The growth of AI data centers could force U.S. utilities to rethink their power generation plans, BofA says

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Diving certificate:

• Bank of America analysts expect the United States will need more than 230 GW of new generation capacity over the next five years, but regulated utilities are expected to add only about 93 GW of accredited supply, leaving a gap of more than 100 GW.
• Data centers alone could add about 125 GW of U.S. electricity consumption during that period, which would boost overall electricity demand growth to a compound annual growth rate of 4.1% from 2026 to 2030, according to the report.
• With large gas turbines largely sold out by 2030, data center developers will increasingly rely on on-site gas engines while utilities expand coal-fired power plant operations, deploy batteries and advance transmission upgrades, BofA analysts said.

Insight into the dive:

The report’s forecast comes largely from semiconductor analysts at BofA, whose predictions for rapid deployment of AI computing infrastructure, including specialized chips and servers, underpin the company’s outlook for a growing power supply gap in the United States.

The analysts also note that utilities have revised their demand forecasts upward in each of the past three years as AI-driven electricity demand materialized faster than expected.

As utilities struggle to bring new capacity online quickly enough, BofA expects more data center developers to turn to behind-the-meter generation. According to the report, more than 7.5 GW of on-site data center projects are already under construction, with another 60 GW or more in the pre-construction phase. Instead of operating completely off-grid, these plants are intended to combine self-generation with traditional grid connections to improve reliability and shorten project times.

AI infrastructure is reshaping long-term electricity demand after a decade of largely flat consumption growth due to efficiency improvements, LED adoption and distributed solar power generation. The analysts said planned generation expansions could overstate available supply because intermittent resources such as wind and solar contribute less credited capacity during peak demand than their nominal values ​​suggest. Therefore, solid resources remain crucial even in the expansion of renewable energy production.

Natural gas is expected to play a central role in meeting new demand, but equipment availability is a constraint. Large gas turbines remain the preferred technology for flexible energy, but production capacity is largely at capacity through 2030 and it may take years for new units to come online after delivery. This has increased interest in natural gas piston engines, which can be deployed more quickly and respond more quickly to changing loads. Manufacturers including Caterpillar, INNIO, Rolls-Royce and Wärtsilä have expanded production to meet rising demand, analysts said.

According to the report, utilities and regulators are also increasingly keeping existing power generation assets online longer to ensure reliability. It identifies coal-fired power plants in Maryland, Wisconsin, Indiana, Utah, Kansas, Nebraska and Mississippi that have had their retirement dates postponed or canceled to preserve available capacity.

Battery storage, transmission expansions and regulatory changes that increase utilization of existing generation assets could also help address reliability issues, although analysts note that transmission projects often take years to get approved and built. They cite the Champlain Hudson Power Express, which took 16 years from planning to commissioning, as an example of development timelines for new infrastructure.

The concentration of AI-driven data center growth in the U.S. is prompting utilities and regulators to address how to connect large new loads and distribute the costs of new infrastructure. Higher electricity prices could lead to some reduction in demand from customers and energy-intensive industries, but scientific research suggests that electricity demand is relatively inelastic in the short to medium term. A 10% increase in real electricity prices typically results in a 1 to 2% decrease in consumption.

“The market is no longer constrained by demand, but by where electricity can actually be delivered,” BofA analysts said in their Global Research Report.

https://www.utilitydive.com/news/ai-data-center-growth-utilities-generation-plans/825541/