With power demand rising and expected to continue to rise, there is a growing need for power reliability. Reserve margins during high power demand weather events, both hot and cold, have been barely adequate in some regions. In our power grid regions, scarcity must be avoided since demand spikes during extreme heat or cold can lead to shortages, blackouts, and spiking fuel prices. In those extremes, it is things such as inadequate pipeline capacity that make natural gas prices spike in some regions, resulting in local scarcity in a time of need. Since natural gas is used both for electricity and heat, the local draws can be very large in the winter. With new demand expected on the natural gas supply for LNG exports, there will be a need for more pipelines, big and small, short and long. With grid demand expected to rise due to AI data centers, electrification, and presumably in the U.S., reindustrialization, there will be a need for more natural gas, since it is extensively used in industry.
The Energy Information
Administration shows in the graphs below that natural gas production from the
Appalachian Basin is expected to grow considerably in the next few years to
2030. Gas from the Southwest, Permian, and other Texas plays, is expected to
grow just slightly. Gas from the Haynesville (I believe it is reflected in the
graphs as ‘Gulf Coast (onshore)’) is expected to grow modestly. According to
the graphs, Appalachian production will grow from current levels of 12TCF
annually to about 15TCF in 2030. That represents 25% of growth over 4.5 years
or about 5.5% growth per year. That is doable, but it is also a lot of gas.
Current production of around 33BCF/day is expected to grow to over 41BCF/day,
an additional 8.25BCF/day. That will likely require that several hundred to a
few thousand more wells would need to be drilled per annum. At current
Appalachian rig counts of 33 rigs (some of which are drilling in high liquids
areas), the region would need around 30 more rigs to achieve that production
growth. That means a near doubling of rigs. It will not happen without clear
price signals, pipeline capacity, firm capacity agreements, increased LNG
export capacity, and LNG demand. The EIA thinks that LNG exports will drive
natural gas production growth and seems to forecast little growth from domestic
consumption, which would include data center consumption, electrification
consumption, and reindustrialization consumption.
Natural gas, along with coal,
nuclear, hydro, and geothermal, provides needed dispatchable generation. The
Midcontinent and East Coast regions just narrowly avoided blackouts during a
June heat wave. As FERC chairman Mark Christie put it:
“We’re simply not building generation fast enough, and
we’re not keeping generation that we need to keep… Some of our systems really
came close to the edge.”
PJM Interconnection saw demand
larger than their summer forecasts and was down to 10GW of spare capacity. They
noted that demand response (DR) was essential to reducing load, with about 4GW
of DR being tapped. Of course, when commercial loads are lowered, it can affect
manufacturing output, so those companies may be compensated for dropping loads.
According to Utility Dive:
“The U.S. may need to require utilities and other
load-serving entities to meet mandatory reserve power supply targets, according
to Christie. “I personally think we’re going to have to move toward something
like that, because … look at how tight all these grid operators were … coming
right up to the edge of not having enough resources.”
Christie also noted that while
wind and solar can be good sources of energy, they are not good sources of
capacity since they can’t be called on when needed.
Texas is at the center of power
scarcity and abundance strategies and debates. AEP reports their forecasted
load growth at 24GW, with more than half in Texas, a 15% increase from their
previous estimate. They note that 5GW of load growth is expected in Texas just
to power new cryptocurrency mining. William
Fehrman, AEP president and CEO, noted:
“Potential customers are drawn to AEP’s footprint
because of our advanced transmission network capable of delivering consistent
large load power,” he said, adding that the company owns more 765-kV lines than
all other utilities combined.
AEP’s current load is 37.6GW, so
that is an expected 39% increase in load in less than five years, an average
8.66% increase per annum. It grew by about 12% in the past year.
The EIA confirms that Texas is
ground zero for energy demand growth, as they predict 22% of electricity sales
growth in just two years from 2024 to 2026 for ERCOT, as shown below. PJM is
expecting modest to robust growth of 7.5% over two years, but some other
eastern regions are not expecting power sales growth.
A new law in Texas gives ERCOT the
power to curtail power to data centers and other large, non-critical power
consumers during power shortage events. It also includes “a voluntary demand
response procurement program under which loads of 75 MW or more could ramp down
or switch to backup generation at utilities’ request.” ERCOT forecasts 138
GW of large loads on its grid by 2030, up from 87 GW this year. In the San
Antonio area, ERCOT is deploying 15 temporary emergency generation units
totaling 400MW in a reliability-must-run (RMR) agreement and another RMR
agreement for an aging 400MW plant. I assume these are natural gas plants. The
law mandates the installation of shutoff equipment as a condition of grid
interconnection for loads over 75MW. There is a lot of uncertainty about data
centers, with some experts saying 80-90% of proposed data centers won’t get
built. PJM could also tie data center approval with a requirement to
participate in demand response, but they have yet to do that. Owners of
underutilized gas peaking plants might like to be utilized for data centers,
either behind-the-meter or through the grid, at least until the more efficient
gas turbines become available again.
The DOE put out a report in July
that said load growth combined with plant retirements and an overall loss of
dispatchable generation could lead to future blackouts. Utility Dive noted some
details:
“DOE’s report assumes 104 GW of plant retirements by
2030, alongside the addition of 210 GW of new generation — but only 22 GW of
the additions will be “firm, reliable, dispatchable generation.”
In partisan fashion, the title of
the report blames “a radical green agenda” for the potential shortfall, while
also noting that the rise in demand is quite new. They expect grid reliability
to decline in all regions. A factsheet about the report notes more details:
· The
report estimates an additional 100 GW of new peak hour supply is needed by
2030. Of this, 50 GW of this is directly attributable to data centers.
· Data
centers can be built in 18 months, but it takes more than three times as long
to add new generation required to service those data centers to the grid.
· Load
growth is accelerating at a rate not seen in decades. The energy infrastructure
industry, which is accustomed to moderate to zero load growth, needs to
innovate to keep up with the demand.
· Intermittent
energy sources like wind and solar will not meet reliability demands, and the
planned closures of firm, reliable power sources like coal are dramatically
greater than expected additions.
Environmental groups
such as the Sierra Club slammed the report’s methodology as biased against
renewables, but if those demand growth numbers are correct, there will indeed be
a need for considerably more dispatchable generation. The Trump administration
declared an energy emergency earlier this year that gives it the authority to
order some plants to remain online past their planned retirement dates. In
light of other issues, such as the current shortage of gas turbines, which is
expected to last another year or two, that is probably a good idea. Recently,
Talen Energy petitioned the DOE to allow it to run an oil-burning unit at a
power plant in Baltimore to remain online past its retirement date. The
petition was approved. The environmental groups also criticized the orders to
keep plants online.
Power consumers are concerned with
the potential effects of growing power demand on their electric bills. It is a
real concern as PJM’s latest capacity auctions have led to massive increases in
capacity prices that will likely increase power prices more than they already
have. In PJM, prices have increased 10-15% in Ohio and 20% in New Jersey, and
there may be more increases ahead, unfortunately. Others have said the data
centers are not yet affecting power prices, but if the capacity auctions show
that demand is outpacing supply due to perceived future demand growth means
then they kind of are affecting power prices.
The Abundance Movement: Bipartisan, but the Dems Stand to
Gain by Adopting a More Sensible, Pragmatic Approach to Energy and Technology
An opinion piece in Utility Dive
by Arjun Krishnaswami argues that some utilities are benefiting from energy
scarcity, but I do not think I agree. Krishnaswami mentions the recent
popularity of a book by Ezra Klein and Derek Thompson called ‘Abundance,’ which
says we are not building enough nor fast enough due to permitting red tape and
other ‘liberal’ snafus. Project cost and time overruns have become the norm for
large projects. There is also an abundance movement independent of Klein and
Thompson, with the Abundance Institute arguing in favor of techno-optimism and
combating techno-pessimism and techno-phobia. I wrote a little about this about
a year ago in an article about Dynamism vs. Stasis. Krishnaswami was a policy
advisor in the Biden administration. He seems overly focused on renewable
energy, arguing about the merits of 100% clean electricity, when we are nowhere
near that possibility. Along with Klein and Thompson, he advocates for the
acceleration of all clean energy to combat climate change. I believe that is
unrealistic. Krishnasami says Klein’s and Thompson’s focus on streamlining
permitting, simplifying government processes, and making public investments
more focused is not enough. He thinks we are not building clean energy fast
enough. That is neither here nor there since subsidies are about to go away for
wind, solar, and other clean energy buildout, including EVs. The chances of
increasing buildout in the next few years don’t look good to me. He notes
Klein and Thompson’s solution to increasing clean energy buildout:
“1) opposition from people who live nearby specific
projects and groups concerned with local environmental impacts and 2)
“everything-bagel liberalism,” the tendency to add too many strings to
government incentives. The solution to the first problem, they argue, is to
limit the power of the opposition by streamlining federal permitting and
constraining public input in state and local siting processes. And for the
second, their remedy is to limit the number of goals of government programs and
reduce the requirements for funding.”
I think those are decent arguments
to incentivize or at least not disincentivize energy projects. However,
Krishnaswami says it is not local opposition, liberal environmental opposition,
and government permitting difficulty that are slowing the buildout, but vested
utility interests. He complains about PJM’s broken interconnection process, the
slowest and most backlogged in the country. However, the slowness may reflect a
methodology to keep power affordable, and not let it balloon like it has in
California and the Northeastern states. His answer to who is driving the
scarcity is as follows:
“It is the incumbent utilities that own the fleet of
aging coal-fired power plants, which are struggling to compete with new clean
energy projects. If cheap clean energy is allowed to enter the market, these
companies will make less money. The outdated processes for approving new
projects help prevent cheaper energy resources from threatening their business
model. The companies have significant decision-making power — together, power
plant owners, transmission owners (many of whom also own generation) and other
energy service suppliers make up 60% of the voting power in PJM decisions.”
It should perhaps be noted that in
the Northeast and Midwest, where PJM operates, solar and wind resources provide
less output than solar in the sunny West and Southeast and wind in the western
Midwest, Southwest, and Great Plains. Thus, wind and solar are both less
economical due to lower output and are less able to replace lost gas, solar,
and nuclear generation due to both lower output and intermittency. Thus, the
natural abundance of clean power is lower in PJM’s region. Of course, utilities
want to get returns on their investments in dispatchable generation, especially
as some of it is forced to be used inefficiently to back up renewables and to
be shut-in when renewables are at peak daily availability. He suggests changing
policies, rules, business models, and profit margins are the answer, but I
disagree. He seems to be disregarding the very real and urgent need to assure
reliability with baseload and dispatchable power.
A new think tank, Washington Power
and Light, aims to build America with energy abundance and change liberal
approaches to energy to embrace energy pragmatism and pragmatism in general. I
am a fan and wrote about pragmatism as a uniquely American philosophical methodology earlier
this year. They call pragmatism the new radicalism, but being pragmatic is
being sensible and realistic, which is hardly radical, so I would disagree with
that saying. I agree wholeheartedly with them that energy abundance enables
many things while energy scarcity dis-enables. They suggest that we spend too
much time worrying about demand and too little time increasing supply.
They seem pleased with the recent
work of the American Enterprise Institute (AEI), which they say is a
center-right group, and cite an AEI article by climate scientist Roger Pielke
Jr. and Ray Teixeira about public debate in climate and energy policy. Some of
the key points of the article are that the prevailing public views, at least on
the liberal side, are more radical than the IPCC’s climate policy views. They
say the public does not support a rapid drawdown of fossil fuels but an
all-of-the-above energy strategy, including increasing domestic oil and gas
production. They say the public is focused on energy affordability and
convenience and is not willing to pay high costs for faster decarbonization.
They utilized a climate/energy survey with detailed questions just before the
2024 election to derive the prevailing public views. Environmental groups were
dismayed by Obama’s all-of-the-above energy policy, but most people support
such a policy, they say. However, those groups grew in power under Obama and
more radical groups emerged, far more catastrophist about climate than the
IPCC. Below are the survey data on voters’ energy priorities. A key point of
the survey is that voters are not all that willing to pay for climate action,
since they have other energy priorities.
Washington Power and Light notes
the new bipartisan Build America Caucus, currently composed of 17 Democrats and
11 Republicans, as a cooperative group focused on things that matter, including
the following:
They hope to reduce
gridlock, red tape, and delay. The building includes infrastructure, both clean
and fossil fuel, other infrastructure, new technology, and housing, all of
which are clear needs. This is a great example of sorely needed bipartisan
Congressional cooperation to solve problems that need solving.
As Ralph Benko and Jeff
Garzik of Washington Power and Light put it:
“After many years of yearning, expressed by bipartisans
of both parties, a convergence between Abundance Democrats and Equitable
Prosperity Republicans is beckoning, optimally beginning with good abundance
energy policies.”
Abundance is rather synonymous
with economic growth. Benko and Garzik invoke endogenous growth theory, which
sees economic growth as primarily the result of internal forces, rather than
external ones. “It argues that improvements in productivity can be tied
directly to faster innovation and more investments in human capital from
governments and private sector institutions.” This can involve government
and private sector institutions supporting innovation initiatives and offering
incentives for individuals and businesses to be more innovative, such as
R&D funding and intellectual property rights. According to Investopedia:
"Economist Paul Romer put forward the argument that
technological change is not just an exogenous byproduct of independent
scientific developments. He sought to prove that government policies, including
investment in R&D and intellectual property laws, helped foster endogenous
innovation and fuel persistent economic growth.”
Romer won a Nobel Prize in
economics in 2018 for his work on economic growth and technology. However,
endogenous growth theory has been criticized as difficult to measure and
validate. Romer suggested that 50%-80% (or more) of our rising standard of
living comes from technological innovation.
Benko and Garzik argued in an
article at Hackernoon that there has been too much emphasis on demand and not
enough on supply. Abundance is a result of adequate supply. The article
recounts a history of supply-side economics and its advocates like Rep Jack
Kemp, Prof. Robert Mundell, and Dr. Arthur Laffer, who respectively were
praised by Reagan, Obama, and Trump. Apparently, the abundance rhetoric of
Klein and Thompson is finding support throughout the Democratic Party from moderates
to Progressives. Klein is considered to be center-left. Energy abundance is a
key part of abundance, which is synonymous with what the right has called
prosperity. Below is Benko and Garzik’s summary of the debates within the
Democratic Party about abundance.
They conclude their Hackernoon
article with the following observations and insights about the abundance
movement:
“The abundance movement represents a significant
intellectual development within the Democratic Party, advocating for a shift
towards a more proactive, supply-oriented approach to solving America's
challenges.”
“It champions deregulation, public investment, and a
focus on tangible outcomes in areas like housing, energy, and infrastructure.
However, this agenda faces opposition from environmentalists concerned about
regulatory rollbacks, economic populists who prioritize redistribution and
fighting corporate power, and social equity advocates who demand guarantees of
fairness and inclusion.”
“The ongoing debate between these factions will undoubtedly shape the future direction of the Democratic Party, and, thereby, that of America. The supply-side progressive forces appear to be gaining momentum.”
References:
Want abundant
energy? Ask who benefits from scarcity. Arjun Krishnaswami. Utility Dive.
Opinion. July 30, 2025. Want
abundant energy? Ask who benefits from scarcity. | Utility Dive
FERC’s
Christie calls for dispatchable resources after grid operators come ‘close to
the edge’ Ethan Howland. Utility Dive. June 27, 2025. FERC’s
Christie calls for dispatchable resources after grid operators come ‘close to
the edge’ | Utility Dive
Texas
law gives grid operator power to disconnect data centers during crisis: The new
law pairs mandatory curtailment with a voluntary demand response procurement
program. Brian Martucci. Utility Dive. June 25, 2025. Texas
law gives grid operator power to disconnect data centers during crisis |
Utility Dive
Build
America With Energy Abundance: A Bipartisan Path to Prosperity. Ralph Benko and
Jeff Garzik. The Fulcrum. August 1, 2025. Build
America With Energy Abundance: A Bipartisan Path to Prosperity
We
expect rapid electricity demand growth in Texas and the mid-Atlantic. EIA. July
31, 2025. We expect rapid
electricity demand growth in Texas and the mid-Atlantic - U.S. Energy
Information Administration (EIA)
Eastern
U.S. natural gas increasingly meets LNG-fueled demand growth in AEO2025. EIA.
July 29. 2025. Eastern
U.S. natural gas increasingly meets LNG-fueled demand growth in AEO2025 - U.S.
Energy Information Administration (EIA)
Enverus
U.S. Daily Rig Count. U.S.
Daily Rig Count | Enverus
AEP
expects to add 24 GW of load by 2030, mainly from data centers. More than half
of the pending load is in Texas, where AEP Texas is set to interconnect 5 GW of
cryptocurrency operations, per William Fehrman, AEP president and CEO. Ethan
Howland, Utility Dive. August 1, 2025. AEP
expects to add 24 GW of load by 2030, mainly from data centers | Utility Dive
Load
growth, plant retirements could drive 100x increase in blackouts by 2030: DOE.
Robert Walton. Utility Dive. July 8, 2025. Load
growth, plant retirements could drive 100x increase in blackouts by 2030: DOE |
Utility Dive
The
Department Of Energy’s Resource Adequacy Report Affirms The Energy Emergency
Facing The U.S. Power Grid. DOE Fact Sheet. July 7, 2025. DOE_Fact_Sheet_Grid_Report_July_2025.pdf
Towards
21st Century Equitable Prosperity: From Reaganomics to the Abundance Agenda. Ralph
Benko and Jeff Garzik. Hackernoon. July 2nd, 2025. Towards
21st Century Equitable Prosperity: From Reaganomics to the Abundance Agenda |
HackerNoon
Endogenous
Growth Theory: Definition, History, and Criticism. Daniel Liberto. Updated
September 7, 2023. Reviewed by Eric Estevez. Investopedia. Endogenous
Growth Theory: Definition, History, and Criticism
The
Science vs. the Narrative vs. the Voters: Clarifying the Public Debate Around
Energy and Climate. Roger Pielke Jr. and Ruy Teixeira. American Enterprise
Institute. July 9, 2025. The
Science vs. the Narrative vs. the Voters: Clarifying the Public Debate Around
Energy and Climate | American Enterprise Institute - AEI
NEW
CAUCUS: New Bipartisan Build America Caucus Launches to Support Pro-Growth
Policies. Representative Josh Harder. May 8, 2025. NEW
CAUCUS: New Bipartisan Build America Caucus Launches to Support Pro-Growth
Policies | Representative Josh Harder
Electricity
cost concerns grow amid push for more AI data centers. Meg Hilling. WDTN
Dayton. August 2, 2025. Electricity
cost concerns grow amid push for more AI data centers
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