Policy & Regulation

Growth in commercial electricity demand linked to states with high data center growth

Electricity demand tied to data centers has grown the most in Virginia, one of the largest markets in the world for this development.
Growth in commercial electricity demand linked to states with high data center growth
(Data Center photo. Courtesy Microsoft.)

While consumption of electricity has returned to pre-pandemic levels, the growth in commercial demand for electricity is concentrated in a handful of states experiencing rapid development of large-scale computing facilities such as data centers, according to the U.S. Energy Information Administration (EIA).

Annual U.S. sales of electricity to commercial customers in 2023 totaled 14 billion kilowatt-hours (BkWh) more than in 2019, a 1% difference. According to a new study released by EPRI, data centers could consume up to 9% of U.S. electricity generation by 2030 — more than double the amount currently used. This could create regional supply challenges, among other issues.

Electricity demand has grown the most in Virginia, which added 14 BkWh, and. Texas, which added 13 BkWh. Commercial electricity demand in the 10 states with the most electricity demand growth increased by a combined 42 BkWh between 2019 and 2023, representing growth of 10% in those states over that four-year period.

Source: U.S. Energy Information Administration, Electricity Data Browser

On the other hand, demand in the forty other states decreased by 28 BkWh over the same period, a 3% decline, and commercial electricity consumption declined between 2022 and 2023 in a few states because of mild summer weather.

Virginia, the state with the highest growth in electricity demand, has become a major hub for data centers, with 94 new facilities connected since 2019 given the access to a densely packed fiber backbone and to four subsea fiber cables.

In Texas, relatively low costs for electricity and land have attracted a high concentration of data centers and cryptocurrency mining operations, the EIA said. North Dakota had the fastest relative growth at 37% (up 2.6 BkWh) between 2019 and 2023, which EIA attributed to the establishment of large computing facilities in the state.

Last month, Duke Energy announced agreements with tech giants Amazon, Google, Microsoft and Nucor to significantly accelerate clean energy deployments in the Carolinas.

In memorandums of understanding (MOUs) signed in May, the companies proposed developing new rate structures, or “tariffs,” designed specifically to lower the long-term costs of investing in clean energy technologies like new nuclear and long-duration energy storage through early commitments. 

The proposed Accelerating Clean Energy (ACE) tariffs would enable large customers like Amazon, Google, Microsoft and Nucor to directly support carbon-free energy generation investments through financing structures and contributions that address project risk to lower costs of emerging technologies. ACE tariffs would facilitate onsite generation at customer facilities, participation in load flexibility programs and investments in clean energy assets.

The EIA expects U.S. sales of electricity to the commercial sector will grow by 3% in 2024 and by 1% in 2025.

The growth of data centers has brought a slew of questions related to their development and potential co-location with generators. In a filing to the Federal Energy Regulatory Commission (FERC) this week, Exelon and American Electric Power (AEP) protested a proposal that would result in the co-location of an Amazon Web Services (AWS) data center at Talen Energy’s Susquehanna nuclear plant in northeast Pennsylvania.

The parties said the proposed Interconnection Service Agreement (ISA) raises unresolved questions and could result in unfair cost burdens on ratepayers and negatively impact market operations and reliability.

Most notably, Exelon and AEP asserted the pending ISA between PJM Interconnection, Susquehanna Nuclear and PPL Utilities would allow the data center to derive benefits from the transmission system without paying for them. Under the ISA as proposed, the parties said the co-located data center would not be classified as “network load” and therefore would not be required to pay PJM transmission fees.