There are solutions to Oregon’s looming power crunch. Here’s what’s on the table
It’s the bedrock bargain between monopoly electric utilities, the customers that rely on them, and regulators nationwide:
Provide the service reliably. And provide it affordably.
For safety and convenience, customers abhor when the power goes out. And regulators and advocates get deeply exercised when customers experience rate shock or get cut off for their inability to pay for the essential service.
So that’s the implicit deal. Don’t let the lights go out. And don’t gouge the ratepayers. Accomplish that, and private utilities can maintain their monopoly service territories and steady profits.
Yet in Oregon, that compact is cracking under the weight of exploding demand from data centers, soaring electricity rates and clean energy mandates that require electric utilities to slash 80% of their greenhouse gases by 2030 and eliminate them altogether by 2040.
Those targets were always a stretch, but data centers’ soaring power demand has complicated the picture considerably while straining the existing electrical grid.
Utilities and regulators have a range of options to meet the Northwest’s power demand, pursue its climate goals and keep the lid on rates. But none are fast, easy or cheap. Just keeping the juice flowing may require painful compromises.
Power planners are working to chart a path forward using a mix of existing and emerging technologies, regulatory changes and operational reforms. And advocates want to keep the pressure on.
“We have the solutions,” said Nora Apter, Oregon director of the advocacy group Climate Solutions. “It’s about whether we have the willingness and commitment to act on them.”
Data centers cut back
Data centers are almost wholly responsible for the big jump on Oregon electricity demand this decade, and trends suggest the industry will want even more of the state’s power as the artificial intelligence boom accelerates. Forecasters project data centers could use a quarter of Oregon’s power by 2030.
That’s when energy consultants say the Northwest faces a potentially massive gap between the region’s energy demand and its supply.
State lawmakers sought to contain tech companies’ impact by passing the POWER Act last year. The law requires Oregon data centers to shoulder the cost of new generation and transmission lines to power their installations. But utilities and ratepayer advocates are already at odds over just how much data centers should pay.
Another option is to reduce data centers’ electricity use at peak times, when extreme weather pushes energy demand above supply. Texas lawmakers passed a bill last year that cuts off data centers when energy crises hit.
Tech companies have spent billions of dollars building and equipping their Oregon data centers and may resist the notion of shutting them down — even for just a few days each year. But they might be more accommodating if they knew in advance they could get more power now in exchange for a little flexibility during peak times.
“They are not going away anytime soon, and adding the flexibility to them will really make them easier to get connected,” Baskar Vairamohan, technical executive with the Electric Power Research Institute told a meeting of regional power planners earlier this month.
New data centers could be required to install backup power, diesel generators or long-duration batteries to keep them operating during a power crunch.
These solutions have limits, though. Diesel backups can only run for so long — perhaps 50 hours in a year — before triggering environmental penalties for spewing exhaust into the air. And batteries would run dry during an extended blackout.
These are the difficult trade-offs confronting a panel of energy and policy professionals Gov. Tina Kotek appointed Tuesday to study the impact of the data center industry on the state’s environment and power supply. They hope to make policy recommendations by fall, well ahead of next year’s legislative session.
But the panel won’t scrutinize the enormous tax breaks that brought the data center industry to Oregon, incentives that will save the industry nearly $390 million this year.
There’s at least a chance that Oregon’s data center boom will burn itself out. If there’s no power here, the tech industry will shift to states with more capacity. That could buy the state some breathing room.
Upscale energy efficiency
Energy efficiency is the centerpiece of a state energy strategy released this fall by the Oregon Department of Energy.
The document calls energy efficiency a “least-cost resource” that can reduce utility bills while supporting reliability. One scenario shows efficiency measures could cut Oregon’s overall energy demand by more than a fifth over 25 years.
“If more homes and buildings were converted from electric resistance to heat pumps for heating and water heating, peak loads would decrease substantially,” said Brian Stewart, co‑founder of Electrify Now, a Portland-based electrification advocacy group. It could also save families — particularly renters — a lot of money.
Roughly 20% of houses and 65% of apartments in Oregon rely on inefficient electric resistance heat such as baseboard or wall heaters, according to the Northwest Energy Efficiency Alliance’s Residential Building Stock Assessment.
More efficient water heaters could also reduce those customers’ power needs by more than 20%, further reducing peak loads and saving customers hundreds of dollars, Stewart said.
The steep cost of heat pumps remains a major barrier, said Jim Plantico, program manager with the Community Energy Project. The Portland nonprofit performs free energy retrofits for low‑income homeowners and renters — whole‑house weatherization paired with heat pumps — funded by a $10 million grant from the Portland Clean Energy Fund.
Last year, the group completed only 170 projects because the retrofits averaged more than $42,000. Many qualifying homes lack insulation, have broken windows or outdated wiring, pushing costs higher, Plantico said. Others require major deferred maintenance — fixing leaky roofs, getting rid of mold — before efficiency work can even begin.
Data centers could help. In a recent filing with the utility commission, the Oregon Citizens’ Utility Board proposed requiring data centers to fund energy‑efficiency upgrades in low‑income homes — particularly those with highly inefficient HVAC systems — to offset some of their own electricity use.
Stewart said large commercial buildings, which account for nearly 20% of Oregon’s energy use, can also move the needle on efficiency. New state building energy performance standards will soon require large commercial building owners to measure and reduce energy use over time, following targets adopted last year by the Oregon Department of Energy. The mandate takes effect in 2028.
Transmission fixes
One of the primary barriers to meeting Oregon’s emissions mandates amid growing demand — some say the most important — is the lack of transmission capacity to deliver renewable power to customers.
Nominally, the region’s electricity grid is full, and the Bonneville Power Administration, which operates three quarters of the high-voltage lines in the Northwest, faces a massive backlog of requests for more capacity. Bonneville has a slate of new transmission and upgrade projects to address those requests and will be under pressure to deliver on them.
In the meantime, however, experts say the existing system is actually dramatically underutilized.
If a new power plant wants a long-term contract to connect to the grid today, it has to contract with Bonneville or a utility for “firm” transmission rights for the entire capacity of the plant, whether it uses that capacity around the clock or for a few hours a day. That’s an obvious mismatch for renewables like wind and solar, which only produce when the wind is blowing or sun shining.
A better way to manage the system, said Spencer Gray, executive director of the Northwest & Intermountain Power Producers Coalition, would be to move to more flexible transmission contracts, allowing grid operators to efficiently use its capacity and curtail service in rare instances when the system is constrained.
Better regional — and interregional — coordination of transmission has always been high on experts wish lists to diversify energy supplies, eliminate duplicative investments and improve grid reliability. As it stands, the Northwest has a balkanized regional grid fragmented into individual utility fiefdoms rather than coordinated as a single, efficient network, as it is in much of the rest of the country.
But achieving that level of cooperation always been a challenge in the Pacific Northwest.
“Nobody else likes someone else running their thing,” Letha Tawney, chair of the Oregon Public Utility Commission, said at a recent energy policy forum. “They just don’t. Ask my kids.”
Artificial intelligence is driving demand for transmission, but AI could also help solve the problem, alongside other so-called grid enhancement technologies like advanced conductors that significantly increase the capacity of existing equipment. PGE, for example, just completed a joint project with an AI company called Gridcare that used better forecasting to unlock an average of 84 megawatts of incremental annual capacity on existing lines to serve a data center in Hillsboro.
Gov. Tina Kotek has stepped into the fray, too. She issued an executive order last year directing the Oregon Department of Energy and Public Utility Commission to develop a framework to expedite transmission projects by identifying and designating transmission corridors, streamlining siting and permitting approvals for future projects and targeting financial support for projects.
“There are near-term steps agencies can take to accelerate deployment and progress on transmission,” said Apter of Climate Solutions.
Power to the people
Another major opportunity, experts say, lies in shifting from a centralized, top‑down utility system to a more democratic grid — one that depends on residents, businesses and communities to ease demand and supply some of the power. That entails customers cutting or shifting their energy use as well as installing solar panels and batteries and participating in community solar projects, microgrids and virtual power plants.
Some of that is accomplished by using smart thermostats, charging EVs during off‑peak hours or trimming electricity use during heat waves or cold spells. PGE, for instance, offers a Time of Day rate with cheaper off‑peak prices and higher peak rates to encourage shifting.
Customers can also become energy producers by investing in rooftop solar, home batteries and smart devices, or by joining community solar and microgrids — small-scale, local energy systems that generate, store and distribute power to a neighborhood, school or hospital. These tools give people more control over their electricity use and offer backup power during outages.
The energy produced is more costly than from a utility-scale project. But aggregating power from home devices can reduce peak power consumption by tens or even hundreds of megawatts per year, reducing the need for costly new infrastructure and lowering energy bills for everyone.
PGE residential customers who own battery systems, for example, can enroll in a pilot program that allows the utility to draw power from them during periods of peak demand. The customers, in turn, save hundreds of dollars per year.
“Imagine there are thousands of people doing that,” said Stewart with Electrify Now. “It takes a huge chunk out of your peak loads, which means that we don’t have to build new wires and new capacity. So everybody wins from this.”
The challenge: a home battery can cost more than $20,000. And widespread use of customer‑owned devices would cut into utility profits, one reason utilities have been slow to embrace the new model.
Both PGE and PacifiCorp are taking steps toward a more decentralized grid. PGE is working with customers to shift energy use away from times of highest demand. But those efforts are entirely in‑house, Stewart said, while other states and countries rely on third‑party companies that aggregate home batteries, thermostats and other devices into massive virtual power plants. Those private aggregations, he said, dwarf what PGE is developing and can be far more cost‑effective.
Wildfire liability caps
Utilities want some form of cap on damage awards due to wildfires caused by their equipment, or some mechanism to shift some of the resulting cost to ratepayers.
Lawmakers and regulators have so far dismissed utility proposals, but there’s little doubt that such liabilities, and the growing expense of guarding against them, have become a major financial pinch point. PacifiCorp has paid about $1.7 billion to settle claims related to Oregon’s Labor Day fires in 2020 and faces billions more in potential liabilities. The company has seen its credit rating downgraded to just above junk bond status as a result.
That matters because it increases borrowing costs for the debt the company will take on to finance new renewable and transmission projects — costs shouldered by ratepayers. The company says the current legal regime makes Oregon an unattractive and risky locale to invest.
The related cost of insurance, weather stations, tree trimming and other expenses to mitigate wildfire risks are also growing. And while some criticize utility proposals to offload the costs or cap their responsibility, Tawney at the PUC says Oregon is one of only two states without any form of wildfire liability cap.
“If we don’t solve the wildfire risk,” she said, “we won’t solve any of this.”
Nuclear renaissance
Big tech companies, utilities and even some environmentalists are touting a new class of nuclear power plant as a potential solution to the region’s energy woes. Advocates say small, modular reactors are safer than their troubled predecessors from the 20th century and emit no carbon. An Oregon company, NuScale Power, is among those furthest along in developing the new technology.
But nuclear plants are illegal in Oregon. State voters outlawed them in 1980 until the federal government found a permanent disposal site for toxic nuclear waste — a goal that has advanced little in the intervening 45 years.
Amazon is looking to get around that by siting modular reactors in Richland, Washington, just across the Columbia River from the company’s data centers in Morrow and Umatilla counties. PacifiCorp, meanwhile, is working with a partner to build an advanced reactor on the site of a former coal plant in Wyoming.
But modular nukes are still in their infancy — there are none operating in the U.S. and no one knows if the technology will deliver. Siting, permitting and building new reactors will likely take at least another decade, far too late to address the extreme energy crunch facing Oregon between now and 2030.
Moreover, it’s not clear nuclear power will actually be cheaper than alternatives. Jennifer Light, planning director for the with the Northwest Power and Conservation Council, said there’s a lot of uncertainty about whether the small reactors will be cost effective, technologically feasible and provide the flexibility the region needs.
The same holds for offshore wind farms and turbines that burn hydrogen, both touted as potentially huge and reliable sources of carbon-free energy. They’re on many advocates’ wish lists. But they each involve massive infrastructure investments and face technical and regulatory hurdles, political opposition and economic uncertainty.
Neither will help meet Oregon’s 2030 targets, and relying on them by 2040 may also be magical thinking.
Put the brakes on
This one’s anathema to climate activists. But it may be inevitable that Oregon relaxes its clean-energy targets.
The state’s emissions targets and timelines are among the most ambitious in the country. But lawmakers provided two offramps.
The first is a cost cap. If a utility projects that meeting the law’s targets would increase its costs of providing service above a 6% threshold, it can ask to delay compliance. The same holds if compliance would compromise service reliability.
Any delay might mean relying on natural gas as an interim solution for longer. Gas turbines are dirty. They’re expensive. And adding any new capacity is risky, challenging and slow.
Gray, the head of the power producer’s coalition, says there’s nothing magical about the “deeply aspirational” deadlines that lawmakers established in 2021. The region will continue moving forward on grid decarbonization. But a lot has changed in the past five years.
“We’re not opposed to altering the law to meet reality,” he said, “and have a regional conversation about what’s actually possible.”