Power Grab: Data Centers and the Grid Part 4 - AI & Wholesale Power Markets
Updates since last week:
Vistra is in discussions with two large companies concerning sale of power from existing gas and nuclear facilities, with plants in ERCOT and PJM eliciting interest.
PG&E and real estate developer Westbank plan to develop a district energy system combining three new data centers – using up to 200 MW - and 4,000 residential units in San Jose.
Modular nuke start-up Oklo has LOIs and will partner with two major data center providers to deliver up to 750 MW.
Sharon AI and industrial gas company New Era Helium Corp announced LOI to form JV for design, development, and operation of a 90MW data center in New Mexico’s Permian Basin.
Bloom announces deal to sell up to 1 GW of fuel cells to AEP Ohio.
Gas pipeline company Energy Transfer increases estimate of gas in discussion w/datacenters from 3 bcf/day to 10 bcf.
Today, we’ll discuss potential implications of AI load for other electricity users in wholesale markets. Next week, we’ll cover distribution utilities.
One more thing: just to cast some high-level doubt into the equation. Recent comments and indicators from the industry hint that gains from language learning models may be slowing down. This is worth watching: it implies simply throwing stronger chips and more energy at the problem may not be enough.
But assuming the AI language learning model training effort will continue at the current pace. If so, what are likely impacts to wholesale markets?
Some markets will be affected much more than others. ISO-NE and NYISO likely won’t see that much impact as it’s hard to site many datacenters or new power plants to supply them.
PJMis another story. In January, PJM had tripled its forecasted growth numbers from 2023, well before many new utility announcements. Dominion’s service territory is crowded, but new load is going to other regions: New Jersey’s PSEG just filed an updated forecast to PJM in late October, w/datacenter load growing from 343 MW to 1,196 by 2030. Exelon in late October requested of PJM a Large Load forecast adjustment of 2,600 MW for 2029.
The mid-Continental ISO – MISO – is not seeing quite the same pressure, but its CEO noted this month that 2.5 GW of new datacenter load showed up, and over 4,600 MW of data center load is noted in MISO’s July 30th Existing Large Load and New Load Additions Update.
Texas is seeing huge demand growth. Oncor alone reports 59,000 MW of requests in a system peaking at 85,000 MW this summer.
SPP and California? SPP is not a big datacenter market – yet. But it’s growing. North Dakota, may see massive growth from just two undisclosed companies, starting at 500 to 1,000 MW and growing 10x from there, w/up to $250 bn in investment. Meanwhile, California’s power prices may be just too high, and land too expensive to attract much AI load.
The pressure is most likely going to be centered on the competitive markets in Texas and PJM.
But power prices will be affected everywhere because of equipment limitations, esp. transformers and switchgear, and related raw materials.
Then add the fact that interconnection queues are slowing down, and supply is simply unavailable. So, prices are headed up – more in some markets than others. Consulting group Bain & Company projects average annual cost increases of 1% annually. These increases will be more concentrated in areas of rapid growth, but nowhere will this dynamic be deflationary.
In the next and final session, we’ll talk about the distribution utilities, the enormous uncertainties facing them, and the inherent risk of overbuilding in an extremely uncertain AI world.