Report casts doubt on data center growth forecasts

By EPN Staff

A new report by an anti-nuclear and anti-natural gas advocacy group is being promoted to question the nation’s electricity needs. Their primary premise: There aren’t enough computer chips for all of the nation’s planned data centers.

“For all the data centers announced in the United States for 2025 through 2030 to go forward, it would require 90% of incremental global chip supply for that period be directed to the United States market,” the report, from London Economics International in Boston, states. 

“This is unrealistic, as the United States currently accounts for less than 50% of global chip demand, and other regions in the world are expanding demand for chips.”

Why it matters

Overstated demand may drive utility companies to overbuild new generation, needlessly raising other customers' electricity bills, the report cautions. It was prepared for the Southern Environmental Law Center, which touts energy efficiency and environmental protection and opposes nuclear and gas plants like the ones that, in many cases, would be used to power data centers.

The SELC report is the latest advocacy argument to raise doubts and slow energy production and infrastructure development efforts, which are under intense pressure to meet booming forecasts. 

The Trump administration has doubled down on accelerating production and development, issuing executive orders to “unleash American energy” and expediting nuclear power generation as a way to protect national security, lower energy costs and promote economic prosperity.  

The issue doesn’t lend itself to clear-cut answers; in fact, its complexity is underscored by the data center industry, which acknowledges a need for an approach that achieves national goals and meets public demand while avoiding inaccurate forecasts. 

"In an environment of rapid load growth, improvements to forecasting are essential to rightsizing grid investments and improvements and minimizing stranded asset risks,” Aaron Tinjum, the vice president of energy for the Data Center Coalition, said. 

The bigger picture

Data centers use a lot of electricity, and their growth projections are driving a significant share of overall energy need projections.

“If data center growth does not materialize at the expected levels, the cost of system expansions by vertically integrated utilities would likely fall on other ratepayers,” London Economics’ report states.

Announced data centers are getting larger, too, raising the stakes. An average center in the past had a load of 5-10 megawatts, the report states. Hyperscale centers have loads of 100 MW or more, “and even a 200 MW facility is now considered typical,” the report states.

Even larger facilities may become common. Meta Platforms Chairman and CEO Mark Zuckerberg recently said his company was on track to bring the first 1-gigawatt-plus supercluster network online next year, and that a second data project “will be able to scale up to 5GW over several years.”

Not every data center announcement is that high profile, and the London Economics report says developers have incentives to make duplicate requests in different regions and with different utility companies as they race to find the power to supply their systems.

That argument, and general concerns that data center energy needs may be overstated are not new, but the SELC-commissioned study amplifies a newer narrative among opponents by tying to the global chip supply.

Additional details 

The report notes that some data centers use on-site generation, limiting cost risks for other customers. And it says that demand flexibility – a data center's ability to dial back energy usage at peak times on the broader grid – may reduce the need for new generation capacity.

“This supports flexibility in hourly consumption of electricity, moderating electricity demand from new data center customers, especially if the customer is on a tariff which incentivizes reduction in electricity demanded from the utility during periods of scarcity and/or high peak demand,” the report states. 

The Data Center Coalition also noted utilities and grid operators have a number of strategies to ensure accurate accounting, including verifying the commercial readiness of large load additions. 

"While we recognize that grid planning and management is ultimately the role of utilities, grid operators and regulators, the data center industry has been actively leaning in as a committed and engaged partner at this transformative moment to help advance and accelerate grid modernization and energy infrastructure to support American economic competitiveness and national security,” Tinjum said.

State-level regulators are also grappling with these issues, and some states have instituted – or are at least discussing – new charges for the largest energy users.