{"id":32808,"date":"2025-06-29T13:46:17","date_gmt":"2025-06-29T13:46:17","guid":{"rendered":"https:\/\/financialrush.com\/?p=32808"},"modified":"2025-06-29T13:46:17","modified_gmt":"2025-06-29T13:46:17","slug":"us-energy-groups-spend-record-sums-on-power-plants-to-feed-data-centres","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=32808","title":{"rendered":"US energy groups spend record sums on power plants to feed data centres"},"content":{"rendered":"

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US energy companies are pouring record sums into building power plants and transmission lines to meet electricity demand from data centres, raising concerns that the costs may be passed on to consumers.<\/p>\n

According to Jefferies investment bank, utility capital expenditure is expected to hit $212.1bn in 2025, a 22.3 per cent rise year on year and a 129 per cent increase compared with a decade ago. Investment is forecast to reach a record high in 2027 of $228.1bn.<\/p>\n

\u201cCompanies are investing in generation and transmission to reindustrialise the economy,\u201d said Julien Dumoulin-Smith, power utilities and clean energy analyst at Jefferies.<\/p>\n

\u201cOver the last couple of decades, we\u2019ve seen a relative paucity of new investment\u2009.\u2009.\u2009.\u2009we\u2019re now seeing a very meaningful shift, and should see a sharp uptick as data centre deployment accelerates.\u201d<\/p>\n

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While the growth of data centres could fuel an economic boom, companies, regulators and governments across the country are waking up to the huge capital sums required to build the infrastructure that supports artificial intelligence \u2014 while balancing pressure to prevent consumers\u2019 bills from rising.<\/p>\n

If data centres pass costs on to households and small businesses, they could face opposition to their expansion plans \u2014 while utility companies<\/a> may have to be more selective with their investments.<\/p>\n

\u201cThe longest-term risk to the sector that I\u2019m concerned about is affordability. Since the pandemic, we\u2019ve been tracking around 10 per cent year-over-year increases [in consumer energy bills],\u201d said Barclays\u2019 US power and utilities analyst Nicholas Campanella. \u201cThere is going to be a point where stakeholders like politicians, consumer advocates and regulators want to step in and deal with that.\u201d<\/p>\n

US electricity demand is expected to grow 25 per cent by 2030 and 78 per cent by 2050 from 2023 levels, according to a report by ICF, a consulting group. Residential prices are projected to increase by between 15 per cent and 40 per cent, according to a sample of four utility service areas.<\/p>\n

A workaround to providing power for data centres, while sparing taxpayers, is for \u201chyperscale\u201d developers such as Amazon, Microsoft and Meta to help fund utilities\u2019 investments by paying directly or through special tariffs.<\/p>\n

\u201cWhether we have to build them a substation or build an extension for a transmission line, we would charge our data centres directly for that,\u201d said Xcel Energy chief executive Bob Frenzel.<\/p>\n

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Gustavo Garavaglia, chief financial officer of AES Utilities, said: \u201cOur guiding principle is that customers cannot be harmed by the creation of new data centres. We have clauses in our agreements that protect us, like minimum terms, and they are committed to a certain amount [of energy] every month.\u201d <\/p>\n

In March, Dominion Energy \u2014 which serves Virginia, home to the highest concentration of data centres in the US \u2014 proposed the creation of a rate structure for energy users that demands loads of 25 megawatts or more and a minimum 14-year contract provision for new high-load customers.<\/p>\n

Determining how much to build and who pays for investments can be difficult. Since hyperscalers pitch to multiple utilities at a time, demand forecasts are likely to be inflated. <\/p>\n

\u201cIf they reach out to four or five utilities, they all have to assume they\u2019re going to get the project and then put it into their plan, said Todd Snitchler, president of the Electric Power Supply Association. \u201cBut if the objective is to marry supply and demand in a way that doesn\u2019t result in customers being overcharged, we need to have a better handle on this.\u201d<\/p>\n

Some data centres are planned to be built next to existing sources of generation, which minimises the amount of required transmission upgrades.<\/p>\n

But a problem is that this can lead to the need for new infrastructure elsewhere on the grid, which is harder to account for.<\/p>\n

\u201cIt\u2019s not always straightforward to tell who is responsible for what,\u201d said Astrid Atkinson, chief executive of Camus, a grid software provider. <\/p>\n

\u201cI think in theory, most folks would agree that if you trigger an upgrade, you should probably pay for it. But if you\u2019ve triggered an upgrade that\u2019s happening one or two states away, it\u2019s a more complicated conversation to have.\u201d<\/p>\n

However, some industry experts say that low prices in recent years have been responsible for power generation assets being in danger of closure.<\/p>\n

\u201cWe\u2019ve had the luxury of extraordinarily affordable energy for a long time \u2014 a couple of years ago, we were at risk of closing valuable nuclear assets because prices were honestly too low to support their operations,\u201d said Dan Eggers, chief financial officer of Constellation Energy.<\/p>\n

\u201cThese new customers use electricity all hours of the year. If we can do things to increase the utilisation of the power grid, that\u2019s a benefit, right?\u201d<\/p>\n<\/div>\n\n
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