The demand for energy in the U.S.has grown rapidly throughout the last three years. The nation’s surge is concentrated among a few states, said Jeff Schmid, president and CEO of the Federal Reserve Bank of Kansas City, one of those being Texas.
There’s a lot going in the Lone Star State that contributes to Texas’ load growth. There’s the state’s expanding footprint of energy-intensive data centers, artificial intelligence and cryptocurrency mining, a growing population, extreme weather patterns and the increase of electric vehicles.
All of this comes as the state’s grid operator ERCOT works to maintain reliability among peak demand, or when consumer demand for electricity is at its highest. But peak demand has been growing significantly faster, said Joshua Rhodes, an energy research scientist at the University of Texas at Austin. It grew faster between 2021 and 2023 than it grew from 2006 and 2023.
The increase of energy demand across the country is increasing demand to rates that haven’t been seen since the end of World War II, said Garrett Golding, a senior business economist at the Federal Reserve Bank of Dallas. The 1.3 percent demand growth pace is more than twice as fast as the decade before the pandemic.
“These dynamics, on top of the uncertainty of current forecasts, present major challenges for grid planners, power generators, transmission developers, regulators and at the end of the day, everyday consumers in the broader economy,” Golding said.
Industry leaders, government officials, business people and bankers gathered on Wednesday at the Federal Reserve Bank of Dallas to discuss the need for developing domestic energy infrastructure at scale across the country to keep up with growing energy demands.
More than $100 billion has been invested into ERCOT’s generation sector over the last 20 years, Vistra Corp. chief strategy and sustainability officer Stacey Doré said.
In a resource adequacy report ERCOT published earlier this month, the grid operator reported that some of the low risk of ordering an energy emergency alert, or controlled outages, has been influenced by the recent and forecasted addition of data centers that are planned to operate 24/7.
The U.S. operates 40 percent of the world’s data centers. And soon, Texas is expected to become the next market leader of data center buildouts across the U.S., said Geoffrey Hebertson, lead renewable analyst of Rystad Energy.
Dallas-Fort Worth makes up nearly a third of the state’s buildout of data centers, thanks to North Texas’ high Internet connectivity capabilities. The state is set to outpace Virginia, the current front runner in data centers, that handles about 70 percent of the world’s Internet traffic, Hebertson said.
But it’s not just data centers that are contributing to an increase in energy demand. It’s coming from a variety of sectors, Doré said. Focused investments into domestic manufacturing have boosted demand as well as artificial intelligence.
“It’s important for us in the electricity industry to make sure that we’re not discriminating against certain types of load customers, favoring stuff over others,” Doré said. “Load is load is load.”
Since Texas has its own isolated energy grid, it’s responsible for generating the majority of its energy for its residents. Most of the state’s energy comes from natural gas, but other energy sources, namely solar and wind, have played a critical role in offsetting high demand.
As the nation’s leader in wind energy production, Texas accounted for more than a fourth of the country’s wind-sourced electricity in 2022, according to the state comptroller.
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Texas Among States Experiencing Surge of Energy Demand
In a resource adequacy report ERCOT published earlier this month, the grid operator reported that some of the low risk of ordering an energy emergency alert, or controlled outages, has been influenced by the recent and forecasted addition of data centers that are planned to operate 24/7.
