Most Power Sought for US Data Centers Will Never Materialize

i[0kh3dkiqhza6)0ukr}s}n3_media_dl_3.png BloombergNEF, DC Byte

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(Bloomberg) — More than two-thirds of the electricity sought for the artificial intelligence boom in the US isn’t likely to materialize due to “phantom” projects and long-shot pitches.

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That’s based on new projections from Wood Mackenzie, which sees US grid operators and utilities likely committing to about 28% of the 1,066 gigawatts requested for data center projects. A gigawatt is the equivalent generating capacity of a traditional nuclear reactor.

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While no one expects every proposed project to be built, the data reveals how inflated projections of future power demand complicate planning and budgeting by utilities and grid operators. That can translate into higher utility bills, since capital costs for upgrading infrastructure are typically covered through rate hikes.

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“Everyone’s trying to figure out the rules of the road in order to make this the most efficient process without increasing grid prices,” said Alex Klaessig, co-founder of energy market intelligence firm Halcyon.

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Developers have been taking a shotgun approach to pitching projects to utilities, seeking to get ahead in the AI build-out. That’s overwhelming US grids and creating even more data center bottlenecks. The explosion of requests is stretching approval timelines, forcing more applications to be vetted than ever before, and threatening to undermine US efforts to compete in the global AI race.

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“If we don’t allow these data centers to come online as fast as we can, then we might lose the future benefits of AI,” Klaessig said.

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Some developers are pitching the same project to multiple utilities, with plans to push ahead with the application that lands the best deal and speediest approval. That creates what the industry calls “phantom” applications, complicating efforts to accurately forecast true power demand.

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“Grid operators don’t know which ones are real and which ones aren’t,” said Glenn Schwartz, who heads energy policy at consulting firm Rapidan Energy Group. He estimates that only 20% to 30% of the power that developers are seeking will go toward projects that get built, due in part to phantom requests.

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Flooded grid queues aren’t specific to data centers: renewables projects are regularly hampered by long wait times to connect to electrical networks across the world.

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While it’s impossible to determine how many requests are duplicates, Reid Ramdathsingh of Rystad Energy estimates about half of the applications are credible on the biggest US grid, operated by PJM Interconnection LLC, which serves 67 million Americans from Illinois to Virginia. He sees 14% of applications as legitimate on the main grid in Texas, a state that has seen the fastest data center growth.

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PJM said in a statement that it has taken steps to improve the forecasting of large loads.

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Of course, the 1,066 gigawatts of applications cited by Wood Mackenzie would require a staggering jump in US electric capacity. The amount represents 83% of the nation’s total utility-scale generation capacity at the end of last year, according to the US Energy Information Administration.