Utility executives remain optimistic amid rising power demand, federal policy shifts

It is a particularly challenging time for US utilities as they deal with simultaneous challenges like rapidly increasing power demand, supply chain kinks, and federal policy uncertainty, but executives said they see opportunities and broadly agreed that all power grid resources will be needed to meet anticipated power demand growth.

For the first time after a long period of declining or flat power demand we are seeing "massive growth in power demand" and at the same time a new policy environment is taking effect, Meredith Annex, head of clean power for BloombergNEF, said on April 29 during the BNEF Summit New York, held in New York City.

"With the demand growth we are seeing in California, the challenge is real, and we have to figure out a ways to ensure that we can supply the power and deliver it safely, affordably and in a reliable way," Caroline Choi, executive vice president of public policy and corporate affairs at Edison International and Southern California Edison, said.

"We do have complexities as tariffs come into effect and get amended and how that affects the company in the long haul, we continue to analyze and figure out, but overall, we are very optimistic about the path that we are on," she said.

Electricity has always been on people's minds regarding economic growth, but utility executives are having very different conversations today than fifteen years ago, Bob Frenzel, president and CEO of Xcel Energy, said.

"At the federal level we are talking about energy dominance and national security around our product and at the state level we are talking about energy transitions," he said. He then asked who would have thought that utility executives would sit in the board rooms of Amazon and Nvidia and be a topic of conversation.

One challenge in supplying power for data centers is that the facilities require 24/7 supply, which is different than electric vehicle charging load, which tends to occur off-peak during the evenings.

By 2035 the US could have the same volume of power serving data centers as serving EVs and they are completely different load serving challenges, Frenzel said. Always-on loads like data centers are more of a challenge because more generation and transmission are needed to serve them, he said.

Choi agreed, saying that 500 MW of load can show up in months from a data center, while EV load growth is not that fast, making it easier to size the power system for that demand.

"We need to get ahead of that growth and that is important for policymakers to understand because we don't always know exactly where the load is going to be," she said, adding that rulemaking around electrification is driving load growth and utilities need to invest to meet it.

Figuring out where that load is going to materialize is causing utilities to take more risk than they are accustomed to managing, Frenzel said.

Power supplies

Asked about which new power generation assets are being built, Ken Zagzebski, senior vice president of AES, president of AES Utilities, and CEO of AES Indiana and AES Ohio, said that it will come down to timing.

"I think gas infrastructure, including the ability to build turbines and the capacity for that is limited, so you have to put infrastructure in places where manufacturing facilities are being built to meet the growth.

In the near term, there will be some additional gas, but you also need renewables which can be put in place very quickly, he said.

"I believe the country, from an industrial and energy policy perspective, needs to be pushing forward with nuclear energy," Frenzel said.

And that includes small modular reactors, and possibly some large traditional reactors, because of the large loads that are being added to the system, he said. Additionally, if the country builds more nuclear power plants, it should also build the supply chains for nuclear power, he said.

Regarding which resources can be constructed the fastest, Frenzel said wind, solar and storage are "available right now," but if you are not in the queue for a gas-fired turbine right now it will take four to five years to procure.

"We feel like we can continue a clean energy transition but you do need gas to firm up load so you can put in a simple-cycle gas turbine to backup wind and solar," he said. Storage is also an important piece but tariffs "put a wrinkle in that," he added.

Asked about onshore wind power, Zagzebski said his company thinks it is still economic.

Choi said, "we expect more onshore wind in California."

"We've got 15,000 MW to 29,000 MW of generation needs before the end of the decade and I would expect a significant portion of that to come from onshore wind," Frenzel said.