{"id":197320,"date":"2025-06-19T14:10:09","date_gmt":"2025-06-19T14:10:09","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/197320\/"},"modified":"2025-06-19T14:10:09","modified_gmt":"2025-06-19T14:10:09","slug":"can-the-us-power-grid-keep-up-with-the-ai-data-centre-boom","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/197320\/","title":{"rendered":"Can the US power grid keep up with the AI data centre boom?"},"content":{"rendered":"

This article is an on-site version of our Energy Source newsletter.\u00a0Premium subscribers can sign up here<\/a>\u00a0to get the newsletter delivered every Tuesday and Thursday. Standard subscribers can upgrade to Premium here<\/a>, or explore<\/a> all FT newsletters<\/p>\n

Welcome to Energy Source, coming to you from New York and Washington.<\/p>\n

Despite intensifying tensions in the Middle East, global oil supplies will substantially outstrip demand this year, according to a report<\/a> by the International Energy Agency. <\/p>\n

While weak consumption in the US and China will dampen appetite for oil, production is expected to rise to 104.9mn barrels per day, outstripping forecast demand by 1.1mn b\/d. This trend is set to continue for the next five years.<\/p>\n

Absent a \u201cmajor disruption\u201d, the IEA says its prediction should hold water. <\/p>\n

Enter Donald Trump<\/a>, who teased oil markets by saying the next week would be \u201cvery big\u201d in determining the outcome of the war, saying the US \u201cmay\u201d or \u201cmay not\u201d join the fray and assist Israel in attacking Iran.<\/p>\n

Trump\u2019s remarks sent the Brent crude benchmark down by 3 per cent before it pared back some of its losses. <\/p>\n

At the time of writing Iranian oil flows have not been disrupted. But what happens next is anyone\u2019s guess, even Trump\u2019s.<\/p>\n

\u201cI mean, nobody knows what I\u2019m going to do,\u201d he added.<\/p>\n

Today\u2019s newsletter includes a look at utilities\u2019 uphill struggle to serve the booming AI data centre industry, while my colleague Jamie Smyth caught up with Bernard Looney, BP\u2019s former CEO.<\/p>\n

Thanks for reading, Martha<\/p>\n

Can the US power its data centre boom?<\/p>\n

Interconnection queues are bursting at the seams, as tech companies tussle to hook power-hungry data centres up to grids across the country.<\/p>\n

If data centres are onboarded faster than new power plants can be brought online, consumers could face soaring energy costs and electricity outages, warns energy consultancy Wood Mackenzie in a report<\/a>.<\/p>\n

\u201cThere is a risk, especially in deregulated markets, that we will make commitments to build data centres and the sufficient generation won\u2019t be there,\u201d said report co-author Ben Hertz-Shargel. <\/p>\n

\u201cIn the future we could end up in a state of imbalance where we face not only blackouts but severely increased prices.\u201d<\/p>\n

One of the biggest challenges is predicting future data centre electricity demand. While energy investors plan on 30-year timelines, tech companies have a shorter-term view, being subject to uncertainty over AI\u2019s profit outlook.<\/p>\n

While Wood Mackenzie is tracking 134GW of proposed data centres across the US, interconnection requests far exceed this, due to developers hoarding spots in multiple queues, hoping one of them will pay off. Developers are looking outside of hubs such as Virginia and Texas at states including Pennsylvania, Ohio, Indiana and Iowa, where they are banking that connection times will be faster.<\/p>\n

\"Bar<\/p>\n

Some data centre developers are trying to bypass the interconnection issue by developing their own off-grid power supplies, both as a bridge solution until they can hook up to the grid and as a long-term contingency.<\/p>\n

Project Stargate, a $500bn AI infrastructure initiative backed by OpenAI and SoftBank, has applied to build a natural gas plant at its site in Abilene, Texas, which would provide its data centre there with 360.5MW of power.<\/p>\n

Last week, Meta signed an agreement with XGS Energy to develop 150MW of advanced geothermal electricity to power its AI efforts. <\/p>\n

Technologies such as small modular nuclear reactors \u2014 which can provide about a third of the power of a conventional plant \u2014 are the subject of much industry hype, with backing from companies such as Amazon, Google, Microsoft and OpenAI.<\/p>\n

But these projects are hard to pull off. Data centre power demand can vary from minute to minute, and grids are better equipped to deal with the fluctuations. Finding adequate land and securing air permits is also a challenge.<\/p>\n

\u201cThe challenge is leaving a world where tech cycles move very quickly to the world of infrastructure, which moves more slowly,\u201d said Joseph Majkut, director of the Center for Strategic and International Studies\u2019 energy security and climate change programme. <\/p>\n

\u201cI expect it could be a successful model over time, but I think the reality of building large industrial projects is starting to impose itself on the tech community.\u201d<\/p>\n

The structure of energy markets across the US will also determine whether supply will match demand and keep energy bills from rising.<\/p>\n

Utilities that are best placed to handle massive demand growth are vertically integrated ones \u2014 such as Southern Company \u2014 which own and operate generation, transmission and distribution, and only commit to serving new loads when they can ensure they have the power to do so reliably. <\/p>\n

In deregulated markets such as Texas\u2019s Ercot \u2014 where electricity generation is opened up to competition \u2014 utilities only look at the transmission upgrades that would be required to safely serve the load. This means that data centre additions can far outstrip new energy supply. <\/p>\n

In regulated markets investment can be allocated to serve large loads, whereas in deregulated markets the price of wholesale power provides a signal for new investment.<\/p>\n

But even in markets such as Ercot, forward prices are below the level necessary to incentivise new entry, leading to the recent cancellation of plans to build new gas-fired generation in the region.<\/p>\n

High power costs would incentivise new investment, but that would also mean increased prices for consumers.<\/p>\n

\u201cWhile this is the way efficient markets work for all commodities, in electricity, a very localised market in which politicians can be blamed for lofty rates, there is much more likely to be political outcry as a result of large-load demand growth,\u201d said Wood Mackenzie\u2019s report. (Martha Muir)<\/p>\n

Bernard Looney on the global AI power crunch<\/p>\n

The challenge of building out enough energy infrastructure to power AI data centres is similar to the one faced by the US government during the space race in the 1960s and 1970s, according to Bernard Looney, the former chief executive of oil major BP.<\/p>\n

Looney, who resigned from BP<\/a> in 2023 over his failure to disclose the extent of past relationships with female colleagues, is now chair of US-based data centre group Prometheus Hyperscale. He said the solutions to the global power crunch would be found only if government and industry mobilised a similar effort to that challenge by \u201cfocusing on skills, policy and technology\u201d.<\/p>\n

\u201cThere will be the same amount of power in data centres as [there is in] the Japanese economy by 2026\u2009.\u2009.\u2009.\u2009the scale of growth here is extraordinary. It will require some very different thinking,\u201d he told Energy Source on the sidelines of the Enact summit, a discussion between energy industry leaders, policymakers and Big Tech executives in Washington.<\/p>\n

Prometheus, a start-up, plans to build a $10bn data centre in Evanston, Wyoming, initially with power capacity of 1.2GW. It is one of a number of developers seeking to capitalise on the AI boom, but they all face a big challenge in sourcing enough reliable, around-the-clock electricity to keep their data centres running.<\/p>\n

Looney said Prometheus would initially build its data centre facility as an \u201cisland\u201d outside the existing electricity grid while it sourced power from natural gas, wind energy and nuclear power through a partnership with the Sam Altman-backed small modular reactor developer Oklo.<\/p>\n

\u201cWe\u2019re going to build an island, and then in time, we\u2019ll connect to the grid,\u201d he said, adding that Prometheus would \u201cpush power to the grid\u201d rather than consume from it. \u201cWe\u2019ve got natural gas, two pipelines. We\u2019ve got a massive area of land for wind and an agreement with Oklo around SMRs.\u201d<\/p>\n

Looney is also a board director at XRG, the international investment arm of Abu Dhabi\u2019s national oil company. He has a role identifying potential energy targets for the group, which last week submitted a $18.7bn bid<\/a> for Australia\u2019s second-biggest gas producer, Santos.<\/p>\n

\u201cSantos has got some fantastic gas assets, including, by the way, oil assets in Alaska, but predominantly some fantastic gas assets in Asia and in Australia,\u201d he said. \u00a0<\/p>\n

Looney said a deal with XRG would be a great fit for Santos because the Australian company would receive investment to help it grow.<\/p>\n

\u201cIt remains Santos, in some ways, but has the power of XRG behind it. And for XRG, clearly, it\u2019s a fantastic business opportunity, a fantastic opportunity for growing in one of the three core segments.\u201d<\/p>\n

XRG was focused on investing in natural gas, petrochemicals and low-carbon businesses, said Looney, adding that natural gas remained a priority for the group in terms of future M&A.<\/p>\n

\u201cOn the chemical side we\u2019ve done a lot in XRG\u2009.\u2009.\u2009.\u2009we clearly have a focus on gas and I think Santos is part of that focus now. Will we do more at XRG? I\u2019m sure we will if we can find the right deals.\u201d (Jamie Smyth)<\/p>\n

Job moves <\/p>\n