Data center power demand forecasts just keep rising, even as development risks pile up.
BloombergNEF today projected that U.S. data centers’ power capacity could reach 194 gigawatts by 2035, an 83% spike compared to a December report. That’s because more projects are entering the pipeline and aim to come online within the next decade. That total would mean that data centers account for about 20% of electricity consumption by the middle of the next decade — up from 5.9% today.
But there are no guarantees these planned projects will actually come online. Mark Daly, BNEF’s head of technology and innovation and a co-author of the report, acknowledged in an interview with Latitude Media that the U.S. is a really tough environment to build data centers right now. There’s more competition for labor and power equipment than ever before, and data centers are unpopular across the political spectrum. Meanwhile, grid interconnection delays remain a major problem.
In addition, the majority of new projects are sponsored by first-time developers rather than more experienced firms, increasing the likelihood of execution risk and delays. That’s because getting a data center built and grid connected today requires expertise in financing, land, power, and offtake deals — expertise that’s difficult to fake.
BNEF applies historic build rates to forecast how many data centers will actually cross the finish line, which Daly acknowledged could be “too generous” due to all the barriers to construction.
Meanwhile, 15 state legislatures have considered temporarily banning data center development, according to the National Conference of State Legislatures. Nearly half have failed so far. But New York Gov. Kathy Hochul last week enacted the first state-wide moratorium to give regulators up to a year to craft rules that protect ratepayers, the environment, and the grid.
Despite the backlash, hyperscalers — Amazon, Google, Microsoft and Meta — continue to invest record amounts of capital in data centers for artificial intelligence. They could collectively spend $700 billion this year, per their quarterly earnings calls.
“Developers want these projects built,” Daly said. “That’s why so much capital has flowed into the sector and why this pipeline continues to grow.”
There also is more than enough chip manufacturing underway to meet demand, BNEF found.
On-site gas
To circumvent lengthy grid interconnection queues, data center developers are building a lot of onsite gas plants as a bridge to eventually be grid-tied.
While there is interest in going off-grid, BNEF forecast that most data centers are expected to have grid connections. Tim Hade, SVP at Voltus, had a similar conclusion on the latest episode of Open Circuit. He said forecasts underestimate how challenging it is to build a microgrid with enough power for a data center.
“You have to be able to hire people who know how to do really, really, really sophisticated electrical work,” he said. “And there just aren’t enough of those people.”
Currently, just one off-grid facility has been built so far: the SpaceX Colossus 2 project in Memphis, which uses gas turbines and battery storage. The project came online in record time in part thanks to dozens of unpermitted and highly polluting gas generators.
BNEF tracked 124 GW of announced on-site gas capacity, although only a small share of that is under construction. The majority of projects haven’t disclosed their equipment supplier, either.
BNEF noted that advanced gas-powered projects, including Stargate Abilene, backed by Oracle, as well as Colossus 1 have reported performance challenges after energizing, “suggesting some capacity may take longer to reach full output.”
