Confronting the electricity price shock
By Robert W. Chase
Real Clear Wire
The most disturbing thing about the nationwide rise in electricity prices is that the average consumer is footing the bill for the biggest power users – huge data centers for artificial intelligence.
Electricity prices could jump 15% to 40% in just the next 5 years, according to a recent forecast. And prices have already begun to jump. Retail electric prices have increased faster than the rate of inflation since 2022 – rising 13%.
Make no mistake, high electricity prices are now America's most pressing energy problem, affecting everybody, from the ordinary citizen to the huge corporation.
Ohio is part of the PJM Interconnection, a 13-state regional grid operator, the largest in the nation. Shortages in the supply of electricity – and even higher power prices – may affect PJM and the neighboring MISO grid in the Midwest sooner than other regions of the country. Both grids are staring down rapidly approaching capacity shortfalls.
Our electric power usage for AI data centers, electrification and industrialization is growing rapidly and supply is struggling to keep up. Some utilities in the Midwest have encountered demand levels they did not project for a decade. And we’re learning in real time the evolving mix of resources on the grid is proving ill-equipped for periods of peak demand.
During a recent heatwave, the MISO grid, which at times gets 25 GW of wind power – enough for 15 million homes – got just 1 GW of wind generation when power demand was its highest. Brutal heat and no wind left ten-of-billions of dollars in wind investments hulking statues. It was the coal and natural gas fleets that once again came to the rescue.
Our supply of power has almost no margin for error. And the situation is growing more challenging. While rising power prices are a signal to bring new generating capacity to the market, demand is growing faster than our ability to meet it.
New power plants and energy infrastructure – like pipelines and transmission lines -take years of planning and development before they can be connected to the grid. New data centers, on the other hand, with the power needs of entire cities or state are going from the drawing board to operational in a matter of months.
Ohio is already home to 172 data centers, the fourth largest total in the nation. But the next generation of data centers developed to serve the needs of AI dwarf these existing facilities. Consider the data centers tech giant Meta is building, including in Ohio. Just one of these data centers – scheduled to begin service next year – will have the power needs of the entire state of Nevada.
While policymakers are grappling with the challenge presented by the AI boom, and trying to regulate the impact these data centers will have on power markets, the onus must be on tech companies to step up.
Tech giants are placing orders for their own natural gas facilities and are even contracting to bring next generation nuclear power plants to the grid. While helpful, these are solutions for tomorrow while the impact on consumers is already biting today.
What tech companies have not done – at least so far – is embrace the existing coal fleet. It’s a glaring mistake.
Despite soaring electricity demand, many existing coal plants are scheduled to close early—a response to years of state and federal regulatory pressure. Losing these plants is simply incompatible with this moment.
Tech giants have the resources to ensure these facilities not only aren’t pushed off the grid but can be used far more efficiently to meet rising demand.
Addressing soaring electricity prices is going to take creative solutions. And the companies driving the surge must lead the way.
Consumers deserve reliable and affordable electricity, and the knowledge the corporations driving the surge in power prices are doing all they can to confront it.
Dr. Robert W. Chase holds B.S., M.S., and Ph.D. degrees in Petroleum and Natural Gas Engineering from Penn State and is a registered professional engineer in Ohio. He is a member of the Society of Petroleum Engineers (SPE), the Ohio Society of Professional Engineers (OSPE), and the Southeast Ohio Oil and Gas Association (SOOGA). He served as professor and chair of the Department of Petroleum Engineering and Geology at Marietta College from 1978 to 2015.
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