Mike O’Boyle is senior director of electricity and Eric Gimon is senior fellow at Energy Innovation.
Some of the biggest utilities in the country are asking regulators to urgently approve more gas plants, citing explosive power demand from data centers, manufacturing and electric vehicles as the root cause.
Georgia Power’s recent investment plan asks for 1,400 more megawatts of new gas in three years. Duke Energy recently requested an additional 2,700 MW in the next decade in North Carolina, comprising a total 9,000 MW build-out. PJM, the largest regional grid operator, added 10,000 new MW to its demand forecast for the upcoming decade as it struggles to unclog the queue. The list goes on.
Demand growth claims are credible, but the sky is not falling. We know from the work of national labs and universities that we don’t need new gas to maintain affordable, reliable power, even when faced with high demand growth and rapid coal retirements. The only difference now is the urgency of load growth.
The question is, “is gas the only, or even the best answer?” Likely not. Regulators have good reason, including historical precedent, to pause and fully consider other options amid frantic calls to expedite new gas plants.
These arguments aren’t new — they have been playing out for decades, with the most recent incarnation a fight over reliability and the stringency of proposed EPA rules to limit climate pollution from coal and gas plants.
Near-term solutions including efficiency, responsive demand, customer partnerships, grid-enhancing technologies, wind, solar and batteries exist and should be fully examined and deployed before snap judgments to support new gas plants that will cost customers for 30 years or more. Regulators can center these approaches in their responses to utility requests for near-term gas plants, as well as in long-term plans to bolster resource adequacy as the industry continues retiring coal.
Remember energy efficiency?
In 2007, the Energy Information Administration predicted a steady 1.5% annual electricity demand growth — a 21% increase over 15 years. That didn’t happen.
Instead, hunger for more power paused over the last 15 years, with a whopping 785 TWh of demand “missing” from earlier forecasts. That wasn’t an accident.
According to the American Council for an Energy Efficient Economy, between 2006 and 2021, utility efficiency programs avoided roughly 30% of projected demand growth over the same period. While leading states save 1%-2% annually, utility programs in demand hotspots of North Carolina, South Carolina, Georgia, Virginia and Tennessee have room for improvement, saving only 0.64%, 0.36%, 0.20%, 0.15%, and 0.01%, respectively
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Federal appliance and equipment standards also helped. In Dec 2009, the Edison Foundation estimated implementing model codes and federal appliance standards would knock off another 104-293 TWh of demand by 2020 — another 15%-35% relative to the EIA Annual Energy Outlook baseline forecast.
Large energy users also have incentives to invest in efficiency, especially power-hungry data centers and manufacturers. In 2007 the EIA projected data center use would double in a decade extrapolating current practices to future demands for data processing. In reality, efficiency helped hold data center demand flat from 2007-2015 while data processing increased. Amid renewed demand growth projections, industry will likely find new innovative ways to reduce energy consumption while still writing our kids’ college admissions essays.
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The curve may already be bending. Nvidia, the leader in chip production for AI, announced on March 19 its newest chips will use less than one-third the power of its predecessor. Meanwhile, large customers are challenging utility plans to add gas to meet their energy demands. Google and Microsoft have pioneering goals to meet their energy demand with carbon-free energy matched “24/7” to their power demand by 2030, while other tech giants have similar carbon-free goals on similar timelines.
Widening the pool of resources
Proposing new gas plants to serve growing demand does not occur in isolation. It is a decision that implicitly rejects alternatives as either infeasible, expensive or unconsidered. The choice between expedited gas plants and blackouts is a false dilemma. A portfolio of solutions exist that are lower risk and more compatible with utility and state climate goals and customer preferences, starting with the following five strategies:
Build renewables and storage where possible
Renewables and storage can reuse existing interconnection infrastructure to connect to the grid faster, starting with the sites of retiring coal plants. RMI research indicates there are 250 GW of clean energy projects that could leverage existing or retiring fossil interconnection rights to connect to the grid, with the greatest opportunities in the Southeast region.
Projects under development can also add storage to bolster peak reliability value, as demonstrated in a recent contract for solar plus storage in Utah in which Rocky Mountain Power quadrupled the storage procurement in response to growing demand.
Generate closer to demand
Distributed solar has reduced U.S. demand by 62 TWh per year from 2014 to 2022 according to EIA data, but deployment is uneven across states and regions. Reducing obstacles and increasing support for these resources, including with storage, could take a bite out of demand growth and peak growth. Additionally, if possible, large customers should have opportunities to add resources onsite and offer demand flexibility to offset the need for additional peak capacity.
“Bring your own clean energy” isn’t just a hypothetical — a steel mill in Pueblo, Colorado structured a deal for 300 MW of solar partnership with Xcel Energy. The project broke ground in 2022 and will create what the mill CEO billed “the most green steel facility in North America, and maybe the world.”
Work with big customers to flex demand
Some large customers, including data centers, can lower power use when the grid is stressed, if they’re paid to do so. The push for new gas capacity, especially so-called “peaker” units, responds to the relatively few hours per year when the grid is stressed. For example, in South Carolina, projections for short-duration winter shortfalls in capacity are driving calls for new gas. Google recently announced it cracked the code to reducing data demand in hours when the grid is stressed, with successful pilots in Oregon, Nebraska and the Southeast.
Better use of existing power infrastructure
Expanding transmission capacity along existing rights of way is another way to expedite adding more low-cost resources and to access resources from neighboring utilities or regions. While new transmission can take 5-15 years to develop, grid enhancing technologies like dynamic line rating, power flow controllers and storage devices can be installed in a matter of months at a fraction of the incremental cost. For example, an RMI analysis found PJM could add 6.6 GW of clean energy online in 4 years or less by leveraging GETs. Reconductoring existing lines with advanced conductors can nearly double transmission capacity on existing rights of way and come online in 1-3 years.
Better regional and inter-regional coordination on resource adequacy
When one utility falls short on capacity, it can lean on neighbors who may have some spare, but only if arrangements exist for that real-time access. This efficiency is one major benefit of a regional market. Non-RTO regions like the Southeast and West — where load growth is also highest — still have opportunities for more efficient use of capacity across the region. Research from Energy Innovation and Vibrant Clean Energy found that sharing capacity between states in the Southeast would yield more than ten billion in cost savings annually, revealing a region replete with spare capacity if utilities can figure out how to share it.
Regulators are the gatekeepers
Regulators can start by asking good questions to spur consideration of alternative technologies, unlocking the most cost-effective portfolio of supply, demand and infrastructure solutions for customers.
The challenge of load growth isn’t going anywhere. This uptick in demand growth is a litmus test for whether the utility industry is ready to eschew legacy solutions in favor of cost-effective clean energy technologies that require new approaches.
Utility consumers and affected communities cannot afford for utilities to fail.
