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Surging electricity demand puts pressure on utilities

Illustration of America as a power strip with multiple electric sockets across the nation, there are a few plugs in sockets.

Illustration: Aïda Amer/Axios

A surge in electricity needed for data centers, clean tech manufacturing, and EVs is ratcheting up pressure on utilities, writes Katie.

Why it matters: The heavy demand is exposing the notorious weakness of U.S. utilities in their struggle to move quickly in meeting energy needs and also reduce carbon emissions.

Driving the news: Daniel Yergin, energy expert and vice chairman of S&P Global told Axios Generate's Ben Geman that he's concerned about the surge.

  • There's a "whole new outlook on electricity demand, and AI data centers [have] been a big driver of it," Yergin said.

Zoom in: Yergin's comments follow a new report that found that in the next five years, the U.S. is projected to add 38,000 MW of electricity demand, which is like adding another California to the grid.

  • If not enough electricity capacity is built to support the draw, regions of the country could risk blackouts.
  • Last year at an event for utility PG&E, Tesla founder Elon Musk said: "My biggest concern is there's insufficient urgency and people just don't understand how much electricity demand there will be."

Zoom out: A big chunk of the electricity surge will fall on Southern states where tech companies are building AI-fueled data centers and energy companies are also building factories to make batteries, EVs and solar panels.

  • Utilities in states like North Carolina, Virginia and Georgia are now moving to add natural gas plants, which emit greenhouse gases, at a rapid clip, complicating the efforts to meet climate goals.
  • The changing climate itself is also contributing to the demand surge as more air conditioning is expected to be needed to help with hotter peak temperatures in the summers.

Big picture: The fraught energy transition will fall onto the shoulders of the thousands of utilities that operate across the U.S. and are regulated by utilities commissions.

  • Many utilities are ill-equipped to manage the electricity surge, combined with the rise of clean energy, the emergence of EVs and the need to hit climate goals.

Yes, but: In crisis there is business opportunity.

What's next: Expect the fear of a lack of capacity to drive utility decisions and politics to jump in the fray.

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