Texas welcomes AI if data centers build their own power plants

Texas has seen an increase in electricity demand in recent years driven by population growth, extreme weather, data centers and artificial intelligence and cryptocurrency mining.

The Electric Reliability Council of Texas (ERCOT), the operator of the electric grid that accounts for 90 percent of the state’s electric load, has issued reliability and conservation warnings during peak winter and summer demand periods as consumption rises to record highs.

There have been problems with network reliability even without the latest boom in generative AI and data centers consuming as much power as entire cities.

So what happens when tech companies want to build more data centers in Texas? They may have to build power plants to supply electricity to them, too, the utility regulator says.

The Texas power grid is strained during peak demand periods as it is, and adding more load to the demand would further endanger the power system.

Companies looking to set up AI and data center operations in Texas want to have technology and data facilities built near existing power plants so they can use the electricity they provide.

“A new unit that comes with its own new generation”

However, this approach would strain Texas’ already strained grid because it would threaten the adequacy of resources if data centers absorb all the electricity from a nearby power plant, said Thomas Gleeson, chairman of the Public Utilities Commission of Texas (PUCT). , for Bloomberg. an interview.

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“We can’t afford to lose any of our resources in the system right now, especially given those load growth projections,” Gleeson told Bloomberg at a conference in Austin, referring to forecasts that demand for peak power in Texas could double by the end of the decade.

“We really have to look at the co-location issue as a new entity that comes with its own new generation,” according to Gleeson.

The PUCT is telling tech firms they will have to supply some of their own power if they want to connect to the Texas grid in about a year, Gleeson told Bloomberg.

Texas regulators have sought to boost energy production in the state to meet growing demand and balance the growth in solar and wind power generation.

The PUCT is currently considering extending $5.38 billion in low-interest loans to companies planning nearly 10 GW of new natural gas-fired capacity in an effort to boost generation capacity for ERCOT.

Last month, the Commission also approved a transmission reliability plan to meet the future electricity needs of the Permian Basin region. The plan outlines the transportation infrastructure investments needed to support the continued expansion and electrification of West Texas’ oil and gas industry and the growing electricity needs of local communities in the region.

ERCOT estimates that electricity demand in the region will increase to about 26 gigawatts (GW) by 2038, which is equivalent to nearly one-third of the current summer demand of the entire ERCOT system, PUCT said.

Growing Texas Power Demand

In the state of Texas, peak demand could nearly double to 150 GW by 2030, ERCOT CEO Pablo Vegas told the Senate Business and Commerce Committee in June.

“It’s a pretty significant change from a demand perspective,” Vegas said.

“All of that (demand) may not come, but even if a significant portion does come, that’s a really significant growth number.”

Increases in demand on the grid, particularly starting in 2020, have been driven by population growth, extreme weather patterns, the proliferation of electric vehicles and the expanding footprint of data centers, artificial intelligence and cryptocurrency mining, the Texas comptroller’s office says. .

Large-scale computing facilities such as data centers and cryptocurrency mining operations are identified by ERCOT as large flexible load (LFL) customers, and their energy demand will total 54 billion kilowatt-hours (kWh) in 2025, up nearly 60% from expected demand in 2024. This expected demand from LFL customers would account for about 10% of the total electricity consumption forecast on the ERCOT grid next year, the Administration for Energy Information.

Big Tech is looking for energy deals

Meanwhile, tech giants are looking to strike deals with power plants to provide electricity for their data centers, which consume large amounts of electricity both to run their computing equipment and to keep it cool. .

Amazon Web Services (AWS) in March signed an agreement with Talen Energy Corporation to buy its 960-megawatt Cumulus data center campus in northeastern Pennsylvania for $650 million. The data center campus will be directly connected to the Susquehanna Nuclear Facility, the sixth largest nuclear facility in the US with dual units and 2.5 GW of gross capacity.

Microsoft has just signed an agreement with the largest US nuclear power plant owner, Constellation Energy, which paves the way for the restart of the Three Mile Island Unit 1 nuclear power plant.

Microsoft and other major tech firms have been looking to buy carbon-free electricity to power their data centers, which consume ever-increasing amounts of electricity.

In turn, power companies and utilities are ramping up their power supply and planning for an increase in US electricity demand driven by data centers, AI and chip manufacturing.

As a result, U.S. power companies are announcing plans for the largest volume of new natural gas capacity in years as the AI ​​boom drives electricity demand.

Natural gas-fired electricity production in the United States has increased year-to-date compared to the same period last year as total energy demand has increased with warmer temperatures and demand from data centers.

By Tsvetana Paraskova for Oilprice.com

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