24/10/24
US data center growth effect on coal may be limited
New York, 24 October (Argus) — The US coal industry is pondering ways to respond
to the projected boost in domestic power demand linked to planned data centers
in the pipeline, but the centers' effect on coal could be mixed or limited. A
number of projects have been announced for coming years. But generators are
still grappling with uncertain estimates of which major projects in the US will
come to fruition, where they will be located and other criteria that will drive
demand. "Data center companies are shopping around in different utilities'
territories and showing up multiple times and being double counted", said Laurie
Williams, director of the Sierra Club's Beyond Coal Campaign. According to the
National Telecommunications and Information Administration, there are more than
5,000 data centers currently in the US, and demand for data centers in the
country is projected to grow by 9pc annually through 2030. Approximately 8-10
larger data centers could be developed across the US in coming years. A number
of large-scale projects, which could include so-called 'big tech' — Apple,
Alphabet (Google), Amazon, Facebook (Meta), and Microsoft — are going through
the feasibility study phase, Argus sources said. The Sierra Club is expecting
electricity demand from data centers to increase anywhere between 5pc-20pc/yr.
Some generators that spoke with Argus said they project growth of 9pc/yr, while
an "organic" increase in electricity demand was previously expected to be
2pc-3pc. The US Energy Information Administration (EIA) earlier this month
projected commercial electricity sales would rise by 3pc this year and 1pc in
2025, helping to boost overall electricity generation. "It is fair to say that
the growth of commercial demand for electricity is at least due in part to the
effect of data center development," said US Energy Information Administration
(EIA) economist Jonathan Church. "We cannot, however, provide a precise estimate
of what that effect is or what data center growth is." So far this year, US
coal-fired generation has fallen as lower-cost natural gas, nuclear and
renewable generation maintained or expanded their leads over coal in the
generation mix. EIA expects coal-fired generation to fall in 2024 and edge
higher in 2025 . A number of factors still need to come together before more
certain projections of data centers' impact on the US coal industry are
released, market participants said. Those include state environmental goals and
federal regulations, availability of overall energy infrastructure and different
generation types, and the approach that the IT sector will pursue when planning
new projects. At least some IT companies are favoring lower-CO2 emitting
generation. For example, Microsoft, Amazon and Alphabet recently have signed
agreements to use nuclear or renewable generation for some projects. Other
developers have indicated wanting to buy generation from wholesale electricity
markets. In addition, US utilities continue to retire coal units to comply with
US Environmental Protection Agency (EPA) rules. The amount of coal-fired
generating capacity available in the US is expected to shrink to 163.7GW by the
end of 2025 from 177GW in 2023, according to EIA. Longer life for coal plants?
But some in the electric power industry are concerned about enough generating
capacity being available to meet expected load growth because, in some cases,
new generating facilities need to be built to provide the amount of power
needed. "With the level of demand increasing, all energy resource consumption
will increase," Utah Office of Energy Development acting director Dusty Monks
said. "It is not out of the realm of possibility to say these industries (data
centers and AI) will surpass the energy use of traditional customers in the next
10-15 years". Some generators that project increased electricity demand driven
by data centers have proposed extending the operation of their coal plants.
Limited natural gas pipeline infrastructure in some regions and mine-mouth power
plants also support increased coal consumption to some extent. Alliant Energy
delayed the coal-to-gas conversion of a Wisconsin plant by three years to 2028.
Duke Energy may put off some coal-fired power plant unit retirements in Indiana,
with the intention of burning coal in the state until 2038 . Elsewhere in the
US, companies representing up to 15GW of load — mostly data centers — are
seeking service from American Electric Power by 2030. Other utilities are
continuing to convert coal-fired facilities to natural gas instead of retiring
them. While the EPA has rolled out rules for gas plant emissions, gas units may
still be more competitive financially and technologically over coal since gas
prices have been lower and new gas units generally are more efficient when used
as a backup to intermittent renewable energy. Even power plants in Utah, which
traditionally favored coal, generated nearly the same amount of power from gas
and coal over the first seven months of 2024 ( see chart ). US coal producers
are paying close attention to plans for data centers and possible effects on
coal demand but are still scaling back output. US coal mines' output totaled
591.5mn st (536.6mn metric tonnes) this year through 12 October, down by nearly
13pc from the same period in 2023, according to EIA data. Some of the states
with the greatest growth in commercial electricity demand still have relatively
large amounts of coal-fired generation , the EIA data show. But many of these
states are also natural gas generation hubs. This includes Virginia and Texas,
which had an outsized share of commercial generation growth last year. The fate
and plans of data center projects in the pipeline as well as economics,
regulation and company preference will determine the outcome for coal
generation. By Elena Vasilyeva Generation in selected states, January-July
2023-24 MWh Coal-fired generation Gas-fired generation Renewables Total States
2024 2023 2024 2023 2024 2023 2024 2023 Arizona 5,593,283 6,228,907 28,916,433
27,939,458 10,905,903 9,452,570 64,588,784 62,083,941 % of total 8.7% 10% 44.8%
45.0% 16.9% 15.2% Georgia 10,887,241 8,828,638 34,824,577 35,144,586 7,318,882
6,552,342 83,496,202 73,139,216 % of total 13% 12.1% 42% 48.1% 8.8% 9.0% North
Dakota 13,382,059 12,873,017 1,242,138 1,267,175 9,657,014 9,606,927 24,336,701
23,816,246 % of total 55% 54.1% 5.1% 5.3% 39.7% 40.3% Ohio 17,756,489 16,619,607
48,526,513 44,227,623 4,370,982 2,709,434 81,756,362 73,249,449 % of total 22%
22.7% 59% 60.4% 5.3% 3.7% Oklahoma 3,142,129 2,855,139 27,714,093 25,662,258
25,081,028 23,054,481 56,121,790 51,712,526 % of total 5.6% 5.5% 49% 49.6% 44.7%
44.6% South Carolina 9,885,901 8,792,049 12,670,286 13,811,018 3,254,362
3,198,205 59,528,878 58,292,079 % of total 16.6% 15.1% 21.3% 23.7% 5.5% 5.5%
Texas 34,791,194 39,405,356 160,458,170 154,904,393 99,240,556 90,277,178
319,162,821 310,039,675 % of total 10.9% 12.7% 50% 50.0% 31.1% 29.1% Utah
6,954,233 8,802,671 6,720,481 6,762,046 3,452,974 3,331,940 18,090,480
19,499,948 % of total 38.4% 45.1% 37% 34.7% 19.1% 17.1% Virginia 1,190,771
990,257 35,852,015 28,696,547 4,885,261 4,143,970 59,761,590 52,708,332 % of
total 2.0% 1.9% 60% 54.4% 8.2% 7.9% Wyoming 13,486,437 16,573,741 2,756,775
1,141,796 6,258,359 5,759,272 22,786,928 23,743,769 % of total 59.2% 69.8% 12%
5% 27.5% 24.3% — EIA Send comments and request more information at
feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights
reserved.
