Growing need for energy could slow a move to climate-friendly power sources, experts say

• The growth of artificial intelligence and data centers across the country has pushed demand for electricity to 'mind blowing' levels, experts said at an energy conference.
• A shift by power consumers toward electric appliances and vehicles has changed the power needs in many parts of the country, making the demand less predictable.
• Trump administration policies have complicated the move toward renewable energy sources, as the president pushes for more coal and rails against wind power.

Arun Mani, a water and energy specialist at the accounting giant KPMG, said he started working in the energy industry three decades ago because it was “boring.”

Now, Mani said, he and his industry are dealing with “too much excitement” as artificial intelligence and data centers increase American power demand, the world continues fighting climate change and a new presidential administration pushes an aggressive energy policy.

Mike Eugenis, director of resource planning for Arizona Public Service, was sitting across from Mani at the Xcelerate Phoenix energy conference, and said he doubted the industry would return to its boring days again. 

“Maybe we’d like it to be boring right now, but frankly, for the next 15-20 years, I don’t think it’s going to be boring,” Eugenis said.

As U.S. states and cities try to combat climate change by transitioning to renewable energy sources, the energy industry is undergoing an unrelated set of convulsions and historic challenges. Speakers at the April 8 event described the United States as juggling a wide and seemingly conflicting set of energy priorities, with power providers seeking safe paths between the rocks and hard places.

Addressing climate change, accommodating the world’s most powerful technologies, competing with China and restoring U.S. manufacturing all require more electricity, but they don’t all call for the same electricity sources, the speakers said. And while President Donald Trump’s administration is keen to expand U.S. energy production, some industry figures say his policies are causing "uncertainty."

Data centers lead to 'mind-blowing' demand

The U.S. energy industry is responding to its first increase in electricity demand in over a decade. After 10 years of relatively small change, U.S. electricity consumption grew by almost 4% over the last three years. Analysts expect that the growth will accelerate, adding 50% more demand by 2050, according to an April study.

“We are in a new era of growth. For my entire time in this industry, load has not really changed, but we are seeing forecasts drastically changing and a rapid transformation in this industry,” said Ross Nichols, VP of trading and market operations at Invenergy.

Much of that new demand is coming from new and more energy-hungry data centers — warehouses full of internet servers and networking equipment that keep websites and internet services going.

With the rise of artificial intelligence, cloud computing and a more digitized society, the number and electricity demand of these facilities nationwide has doubled in the last decade, now taking up 4.4% of the nation’s overall electricity consumption.

Researchers at the Lawrence Berkeley National Laboratory in California believe it could double again, or almost triple, by 2028. Where data centers typically called for 20-50 megawatts of power in the past, they now often require hundreds of megawatts, said Energy Exemplar CEO David Wilson, who specifically mentioned a real estate firm’s January proposal for a multi-gigawatt data center campus in Texas.

“That’s just a mind-blowing scale,” Wilson said. 

Electrifying homes and businesses taxes the grid

Electrification — the process of using electricity to replace fossil fuels in homes and cars — has also driven up demand. Across the country, homeowners have replaced their gas heaters with electric heat pumps and traded gasoline-powered cars for electric vehicles, increasing their reliance on the power grid.

That development has changed power demand so much that even warm places like Georgia now see winter electricity consumption that rivals their summer need from air conditioners, according to John Moura, NERC’s director of reliability assessment and performance analysis.

Power demand is still summer-heavy for Arizona, but even the Grand Canyon state has seen a rise in winter demand because of unique power purchase agreements and gas agreements, said Eugenis.

The electrification of manufacturing processes, a sector of the economy President Joe Biden and Trump both have worked to revive in the United States, has also added energy demand, as has cryptocurrency mining, a process that maintains the integrity of cryptocurrency networks.

Manufacturing and data centers will likely be the largest drivers in power demand growth in Arizona, according to the North American Electric Reliability Corporation.

Energy providers are hard-pressed to respond to these demands with an aging grid, a shrinking set of electricity-generating capacity, and a rise in renewable power sources that depend on weather conditions for their output. Over the last decade, North America’s power generation capacity has dropped 4% even as its power demand has grown, according to NERC.

Moura told audiences at Tuesday’s event that much of that decline came from retiring coal and nuclear plants, partly because of federal and state policies and partly because they became uneconomical compared to newer energy sources like natural gas and renewables. 

The fastest-growing replacement for those sources was solar, followed by wind. Renewables are the cheapest and fastest way to bring new power onto the grid, and scientists believe that moving to zero-emissions power sources is vital in controlling the rise of Arizona’s droughts and heat waves associated with climate change.

At the same time, Moura said, renewables can be a tricky response to the rising energy demands and shifting demand patterns brought on by electrification and data centers, especially when the weather doesn’t cooperate. “Wind droughts” can knock out massive areas of electrical generation, and cloudy days can smother solar panel generation.

Solar power is also far less productive during winter, when electrification — an effort to combat climate change — is creating more need for power, Moura said. Pairing renewables with batteries can harden power supply against these variabilities, but most existing batteries only hold charge for a matter of hours, not entire seasons. 

AI, smart-grid technology will play a greater role

The combination of rising demand, shrinking generation, and swinging renewable power has created what NERC has called an “urgent need for resources” to manage heightened risk of energy shortfalls around the country. Shortfalls are not expected to hit Arizona, but NERC has rated over half of the continent at "elevated" or "high" risk of energy shortfalls over the next five to 10 years.

Moura said he sees a path to an energy industry with net zero emissions, but it’s only a theoretical possibility at this point. Though the Trump administration pulled the U.S. out of its emissions reduction commitments in the 2015 Paris Accords, the country has been steadily reducing its greenhouse gas emissions.

Pushing that process further, experts said at the energy conference, means that utilities will need to use smart grid technology, AI-enabled models and interconnection with neighboring grids. And, in Moura’s view, the process will require the continued use of at least one fossil fuel: natural gas.

“We need to build more infrastructure, there’s no way around that,” Moura said. “We have to build gas, we have to build generation.” 

By share of U.S. electricity generation, natural gas has almost kept up with renewables in its growth over the last decade. Though cleaner than coal when executed well, gas may have slowed and paused the country’s progress on emissions reductions. Utilities see gas as a reliable, cheap way to plug holes created when renewables aren’t producing enough. For Moura, gas is a reliable “bridge” to a net-zero grid, though scientists worry whether that bridge will be short enough to avoid the worst consequences of climate change.

The Trump administration has responded aggressively to the threat of energy shortfalls, though it has shown hostility toward the idea of combating climate change. Trump declared an “energy emergency” in January and spurring agency reviews of regulations, policies, and even court decisions that have slowed down the construction of new energy infrastructure.

Mark Menezes, president of the U.S. Energy Association and former deputy energy secretary during Trump’s first term, said the president is zeroed in on energy policy. The administration, overlapping with Democrats in some cases, has advocated energy abundance to compete with China, particularly in artificial intelligence. He has also framed U.S. energy production as a form of “energy dominance,” a term that even the solar industry has adopted in its new political environment (multiple people from the Solar Energy Industries Association have used the term to describe the benefits of solar installation in the United States when speaking with The Arizona Republic).

Trump policies raise uncertainty

While his administration has shown some openness to solar power, Trump has been vocal in his distaste for wind power. An audience member asked Menezes to explain the president’s anti-wind stance on Tuesday, but the former Trump official couldn’t offer much, saying the president’s reasons are “not necessarily clear to everybody.” 

Trump has even intervened directly in the retirement of coal plants around the country, including the Cholla Power Plant in northeast Arizona. The president signed an executive order on Tuesday seeking to “(reinvigorate) America’s beautiful, clean coal industry.”

APS, which operates Cholla and had planned to shut down in March, said increasing costs have made the plant uneconomical to operate. None of the energy professionals during the conference panels indicated that coal was a necessary or important part of meeting the industry’s ongoing challenges, focusing much more on natural gas, renewables and nuclear. 

The administration’s tariffs have also introduced uncertainty for power providers in Arizona. During a panel, Eugenis described an incident in January when APS received a surprising bill for natural gas delivered to its Yucca Power Plant in Yuma. The company that manages the pipeline delivering the gas to Yucca had reportedly charged APS for a tariff because part of its pipeline crossed through Mexico on its way from Texas.

The two companies later agreed that the tariff did not apply to the gas, but Eugenis said the story was an example of ongoing unpredictability. A spokesperson for APS confirmed later that a “clerical error” fitting Eugenis’s description occurred, but did not confirm the name of the pipeline company or the amount of the erroneous charge, saying that information was market-sensitive and private.

“There’s just more uncertainty now,” Eugenis said. “We had to work with that party to determine if the tariff was really applicable for that resource, and we find ourselves doing that as we look at what solar and battery manufacturers are out there and what the costs may be for projects we’re doing now and ones we’ve already negotiated and signed contracts for. The developers often aren’t capable of bearing the risks of such large tariffs.”

Trump has since announced a 90-day pause on some tariffs, though tariffs on key trading partners like China, Canada and Mexico remain.

Still, power providers did seem certain about one aspect of their new environment. While speakers at the conference saw decisions from the White House, the transition to renewables and the size of future power growth as wild cards, multiple speakers saw bipartisan agreement on the need for more power and a race to develop artificial intelligence.

“This investment is happening in blue states and red states," Nichols said in an interview. "Regardless of political party, we all believe that this is coming and we need to be prepared for it."

Austin Corona covers environmental issues for The Arizona Republic and azcentral. Send tips or questions to austin.corona@arizonarepublic.com

Environmental coverage on azcentral.com and in The Arizona Republic is supported by a grant from the Nina Mason Pulliam Charitable Trust.

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