AI Boom Sparks Unprecedented Energy Demand Forecasts
Electric utilities across the United Kingdom are projecting staggering increases in electricity demand, with some forecasting needs to double or triple within just a few years. This unprecedented surge is being driven primarily by massive new data centres required to power the rapidly expanding artificial intelligence economy.
The dramatic forecasts have triggered alarm among lawmakers, policymakers and regulators who question whether these projections can be trusted. The central concern revolves around whether utility companies are basing their forecasts on data centre projects that may never actually get built, potentially leaving ordinary ratepayers footing the bill for unnecessary power plants and grid infrastructure costing billions of pounds.
Scrutiny Over Speculative Projects
Industry watchdogs and consumer advocates are raising red flags about the verification processes behind these energy demand projections. "There's speculation in there," stated Joe Bowring, head of Monitoring Analytics, the independent market watchdog in the mid-Atlantic grid territory. "Nobody really knows. Nobody has been looking carefully enough at the forecast to know what's speculative, what's double-counting, what's real, what's not."
The scrutiny comes amid warnings from analysts about a potential artificial intelligence investment bubble that has inflated tech stock prices and could burst. Consumer advocates have discovered that ratepayers in some regions, including areas covered by the mid-Atlantic electricity grid spanning 13 states from New Jersey to Illinois plus Washington D.C., are already underwriting costs to supply power to data centres - some operational, others still in planning stages.
Currently, no standard practice exists across grid operators or utilities to properly vet these massive projects, making accurate forecasting increasingly challenging according to industry insiders.
The Double-Counting Problem
Uncertainty surrounding energy demand forecasts typically stems from two main issues. The first involves developers seeking grid connections without having firm plans, adequate financing or committed clients to ensure project completion. The second, more problematic issue concerns data centre developers submitting multiple connection requests across different utility territories simultaneously.
PJM Interconnection, which operates the mid-Atlantic grid, and Texas lawmakers have both identified this practice. Developers often refuse to disclose whether they've submitted multiple electricity requests for competitive reasons, meaning a single project could artificially inflate energy forecasts for several utilities at once.
The effort to improve forecasting accuracy received significant support in September when Federal Energy Regulatory Commission member David Rosner requested information from the nation's grid operators about how they determine project viability and actual electricity needs. "Better data, better decision-making, better and faster decisions mean we can get all these projects, all this infrastructure built," Commissioner Rosner emphasised in an interview.
States Take Action
The Data Center Coalition, representing tech giants including Google and Meta along with data centre developers, has urged regulators to demand more detailed information from utilities about their forecasts. The coalition advocates for developing best practices to determine the commercial viability of data centre projects.
Aaron Tinjum, the coalition's vice president of energy, stated that improving forecast accuracy and transparency represents a "fundamental first step of really meeting this moment" of energy growth. "Wherever we go, the question is, 'Is the energy growth real? How can we be so sure?'" Tinjum noted. "And we really view commercial readiness verification as one of those important kind of low-hanging opportunities for us to be adopting at this moment."
Igal Feibush, CEO of Pennsylvania Data Center Partners, described utilities as being in a "fire drill" as they attempt to vet the flood of data centre projects seeking electricity connections. He estimates the vast majority will never materialise because many project backers are newcomers who don't understand what's required to actually build a data centre.
States are increasingly taking matters into their own hands to scrutinise utility forecasts and eliminate speculative or duplicate projects. In Texas, where large data centre projects are proving particularly attractive, lawmakers were shocked when grid operator ERCOT reported that peak demand could nearly double by 2030.
Texas state Senator Phil King remarked during a hearing earlier this year that grid operators, utility regulators and utilities themselves couldn't determine whether power requests "are real or just speculative or somewhere in between." This prompted legislation requiring data centre developers to disclose whether they've submitted electricity requests elsewhere in Texas and to demonstrate substantial financial commitment to their proposed sites.
Consumer Costs Already Rising
The impact on consumers is already becoming apparent. PPL Electric Utilities, serving 1.5 million customers across central and eastern Pennsylvania, projects that data centres will more than triple its peak electricity demand by 2030.
Vincent Sorgi, president and CEO of PPL Corp., assured analysts during an earnings call that the data centre projects "are real, they are coming fast and furious" and that the "near-term risk of overbuilding generation simply does not exist." PPL maintains that the data centre projects included in their forecast are backed by contracts featuring financial commitments often reaching tens of millions of dollars.
Nevertheless, these projections prompted Pennsylvania state Representative Danilo Burgos to introduce legislation strengthening state utility regulators' authority to inspect how utilities compile their energy demand forecasts. Ratepayers in Burgos' Philadelphia district recently faced electricity bill increases attributed by utility PECO to rising wholesale electricity costs in the mid-Atlantic grid, driven primarily by data centre demand.
Representative Burgos emphasised the need for greater consumer protection to ensure ratepayers benefit from the higher costs. "Once they make their buck, whatever company," Burgos stated, "you don't see no empathy towards the ratepayers."
The Edison Electric Institute, a trade association representing for-profit electric utilities, has expressed support for efforts to improve demand forecasting accuracy, acknowledging the critical importance of reliable data for planning future energy infrastructure investments that could ultimately cost consumers billions.
