Your guide to navigating the key themes reshaping the energy landscape. Join Enverus Intelligence® Research (EIR) as they delve into power demand forecasting for data centers and uncover the economic intricacies of carbon capture and storage necessary for increased gas-fired power generation.
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In this e-book, EIR explores the significant changes on the horizon for the U.S. energy sector, driven by increasing demand from technology and electrification. As data centers, cryptocurrency mining and electric vehicles push energy consumption to new heights, the industry must adapt to ensure both reliability and sustainability. This evolving landscape emphasizes the urgent need to balance traditional energy sources with emerging technologies and renewable solutions, setting the foundation for a resilient and efficient energy future.
Over the past 15 years, electricity consumption in the U.S. has remained relatively flat as efficiency improvements have taken center stage. Industrial activity has been offshored, resulting in lower domestic load and advancements in power efficiency across lighting, computation and appliances have yielded impressive gains. However, industry consensus now suggests that this trend is on the brink of a significant shift. With no major electricity-consuming technology emerging since the rise of Web 2.0 in the late 90s and early 2000s, we are poised to witness a substantial increase in power demand in the upcoming years.
From 2010 to 2050, the lower 48 states of the U.S. are projected to see a substantial increase in power demand, driven by factors such as data centers, cryptocurrency mining and the rising adoption of electric vehicles. Conversely, advancements in residential solar and storage technologies are expected to reduce grid-level load. A regional analysis of 56 areas reveals diverse supply and demand drivers influenced by independent system operators (ISOs). For instance, PJM’s demand is driven by data centers requiring optimal fiber connectivity, while ERCOT’s load drivers include cryptocurrency, oil and gas, electrification and coastal hydrogen projects. These complexities illustrate varying flow growth dynamics throughout the year and escalating market volatility. As the load curve transforms, driven by residential solar and storage reducing daytime loads and EV charging boosting overnight loads, the energy consumption landscape is poised for significant shifts, necessitating adaptive load management across different regions.
Humanity’s relentless quest for information has accelerated dramatically with the advent of the Internet, as evidenced by the exponential increase in annual data traffic from 2000 to 2050. This surge in data volume is further influenced by artificial intelligence (AI), with power usage variations represented in base and high-case scenarios. The comparison between log and linear scales (Figure 2) underscores the dramatic growth in data consumption. Contributing to this trend is the rapid advancements in GPU and computing efficiency since the early 2000s. Significant improvements in compute efficiency are linked to transformative user applications such as YouTube and Netflix, followed by the advent of user AI. Looking forward, innovations like the anticipated Nvidia chips are expected to continue driving advancements in AI and compute efficiency, sustaining the trajectory of technological evolution.
In the realm of data centers, efficiency metrics like power usage effectiveness (PUE) are crucial for optimizing performance. The industry average PUE is slightly more than 1.5, but leaders like Google and Microsoft have achieved PUEs under 1.2, trending closer to 1.1. This improvement is anticipated to continue with advancements in cooling technology, such as liquid immersion. However, the Jevons Paradox illustrates that while power efficiency improves, overall compute consumption increases, revealing a linear trend on a log-log scale between data center power efficiency and Internet traffic. Projections indicate that U.S. data center electricity consumption is rising, fueled by hyperscale facility development and increased AI adoption. Transitioning to systems using advanced chips like Nvidia H100 could significantly reduce annual power consumption. Base case scenarios project a linear energy use increase from around 140 terawatt hours today to more than 200 terawatt hours by 2030, while high case scenarios forecast consumption rising to more than 320 terawatt hours, highlighting the need for balancing technological advancement with energy efficiency.
Projecting the capacity and retirement timelines of U.S. energy plants is becoming critical amid evolving policies and emission reduction goals. While certain pink projects (Figure 4) are slated for retirement regardless of EPA policies, current targets aim for a 16% reduction in emissions per unit of energy through coal and natural gas co-firing by 2030. Failure to meet this target will expedite the retirement of green and blue projects by 2031. Even if achieved, a 90% reduction goal by 2032 will require substantial reliance on carbon capture and storage (CCS) technologies, likely accelerating the early retirement of all coal plants. Concurrently, the Inflation Reduction Act (IRA) and renewable energy incentives are shifting the interconnection queue towards solar, wind and storage installations, expected to add tens of gigawatts annually and comprise more than80% of future capacity additions, drastically reshaping the U.S. energy landscape. A detailed analysis comparing a 70% clean/economic energy mix versus a 100% clean renewable mix reveals significant overbuilding requirements for the latter, indicating the indispensable role of natural gas for grid reliability amid increasing renewable capacity.
The importance of energy and reliability for data centers cannot be overstated, as these facilities require significant energy supply, often measured in gigawatts or hundreds of megawatt-hours. Reliability is equally critical, with data centers striving for minimal downtime. Tier 4 data centers, the highest publicly recognized tier, guarantee 99.995% annual uptime, allowing for only 26 minutes of downtime per year. However, these stringent requirements present challenges with power sources, particularly for co-locations without grid connections. Conventional power sources like gas, generators, or nuclear fail to ensure the continuous operation needed during extended downtimes. For instance, Microsoft’s power purchase agreement with Constellation for electricity from Three Mile Island demonstrates a focus on both reliability and environmental benefits, warranting a premium cost for electricity. Furthermore, environmental attributes are increasingly factored into energy pricing, adding another layer of complexity to the energy supply for data centers.
The natural gas market is the cornerstone of energy reliability, adjusting to various factors such as the rise of renewables, shifting load dynamics, the retirement of nuclear and coal plants, efficiency gains and the growth of data centers. Despite these influences, natural gas remains crucial for operational flexibility and maintaining stability in energy supply. Accounting for roughly 35% of U.S. power generation, its role has been consistent, underscoring its adaptability and importance in meeting energy demands. As the U.S. transitions to a diversified energy portfolio, natural gas assets, with their established infrastructure and competitive edge, are well-positioned to remain critical, providing a reliable foundation for future growth and stability in the modern energy market.
The EPA’s regulations mandating CCS for new fossil baseload plants have driven a strategic shift in new gas capacity classification, leading many new facilities to be designated as peaker plants to circumvent CCS requirements. These regulations target plants operating above a 40% capacity factor annually, pushing operators to adapt their economic models. An analysis highlights that operating peaker plants at a 40% capacity factor in New York and Texas yields higher margins compared to running similar facilities at 90% capacity factor with CCS, even after accounting for storage, transportation costs and offsets from the 45Q tax credit. In this evolving landscape, tracking large loads offers opportunities to identify growth in gas-fired generation, particularly as existing plants are exempt from new CCS mandates. By leveraging existing infrastructure and integrating regional load forecasts with plant capabilities, energy providers can develop predictive maps for strategic planning, ensuring optimal utilization of gas-fired generation assets to meet future energy demands.
The future demand for natural gas could see a significant rise if large project loads depend exclusively on natural gas until 2035, leading to substantial incremental demand across various strategic regions. Detailed load forecasts indicate regions such as Florida Gas Zone 3, Transco Zone 5, Texas and Louisiana as optimistic zones for growth through effective partnerships. However, the rapid development of solar and wind capacity could stabilize natural gas demand, illustrating the evolving interplay between fossil fuels and renewables. From 2010 to 2030, the profile for gas-fired generation reveals a steady leveling off from 2020 to 2023, a trend likely to continue due to the rise of renewable energy and battery storage solutions. Although the capacity of gas-fired generation is increasing, its utilization is expected to decline as these renewable sources gain prominence in ancillary services, redefining natural gas’s role to focus more on reliability than primary energy provision. This underscores the complex dynamics and adaptations within the energy market, driven by an increasingly diversified mix of technologies and demands.
Globally, there is significant momentum in advanced reactor development, with 98 designs currently underway, including 20 to 30 active projects in Canada and the United States. This focus underscores North America’s leadership in enhancing reactor efficiency, safety and sustainability. As these advanced reactors near deployment, they promise to revolutionize energy production and set new power generation standards. Concurrently, geothermal energy in the western U.S. is proving economically viable, with costs potentially falling below $100 per megawatt-hour. Notably, Microsoft’s partnership with Three Mile Island and Constellation, at a similar price point, highlights industry confidence in geothermal’s potential. This encourages new geothermal projects along the West Coast, emphasizing reliability and low environmental impact, and positioning the region for significant clean energy expansion, marrying economic viability with environmental sustainability.
The U.S. energy sector is poised for transformation as energy consumption rises due to data centers, cryptocurrency and electrification, marking a shift from a decade of stagnation. This growth reflects humanity’s insatiable demand for information, driven by AI advancements. As energy reliability increasingly becomes a consumer cost, natural gas remains crucial for operational flexibility and stability, even as renewables gain traction. Additionally, new technologies like advanced reactors and geothermal energy hold promise for sustainable energy production. Strategic battery storage deployment is essential for balancing efficiency, cost and reliability in this diversified energy landscape. Overall, the integration of fossil fuels, renewables and innovative technologies will be key in shaping a resilient and efficient future energy market.
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