting and siting process, to bring more generation of all types to market. For more on that, see November 22, 2024, article, Conference: Permitting, Siting Reforms Needed to Meet Future Energy Needs.
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 over 200,000 current and future projects worth $17.8 Trillion (USD).
