A Rant reader asked me to take a break from ranting in lieu of “a piece about things that are going well in the industry despite the current economic climate.”
I aim to please. Here is an Energy Happy Clappy. The best thing we have going for us in the industry is load growth! That reminds me of a recent article from ZeroHedge, titled US Utility Giants Discuss Soaring Power Bills, Grid Reforms In The Data-Center Era.
AI, Data Centers, and Load Predictions
I’ll pick apart some data from this article. It states that the AI buildout will require approximately $5 trillion in capital. That number is backed by Bloomberg. Using my rule of thumb, 200 MW per $1 billion of hyperscale data center construction, $5 trillion in data centers translates to $5,000 billion, which converts to 1 million MW or 1,000 GW. That’s more than the peak load of the United States today (about 780 GW). The Bloomberg article indicates something around $3 trillion in investment bonds (660 GW) over the next five years.
Nobody is doing the numbers and saying what I’m saying here: there is no way to power that load, that fast.
One thing is certain: utilities and transmission companies must be circumvented to expedite the GWs necessary for these AI electrical loads. And they are, as I reported in August, and The Wall Street Journal reported in October. This is leaving the utilities to cover the more expensive variable load, where capacity factors are 50% or less.
Governors Flounder
Power bill escalation will continue to outpace the consumer price index, mainly due to scarcity pricing. Even if state legislatures and governors understood capacity markets, they’d have few levers to make a difference. And since they don’t understand capacity markets or economics in general, they plop price caps on auctions to stunt investment. It’s like converting a bodybuilder’s diet from chicken breast and sirloin to cotton candy and Peeps to get them to bulk up faster. Clueless, a little? Yes. As they would say when Jesus shows up, “Quick, look busy and do something.” I.e., do a presser and excoriate the nincompoops managing the grid.
Table 1 Price Caps Today for Increasing Shortages Tomorrow
State | Governor | Action/Position | Date | Source |
Pennsylvania | Josh Shapiro | Filed complaint with FERC to force PJM to lower capacity price cap, citing risk of billions in extra consumer costs. Settlement reduced cap from >$500/MW-day to ~$325/MW-day. | Jan-25 | |
Maryland | Wes Moore | Sent formal letter urging PJM to lower capacity price caps and accelerate interconnection to avoid “unwarranted energy prices.” | Oct-24 | |
Ilinois | JB Pritzker | Joined multi-state governor letter demanding PJM restore prior price-cap levels after auction prices cleared at ~10× the previous year. | Oct-24 | |
Delaware | John Carney | Co-signed multi-state letter urging PJM to lower capacity price cap and reform market rules following extreme price spikes. | Oct-24 | |
New Jersey | Phil Murphy | Joined governors calling PJM auction prices “almost ten times higher than last year,” urging price-cap and market-rule changes. | Oct-24 | |
Virginia | Glenn Youngkin | With eight other governors, expressed frustration at projected bill increases from PJM’s capacity auction and called for reforms including re-evaluating caps and market structure. | Jul-25 | |
Michigan | Gretchen Whitmer | Part of a coalition telling PJM there is a “crisis of confidence” and demanding pricing and governance reforms. | Oct-25 |
Utilities, Flat Loads, and Efficiency
Utilities are entering a generational (is that a pun alert I wrote?) era of load growth that has been non-existent in my three-decade career in the industry. I’m surprised that efficiency (demand-side management, also known as DSM) programs have remained in place during the flat load period from 2000 to 2020. I believe the flat load growth was the result of DSM programs, especially lighting technology and savings, which reduced both energy consumption and peak load. However, the lighting gravy train is over, and that’s great news for us, happy clappy.
Lighting evolved over several generations of technical and application improvements, as I described in 2024: from incandescent to compact fluorescent, metal halide, T-8, T-5, and finally LED. The lighting evolution kept program outreach and direct installers going for 25 years.
Heating, ventilating, and air conditioning technologies followed similar 1/x improvements, where x is efficiency, and the change in energy consumption changes very little with each increase in x. You can see a perfect illustration of 1/x relating to gas mileage in automobiles in Four Steps to Energy Code Flatline.
The Next Wave
Frankly, I love it. I’ve been writing about the end of lighting since at least 2013, featuring R2D2, when the runway spanned over the horizon. People complain, Oh, it’s so hard now. C’mon, man. Put your long pants on. It’s just beginning to get interesting. Going forward, the prize will be awarded to firms that offer innovative solutions to significant problems, rather than selling products like encyclopedias and vacuum cleaners. It’s like the difference between selling services, like physical therapy, versus hot dogs with a street cart (no offense to hot dog salespeople – I love hot dogs).
Although the ZeroHedge article is written in tongues, utilities are making plans to raise billions in capital to build infrastructure, grow their rate base, and increase earnings. In many states, this will be accompanied by increases and flexibility in demand-side management (efficiency) spending. Utilities, specifically those from the Mid-Atlantic north, including PJM, ISO-NE, and ISO-NY (see Figure 1 for regions and states), are asking state governments to intervene on their behalf. Hmm. Looks and reads like the industry is sliding back into re-regulation, which I have been advocating for years.
Figure 1 Regional Transmission Organization (RTO) Map
One Specific Case Study: Illinois
Here’s some fantastic news: Both chambers of the Illinois legislature recently passed Senate Bill 25, the “Clean and Reliable Grid Affordability Act” CRGAA, cergaah? They need some marketing help with that. The legislation:
- Essentially gets rid of impact and spending caps. AI tells me, “EE portfolios for electric and gas utilities were tied to cost caps (typically expressed as: spending as a percent of revenue, or cost-to-achieve savings screens). Utilities would routinely hit those caps, forcing them to cut programs or throttle savings, preventing delivery of deeper, cost-effective EE.” No kidding. I’ve explained this many times that ComEd, for example, needed to thread the needle down the stretch every year. There was no grace for going over. Thank goodness, happy clappy!
- Forces utilities to treat efficiency in an integrated resource plan. AI tells us: The bill defines DSM as programs that reduce load or shift load, and explicitly requires:
- 20-year cost/benefit comparisons
- A full evaluation of all demand-side programs
- Equal footing with supply-side resources
- Gives the Illinois Commerce Commission authority to improve spending increases. AI writes, “SB25 gives the Illinois Commerce Commission full authority to approve IRPs, including cost recovery for demand-side programs. The ICC can approve:
- Higher EE budgets
- Expanded DSM portfolios
- Programs that exceed previous cost screens”
You may be thinking, but I’ll bet you are not, “Weren’t IRPs (integrated resource plans) long-gone relics of centralized, vertically regulated utility markets? I thought Illinois was a deregulated state.”
Answers: yes and yes. Illinois hasn’t had an integrated resource plan in nearly 30 years, since deregulation in the mid-1990s removed utility planning oversight and handed resource development to the market.
Spike the football here!