#198 – Inside Our Industry – The Challenge of Growing Electricity Demand In The US#198 – Inside Our Industry –

Posted on | Inside Our Industry

Last week we shared the thoughts of Agracel’s Director of Development, Todd Thoman on the biggest changes he has seen in economic development over the past 25 years. One of the key changes he mentioned is the availability of reliable power. Following is the first part of a Forbes article that mirrors some of Todd’s concerns.

The Challenge of Growing Electricity Demand In The US
Forbes.com  |  Authored by Ben Boucher, senior data analyst at Wood Mackenzie  |  April 19, 2024

The shortage of electrical equipment remains a significant bottleneck to utility supply chains

Electricity consumption in the US remained stagnant without significant growth for the past two decades up until 2021, as a growing emphasis on energy efficiency effectively counterbalanced the increasing demand. However, in the last few years we have experienced a swift change in demand landscape, pushing electricity demand back into expansion. Load growth, or the increase in power demand over time, has cast a spotlight on the resilience of utility supply chains with crucial electrical equipment, such as transformers and switchgear, already falling into a shortage, resulting in ballooning prices and escalating lead times.

Catalysts of the Load Growth

Substantial investments in the manufacturing sector, particularly in electrical equipment manufacturing, have been the primary drivers of the turnaround in electricity demand. Construction spend in manufacturing surged by 32% year-over-year in February, a staggering 181% versus pre-pandemic levels, stimulating greater demand for the underlying equipment. This upswing in manufacturing investment can be largely attributed to the Inflation Reduction Act (IRA) and the CHIPS and Science Act, both of which are channeling investment into domestic supply chains for critical energy transition components, with the IRA already accounting for more than 200 planned manufacturing facilities.

Increasing interest in artificial intelligence (AI) has further amplified the growing electricity demand, with data center electricity consumption projected to escalate from 2.5% of total US consumption in 2022 to 7.5% by 2030, which is roughly 130 terawatts per hour (TWh) to 390 TWh.

One of the challenges associated with manufacturing and data centers is that they typically require round-the-clock power, something that traditional renewable generation, such as solar and wind, cannot consistently meet. In addition, factors such as the accelerated rollout of electrical vehicles (EVs), the establishment of hydrogen hubs, and heightened peak demand from high temperature and extreme weather events, all contribute significantly to the burgeoning electricity demand landscape.

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