U.S. Power Grid Struggles to Keep Up with Data Center Growth

The exponential growth of data centers with a tremendous appetite for electricity rapidly is outpacing the capacity of utilities to meet their needs, pushing data center developers to prioritize new markets where they can be sure they can hook up to the grid.

Electric utilities across the U.S. are doubling their forecasts of how much additional power they’ll need by the end of this decade to meet surging demand not only for power-hungry AI data processing facilities but also from a resurgence of U.S. manufacturing and the conversion to EVs.

The demand for electricity from data centers alone is projected to consume nearly 10% of the nation’s electricity before the end of this decade.

There were about 2,700 data centers in the U.S. in 2022, consuming an estimated 4% of the nation’s power output. In 2024, the total number of data hubs has grown to nearly 5,400, with power needs expanding from an estimated 16 gigawatts in 2022—a gigawatt is equivalent to the power output of a large nuclear power plant—to more than 21 gigawatts this year, according to a McKinsey study.

By the end of this decade, McKinsey projects that data centers will consume more than 32 gigawatts of electricity, according to a report in the Washington Post.

The world’s largest data center hub in Northern Virginia consumed an estimated 2.7 gigawatts in 2022. Dominion Energy, the largest utility serving the region, says it has customer orders that could double the data center capacity by 2028. Dominion is projecting that the NoVa hub will consume 10 gigawatts by 2035, according to a report in Data Center Frontier.

At the end of 2022, some projects in the heart of the NoVa hub near Ashburn were paused so Dominion could install new power transmission lines, a project that won’t be completed until 2026.

The power crunch is changing the dynamic for the selection of data center development sites, which traditionally have clustered in areas with major internet infrastructure and a large pool of tech talent. The saturation of traditional hubs is creating a land rush in rural areas and mid-level markets, the Post reported.

Officials in Columbus, Ohio; Altoona, Iowa; and Fort Wayne, Indiana, among other mid-market locations, are being aggressively courted by data center developers, the report said. However, even in some second-choice markets, the power supply is not guaranteed.

“Across the board, we are seeing power companies say, ‘We don’t know if we can handle this; we have to audit our system; we’ve never dealt with this kind of influx before,’” Andy Cvengros, managing director of data center markets at JLL, told the Post. “Everyone is now chasing power. They are willing to look everywhere for it.”

With data center expansions needing a nuclear-scale power supply, nuke plants also are become prime locations for data center hubs.

Earlier this month, Amazon Web Services (AWS) acquired the 1,200-acre Cumulus data center campus in Berwick, PA. The campus is directly connected to the 2.5-gigawatt Susquehanna Steam Electric Station, one of the nation’s largest nuclear power plants.

Talen Energy, which owns the plant, agreed to sell its Cumulus Data subsidiary to AWS for $650M, according to a report in Data Center Dynamics.

Cumulus completed its first hyperscale data center, a 48 MW, 300K SF facility, at the Luzerne County site last year. The company planned to scale up the site to 960 MW. AWS plans to build out the campus to its full capacity in coming years.

The cloud computing giant has a 10-year agreement with Talen to provide energy to the site, with the minimum power usage increasing in 120 MW increments. The deal has options that allow AWS to extend it by up to 20 years.

Last fall, Standard Power, a data center operator that provides colocation for AI training and blockchain mining, announced plans to deploy up to two dozen small modular reactors (SMR) to power data center campuses in Ohio and Pennsylvania.

The two data campuses will use reactors built by ENTRA1, an energy development and production company, which will use SMR technology from NuScale Power Corp., which last year became the first company to have an SMR design approved by the Nuclear Regulatory Commission.