Unprecedented electricity consumption by U.S. data centers expected to scale new heights
In the world of energy, changes are afoot. Gradual falls in global power-sector emissions are expected to begin next year, marking a significant shift in the global energy landscape.
In the United States, the main driver of electricity demand growth is rapidly increasing power needs from data centers, alongside building electrification, industrial growth, and electric vehicles. This growth is causing higher electricity demand growth rates, approximately 2.5% annually through 2035, putting stress on the power grid and prompting changes in the power generation fuel mix.
Amidst this accelerating demand, particularly from data centers and AI workloads, combined with ongoing coal and other plant closures and high reliance on intermittent renewables, some power plants are switching from gas to coal. This shift is due to concerns about resource adequacy and grid reliability. The Department of Energy warns that the grid may face outages unless dispatchable energy capacity is increased, which coal plants can provide more reliably and consistently compared to natural gas in certain contexts.
Data center growth specifically is causing urgent investments in grid capacity and generation mix changes. The voracious power needs of these data centers, combined with rising natural gas prices, are causing more power plants in the US to switch from gas back to coal.
Meanwhile, on a global scale, China will account for more than 50% of global electricity growth this year. The rapid rise of renewables in China is a significant factor in the global power generation mix. Renewables are expected to outpace coal in the global power generation mix by either the end of this year or early next year, according to the International Energy Agency (IEA).
Global power-sector emissions are expected to plateau this year before beginning to gradually fall next year. The IEA predicts a 2.3% growth in US electricity demand this year, more than double the average annual growth rate over the last decade.
Politically, the US and Israel have proposed an all-or-nothing plan to end the Gaza war, while Beijing is preparing national security countermeasures in response to the US's hawkish AI stance. Trump has unveiled new tariffs for dozens of countries, and Senator Thune is running the machine McConnell built.
Investors, according to Jacqueline Novogratz, require more "moral imagination." OPEC+ has agreed to increase oil production amid the threat to Russian supply. The New York Times is under a microscope as the Gaza narrative shifts against Israel.
In conclusion, the US power sector is experiencing a shift towards coal as operators seek dispatchable, stable generation to meet the demands of growing data centers and AI applications. This shift, combined with policy factors and plant closures, is leading to an increase in coal-fired generation despite previous trends favoring gas for cleaner emissions. Meanwhile, on a global scale, renewables are expected to dominate the power generation mix, signaling a significant shift in the world's energy landscape.
- The shift in the US power sector towards coal is driven by the dispatchable and stable characteristics of coal power, which meet the demands of growing data centers and AI applications operating within the environmental science sector.
- The global energy landscape is poised to undergo a significant shift, with renewable energy likely to dominate the power generation mix, outpacing coal and signifying a pivotal moment in the climate-change discourse.
- As investors demand more "moral imagination" in their financial decisions, the power industry, with its transition towards coal and renewables, presents an interesting intersection of finance, environmental-science, and industry.
