What AI-Driven Data Centers Mean for Energy Demands

By: Colette D. Honorable, Executive Vice President, Chief Legal Officer and Corporate Secretary

Generative artificial intelligence (AI), once envisioned only in science fiction, is becoming commonplace in our offices and homes. Incredibly, the AI-enabled features of a modern world — from internet searches to autonomous cars — are all powered by an energy system that has been going strong for over 100 years.

Just as AI may be the most significant technological advancement of this century, the energy grid was the most important engineering achievement of the last.

While the way the world produces power continues to evolve, the way electricity flows — from power sources over poles and wires to our homes and businesses — has largely remained unchanged.

Electricity Demand

What has dramatically changed is the demand on the electricity grid. While no one has full visibility into the total amount of potential AI-driven electricity growth nationwide, all indications are that it will be substantial.

A single traditional cloud computing chip needs 150W of electricity — the same as a powerful incandescent light bulb. The latest GB200 GPU chips scheduled to ship from NVIDIA will require 2.7kW per chip, over 18 times the power draw.

Additional datapoints demonstrate significant future AI electricity intensity. According to a recent Department of Energy report, total data center electricity usage more than tripled between 2014 and 2023. They further estimate that data centers are expected to consume approximately 7 to 12% of total U.S. electricity by 2028.

Meeting this challenge should not be underestimated. For scale, one nuclear power generator produces just over 1,000 MW, enough electricity to power around 1,000,000 homes or one new large AI data center. The load growth we face is unprecedented.

All stakeholders, including policymakers, data center and AI developers, generation owners, and electric utilities to name a few, need to work together to meet this incredible moment, which will require significant new investments in both generation and transmission, and their supply chains.

Affordability

Our country must win the race for AI dominance. Full stop. While doing so, we must maintain and improve the standard of living by ensuring electricity remains affordable. The key to doing so is ensuring sufficient supply availability and thoughtful rate structures.

Regarding sufficient supply, in March testimony before the U.S. House of Representatives Committee on Energy and Commerce, PJM reported that, as the reserve margin — or the amount of excess supply available to navigate various operating conditions — continues to decline, prices are likely to increase further. To PJM’s point, new sources of electricity generation are needed to keep pace with accelerating demand and planned generation retirements. While PJM, Exelon, and other transmission owners and operators across the country have been laser focused on facilitating quick connection of new supply resources to the grid, sufficient new supply has yet to materialize. This lack of supply response raises a litany of questions, including how to ensure accountability in generation planning, that state regulators will need to grapple with.

As data centers connect to the grid, it’s essential that they contribute fairly to the infrastructure they rely on. Most already do, but a thoughtful, strategic approach to rate structures helps ensure our energy system remains efficient and sustainable for the future.

Equally important, we must ensure that rates are designed in such a way to hold other residential, commercial, and industrial customers harmless in the event such projects close prematurely or fail to develop. We appreciate the support of developers who are working collaboratively with us in furtherance of this objective.

Generation and transmission facilities have expected lifespans in excess of forty years, and both are needed to support the addition of new data centers. The cost of these facilities is paid for by customers over an extended period. After numerous productive discussions with members of the growing data center business segment informed by our own operations, we proactively filed tariffs with our state and federal regulators to require hyperscale developers to have appropriate ‘skin in the game’ and make additional commitments commensurate with their business need to protect existing customers. This approach preserves affordability while also supporting the ability for committed and non-speculative data center developers to quickly move forward.

Winning the AI Race

The United States already has over 2,000 data centers online and connected to the electricity grid. Every state has a data center in it. Each of these projects has taken careful planning and coordination and proves that our country can successfully build infrastructure — while also preserving electricity reliability and prioritizing affordability.

If the U.S. is to remain well-poised to meet this moment, it will require thoughtfulness about the needs of all customers. This includes new approaches to bringing supply resources quickly online to meet the pace of data center development and changes to how we build transmission to support new economic development. The work we have done in the utility sector for over a century reveals our ability to do so, while ensuring reliability, affordability, sustainability, and energy security is job number one.

Enjoyed this piece by Colette Honorable? Here’s an insightful article in The New York Times that continues the conversation.