The Era of Flat Power Demand is Over: Report Analysis

Grid Strategies has published a report entitled, The Era of Flat Power Demand is Over  which illustrates the inflection point the U.S. energy landscape is currently undergoing. Over the past year, the forecast for nationwide electricity demand growth has nearly doubled from 2.6% to 4.7%, driven by significant investments in industrial, manufacturing, and data center facilities. This surge, totaling $630 billion in near-term projects, marks the end of the "flat power demand" era and presents both opportunities and challenges for the electric grid. Read below for ePRA’s analysis of the report.

Key Drivers of Load Growth

Major investments in new manufacturing and data centers are reshaping energy demands across the country. Since 2021, commitments to industrial and manufacturing projects have reached $481 billion, with over 200 new facilities announced in 2023 alone. Data center expansion is another critical driver, fueled by the rise of artificial intelligence, which demands energy-intensive computing capabilities. By 2028, data center investments are expected to exceed $150 billion, contributing tens of gigawatts to national load growth.

The electrification of transportation and buildings is another emerging factor, with regions like California leading efforts to decarbonize. Although this trend will have a more pronounced impact in the 2030s, it is already beginning to shape energy demand in urban areas. Meanwhile, federal incentives for clean hydrogen production, including tax credits and infrastructure investments, could further accelerate electricity demand as hydrogen plants scale up in the coming years.

A Strained Electric Grid

Despite these drivers of growth, the U.S. electric grid is underprepared to meet surging demand. Transmission infrastructure expansion has slowed dramatically in the past decade, dropping from an average of 1,700 miles of new high-voltage lines annually in the early 2010s to just 645 miles per year in the latter half of the decade. This lag in development poses a significant risk to reliability, especially as peak demand is forecast to grow by 38 gigawatts through 2028.

One key issue is the lack of inter-regional transmission capacity, which limits the ability to transfer power between areas during peak periods. Strengthening this capacity could be a cost-effective solution, reducing the need for new generation facilities by enabling more efficient power distribution. For example, while meeting new demand with local generation requires billions of dollars per gigawatt, inter-regional transmission investments cost less than $300 million per gigawatt of capacity.

Moreover, grid planning processes remain outdated, often failing to account for rapid changes in load growth. Current procedures are bogged down by technical reviews and regulatory hurdles that were designed for a slower pace of development. This disconnect risks creating bottlenecks that could delay economic development and jeopardize system reliability.

Regional Disparities in Growth

Load growth is not uniform across the country, with certain regions experiencing sharper increases than others. The Southeast, Southwest, and Midwest are emerging as hotspots for new industrial projects and data centers. For instance, Georgia Power added nearly 4 gigawatts of winter peak demand to its 2023 forecast, driven by a wave of manufacturers and data centers. Similarly, Arizona Public Service projects 20% growth by 2028, largely from industrial facilities and data centers.

In contrast, the Midcontinent Independent System Operator (MISO) has seen slower growth due to delays in integrating new loads into forecasts. While its 2023 load forecast showed only a marginal increase, expedited project requests for new industrial and data center connections are flooding its planning process, suggesting that future updates may reveal more significant growth.

Other regions, like California, are seeing load growth driven primarily by electrification efforts rather than industrial expansion. The California Independent System Operator (CAISO) attributes its increased forecast to policies encouraging the electrification of transportation and buildings. Meanwhile, Virginia, home to "Data Center Alley," is experiencing gigawatt-scale growth driven by data center construction, making it a key player in national energy demand.

Emerging Trends and Challenges

The report highlights several emerging trends that could reshape load forecasts in the coming years. Federal policies such as the Inflation Reduction Act, CHIPS Act, and Bipartisan Infrastructure Law are spurring a resurgence in American manufacturing, with $100 billion in investments announced for transportation and clean energy industries. These policies, combined with private sector innovation, are expected to sustain long-term growth in electricity demand.

However, the challenges of meeting this demand are mounting. Regional disparities in planning and infrastructure readiness, combined with the slow pace of transmission development, risk creating economic bottlenecks. Utilities must adopt more forward-looking planning processes that account for rapidly changing drivers, such as climate impacts, industrial expansion, and evolving technologies like hydrogen production and AI.