The surge in electricity demand from data centers and other power-hungry applications has begun, but it’s largely confined to a few states so far, new government data show.
It’s a sign that the boom in power demand from artificial intelligence and cryptocurrency mining may have a varied impact depending on geography. And the environmental impact of all this new power growth depends on what sources of power those states use.
The Energy Information Administration says that sales of electricity to commercial customers has finally recovered to prepandemic levels, with 2023 consumption rising 1% above 2019 levels. But the impact varies widely by state. In fact, in most of the country, electricity demand from commercial uses fell.
“Commercial electricity demand in the 10 states with the most electricity demand growth increased by a combined 42 billion kilowatt-hours (BkWh) between 2019 and 2023, representing growth of 10% in those states over that four-year period,” the EIA said. “By contrast, demand in the 40 other states decreased by 28 BkWh over the same period, a 3% decline.” Among the states where commercial demand is flat or slipping are New York and California.
The two states that saw the biggest demand growth in absolute numbers were Virginia and Texas.
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Virginia is home to the largest number of so-called hyperscale data centers in the world, with about 35% of the global total.
Hyperscale data centers can have 5,000 or more servers and sometimes use miles worth of equipment to keep it all running, according to
IBM
.
The electricity grid provider that oversees Virginia has been boosting its forecast for electricity demand, saying last year that it will need eight gigawatts of new power by 2030 after accounting for data center growth—the equivalent of eight large natural gas plants or at least four major nuclear reactors, according to Bank of America analyst Andrew Obin.
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Northern Virginia could run out of reliability-rated power by the winter of 2027 without significant changes, TD Securities analyst Michael Elias wrote in a May report. Other areas that face looming potential power shortages include central Ohio, Dallas, and Silicon Valley, he wrote.
Among the other states where commercial power demand has been increasing is North Dakota, which saw 37% growth between 2019 and 2023. The state has become a hub for cryptocurrency mining, which uses a lot of power. North Dakota has inexpensive electricity, relying on coal and wind for most of it.
Some states have been competing to attract data centers under the assumption that it could lead to job growth. But the numbers so far aren’t particularly impressive in that regard. In 2022, North Dakota announced that “one of the largest data centers in the world” would be built in the state as part of a $1.9 billion project, resulting in over 100 construction jobs and “more than 30” permanent jobs afterward.
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There may be negative impacts for states, too. Increasing demands for power from commercial users could also cause homeowners’ electricity prices to rise, depending on how infrastructure like new transmission lines is funded.
Elias thinks that some of these choices could be easier if companies started building data centers in areas where more power is available and it won’t cause a power crunch. That could lead to electricity demand rising in a larger number of states.
For investors, the surge in electricity demand opens up some opportunities too.
So far, much of the benefit has gone to independent power producers that can sell their power into utility markets where demand is growing, or make side deals with data center owners to secure reliable power.
Among the big winners are
and
which own several nuclear plants that are in high demand. Texas power producer
has also done particularly well.
Elias expects other winners to emerge as power demands rise. His picks to profit include data center-related companies like
Equinix
,
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and
Vertiv
,
which should benefit as their services are in higher demand.
Other potential beneficiaries include power-related semiconductor companies such as
Infineon
,
and
Natural gas producer
could see more demand for natural gas for power production. Utility tech provider
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can help utilities manage the new power needs.
Nuscale is looking to build small nuclear reactors that could provide power to data centers. And Brookfield Renewable Group should profit as it builds more wind and solar farms to produce electricity.
Write to Avi Salzman at avi.salzman@barrons.com
This news is republished from another source. You can check the original article here
