Grid reliability projected to decline as data centers drive demand, watchdog says

The outlook for electric grid reliability in North America is worsening, as demand may outpace supply in the years ahead, according to a key watchdog.

In its annual Long-Term Reliability Assessment, the North American Electric Reliability Corporation (NERC) warned that demand from new data centers and other large loads is expected to outpace energy supply growth.

The international regulatory authority significantly ratcheted up its 10-year summer peak demand forecast, expecting demand growth to be 69 percent higher than what it projected in last year’s report. 

“New data centers for artificial intelligence and the digital economy account for most of the projected increase in North American electricity demand over the next 10 years,” NERC’s report said.

The report indicated several parts of the country will be at “high risk” for electricity supply shortfalls by the end of the decade.

It said that states served by the Midcontinent Independent System Operator could be at high risk starting in 2028, while parts of Texas, the northwestern U.S., the mid-Atlantic and parts of the Midwest could be at high risk starting in 2029.

The report also warned that most new power set to come online includes solar and battery storage, which the report described as “inverter-based and weather-dependent resources that increase the complexity of planning and operating a reliable grid.”

It also noted that fossil fuel plants may retire in the next five years, “reducing the amount of generation that has fuel on site and impacting the system’s ability to respond to spikes in demand.”

NERC is a regulatory authority responsible for the continental U.S., Canada and the northern part of Baja California, Mexico. It was founded by representatives of the electric utility industry and was later designated by the U.S. government as the Electric Reliability Organization that develops and enforces standards for the grid.

“This assessment is not a prediction of failure but an early warning on the trajectory of risk,” said John Moura, NERC’s director of Reliability Assessment and Performance Analysis, in a statement. “The path forward is still manageable but only if planned resources come online and on time.”

To address the issues, the report recommends expediting new power sources and approval processes, among other strategies.

The Trump administration has broadly embraced data centers and has sought to fast-track their buildout — though recent messaging from the administration has also said they should bring their own power sources online.

The administration has been supportive of fossil fuels and has sought to hamper renewable energy projects.