Electric utilities nationwide are facing steep increases in power demand for the first time in decades, a challenge made more difficult by the nature of that demand.

Both large industrial customers and new data centers driven by booming interest in artificial intelligence are creating the burgeoning need for constant large levels of electricity. In December, the U.S. Department of Energy’s Berkeley National Laboratory estimated national data center power consumption could jump from about 4.4% of the nation’s electricity in 2023 to between 6.7% and 12% by 2028.

That 2028 national data center power demand estimate translates to somewhere between double and nearly quadruple the 34.5 gigawatts of capacity Duke Energy owns in North and South Carolina today.

Data centers pose a particular challenge for utilities, with the large computer facilities demanding electricity around the clock as they perform key cloud computing tasks now and, in the near future, seem poised to shift over to either artificial intelligence training models or so-called “inference facilities,” which use the models to answer the questions users type into Google Gemini, ChatGPT or whatever comes next.

With data, it’s “move fast, break things,” said Peter Kelly-Detwiler, a cofounder of NorthBridge Energy Partners. But with utilities, it’s “move prudently, make sure we have safety minutes.”

“Two different cultures, and now they’re about to collide,” Kelly-Detwiler said during a February event held at Duke Energy’s Charlotte headquarters about the challenges that providing power for data centers could pose for utilities.

One challenge for a utility like Duke is knowing how much new power generation it should plan to build. Permitting and regulatory reviews for new power plants happen years before steel goes into the ground or new transmission lines are strung.

If Duke builds too many new gas plants or solar farms, ratepayers could be stuck paying for resources that don’t actually get used. If Duke doesn’t build enough, it could restrain the economic potential in its service areas, which cover most of North Carolina and part of South Carolina.

When Duke initially filed its most recent resource plan in August 2023, it anticipated adding eight large customers whose demand would require the addition of about 1.3 gigawatts to provide service on winter days when demand is highest. But in a Jan. 31, 2024, filing, Duke updated that report to say there were actually 35 large customers who had committed to the Carolinas, with demand totaling just over 3 gigawatts.

“Nearly half of that was from data centers/crypto, so about 1.5 gigawatts. That’s over and above the Carolinas’ strong residential growth factored into our base load forecast,” Bill Norton, a Duke spokesman, wrote in a statement.

That growth is projected to take place even as Duke continues to plan to retire its six remaining coal plants in the Carolinas, to build new natural gas plants, to add solar generation and storage to the grid, and to explore new technologies like small modular nuclear reactors and offshore wind farms.

Are the projections inflated?

Duke’s rapid increase in demand also reflects a nationwide trend.

In 2022, utilities across the country anticipated adding 23 gigawatts of new demand over the next five years. By the end of 2024, preliminary reports from individual utilities indicated the next five years could see demand for as much as 128 gigawatts of new electricity — five times the original estimate — according to a report from Grid Strategies LLC, an energy consulting group.

“The era of flat power demand is behind us,” the Grid Strategies report declared.

As is the case in Duke’s service territory, much of that growth nationally is being driven by data centers.

But there’s a wrinkle in the data center projections, said John Wilson, Grid Strategies’ vice president.

When the firm was preparing its report last fall, it found that utilities were reporting about 90 gigawatts of new data center demand over the next five years.

But other analyses approached the problem from the data centers’ end by looking at what could be built with the number of available chips or how long it might take to build the facilities. Those analyses found that on the high end around 60 gigawatts of data centers could be built over the next five years, Wilson said.

Part of that discrepancy is because companies that build data centers often pursue multiple projects in different utility service areas, trying to figure out what can be built fastest and cheapest. It is likely that some of those projects won’t be built, Wilson said, but neither the developer nor the utilities know which ones those will be.

“There’s a huge amount of uncertainty,” Wilson said.

During the event at Duke headquarters, Jason Carolan, the chief innovation officer for data-center developer Flexential, acknowledged there is likely some overstatement in data center projections. Flexential’s portfolio includes two data centers around Charlotte totaling 5.66 megawatts and a 4.31 megawatt facility in Morrisville.

Developers are primarily concerned about finding places where there is available power and where they can obtain building permits, Carolan said at the Duke event, which was titled “The Grid Awakens.”

“The dispersion of these large-scale, one gigawatt-plus deployments is going to keep happening,” Carolan said. “I think by that sheer nature, there’s going to be estimates that are overblown just because everybody’s double counting.... We’re putting in multiple requests in different markets.”

Duke officials insist that they only start to include projects in load forecasts once they are confident the projects will come to fruition.

“We’re really putting in the load forecast items that are either turning dirt or have letter agreements or are near agreements,” said Harry Sideris, Duke’s president and incoming CEO.

Last May, Duke CFO Brian Savoy told Reuters that Duke is requiring customers who want more than 100 megawatts of power to pay for a set minimum of energy, no matter how much they end up using. The so-called “minimum take” agreements are intended to protect other ratepayers from the cost of adding the infrastructure to serve large customers like data centers, Reuters reported at the time.

“We’re always open to new options that can protect our existing customers while continuing to encourage investment in the Carolinas,” Bill Norton, a Duke spokesman, said in a written statement.

Data center development in NC

Traditionally, new businesses requesting service from Duke Energy have asked for five to 10 megawatts of power. Now Duke is receiving inquiries from companies that need 500 megawatts or more. Often, those requests are coming from data centers.

“As a regulated utility, we have a statutory obligation to serve all customers but also to ensure that service is reliable and affordable,” Jason Higginbotham, a Duke attorney, said at a recent N.C. Sustainable Energy Association event.

Most of the data centers that are imminent in the Carolinas will serve cloud computing. But in the latter part of this decade, Duke expects to start serving some of the larger data centers that drive artificial intelligence.

Those plans have not been thrown off by the unveiling of DeepSeek, a chatbot created by a Chinese firm that touted more efficient artificial intelligence that can work with far less energy. Builders of the largest data centers were anticipating more efficient models and believe they will actually lead to more demand for artificial intelligence, Sideris, the Duke president, said during the company’s fourth quarter earnings call.

“They’re full speed ahead. They’re looking at the fact that these efficiencies may actually increase the demand for AI, so we have not seen any pullback in anything they’re planning on. In fact, we’ve seen a lot more discussions with accelerating some of their work,” Sideris said.

Data centers accounted for 1.92% of the total electricity used in North Carolina in 2023, according to a May 2024 white paper from the nonprofit Electric Power Research Institute.

By 2030, the same report found, the power requirements for North Carolina data centers could increase anywhere from 77%, a level at which they would require about 2.3% of the state’s total electricity generation, to 370%, which would consume about 4.62% of the state’s electricity, even taking into account the growth in the amount of electricity utilities will be able to generate.

About 45% of the total new electricity Duke expects to provide to large-load customers between now and 2033 will serve data centers, with another 3% or 4% serving new crypto mines in the state, Phil Stillman, Duke’s managing director of load forecasting and regulated strategy, told the N.C. Utilities Commission last year.

Why the Carolinas?

During a November earnings call, Duke officials said they signed agreements for 2,000 megawatts of new data center projects in the third quarter of 2024. They did not give any specifics about the projects’ locations or who they would be serving, and it’s worth noting that Duke has a footprint outside of the Carolinas.

Still, on that November call, Savoy, the CFO, said, “We’re having talks with many customers and they’re very serious about citing their data centers in the Carolinas specifically because in the Carolinas over half our energy is carbon-free nuclear, and that’s very attractive to the data centers.”

During last year’s resource planning process, the Utilities Commission also heard from Ronald Moe, a consultant representing data center developer Tract Capital Management.

Tract wants to build a 500 megawatt data center in North Carolina by 2032, Moe said. Tract would also like to build “additional, larger” facilities bringing its total power load to 2,500 megawatts by the mid-2030s, should electricity be available.

To put that in perspective, the Harris Nuclear Plant in Southwestern Wake County has a capacity of 964 megawatts at its one reactor. That means it would take nearly three of those reactors to generate the energy demanded by Tract’s planned data center facilities alone.

When asked why data center developers are drawn to North Carolina, Moe pointed to its proximity to Virginia, where Dominion Energy is serving so many data centers that it has at times placed temporary moratoriums on new facilities in places like Loudon County, outside of Washington, D.C.

“As Virginia has gotten saturated and Dominion has occasionally paused further development, adjacent states, especially those with very educated workforces and other things that make the state attractive to business, were kind of the natural second tier of places after Northern Virginia,” Moe said.

NC Reality Check is an N&O series holding those in power accountable and shining a light on public issues that affect the Triangle or North Carolina. Have a suggestion for a future story? Email realitycheck@newsobserver.com

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