According to RMI, a sustainability think-tank formerly known as the Rocky Mountain Institute, some utilities are making large investment decisions before determining, through system-wide planning, what combination of generation, storage and transmission would be the most cost-effective in meeting new demand. RMI estimates that over-investment in gas resources could raise the power bills of an average US household by $94 to $118 a year, worsening affordability for Americans who are already struggling with soaring electricity costs.
“As data centres’ requests come online really fast, the utilities and sometimes the large load customers themselves are proposing very large individual plants to serve that demand, and that is a bit different from doing a system-wide planning portfolio approach,” said Jesse Cohen, a senior associate at RMI.
“The speed at which things are happening is breaking the traditional planning process,” he added. The scale of this build-out has made the US the international leader in gas-fired capacity development, surpassing China for the first time, according to Global Energy Monitor. Entergy Louisiana plans to build 10 gas-fired plants to support Meta’s data centres in the state.
The utility Northern Indiana Public Service Company plans to build two gas plants to serve Amazon’s planned data centres in Indiana. The sudden proliferation of data centres has already affected how utilities make investment decisions. Georgia Power traditionally files a full system-wide planning document every three years, but recently has filed updates every year as it faces unprecedented power demand from data centres.
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I’ll find some time to dig through this RMI document, there’s a model scenario here that probably has lessons. In the meantime, TLDR take is this..
These decisions reflect a broader planning challenge: utilities must make large investment decisions before they know how much data center demand will actually materialize. That uncertainty is not new. In the early 1970s, many utilities planned for sustained high demand growth and committed to large new nuclear projects. When electricity demand growth slowed after the oil shocks, inflation, and recession, some projects became uneconomic and were canceled, while others left customers paying for investments that no longer matched system needs. In Washington state, abandoned nuclear projects left bondholders on the hook for more than $2 billion.
Today, meeting uncertain data center demand with large, long-lived, high-cost assets creates similar financial risks for utility customers. These assets may be underutilized if the load they are intended to serve arrives late, develops at a smaller scale than expected, relocates, or never materializes. While large-load tariffs with protections such as minimum bills, collateral requirements, exit fees, and customer-funded infrastructure can influence how these risks are allocated, they do not eliminate them. Gas plants carry specific risks, including construction-cost escalation and delays associated with growing turbine backlogs, exposure to volatile fuel prices over their operating lives, and the possibility that future emissions limits will increase compliance costs, constrain plant utilization, or lead to earlier-than-planned retirement.