Power system must transform to meet AI-driven load surge: US energy officials

US energy infrastructure must undergo a fast and unprecedented transformation to meet the soaring electricity demands of AI and data centers, top federal energy leaders warned July 28 during a utility regulatory summit in Boston.

With rising power demand driven largely by the explosive growth in data center development and AI workloads, officials across the Energy Department, the White House and the Federal Energy Regulatory Commission made urgent calls for grid modernization, faster permitting and better cost allocation mechanisms.

"Basically, at this point, if you have megawatts to sell, somebody's ready to buy them from you," Deputy Energy Secretary James Danly said at the National Association of Regulatory Utility Commissioners' summer policy summit. "We have not been in a position quite like that in a long time."

Danly warned that legacy market structures are failing to reflect real-time scarcity and that electricity pricing signals are distorted by subsidies and permitting challenges. At the same time, data center developers are rushing to secure long-term contracts and interconnection sites to power energy-intensive AI operations.

"The imperative for us to win the AI race is pretty clear," Danly said. "Whatever the effect of AI is ... it's going to change the world, and we have a lot of competition around the world to establish dominance in artificial intelligence."

Danly called the data center and AI boom "transformational," likening the current moment to World War II mobilization, with infrastructure needing to be built in 12-18 months, not decades. The DOE is identifying its own sites for potential datacenter development and offering funding, partnership facilitation and permitting assistance to accelerate projects.

White House pushes for speed, reform

Peter Lake, senior director of power for the White House's National Energy Dominance Council, echoed that urgency and said the Trump administration is "100% focused" on delivering enough electricity to win what he called the "AI arms race."

"The future of AI is going to be at the intersection of data and power," Lake said. "And this is very much, we feel at the White House, an inflection point in the history of industrial technologies."

Lake said the US is "falling behind on the power side of the equation," hamstrung by long permitting timelines and slow interconnection processes. In parts of the country, it takes longer to connect a data center to the grid than it took to put a man on the moon, which was eight years and two months, Lake said.

Lake highlighted executive orders that focused on accelerating nuclear generation as an example of the kind of speed needed across all generation types, as those orders were crafted and put on the president's desk in six weeks.

Lake also urged grid operators and regulators to optimize the existing system by extracting more capacity from current wires, delaying plant retirements, reforming interconnection timelines and scaling best practices from successful states.

"The old ways ... will not work," Lake said. "By definition, the way we used to do it cannot be the way we do it going forward."

'Who pays and who profits'

FERC Chairman Mark Christie struck a more cautionary tone, emphasizing that the load growth is real and must be met, but with fairness and cost responsibility in mind.

"The data center sector is driving increases in load and load forecasts that is just beyond anything I've ever seen," Christie said. "We have to build a ton more generation, no question about it."

But building alone is not enough, Christie added. As states weigh the billions of dollars' worth of infrastructure needed, utility commissions must focus on equitable cost allocation.

Christie pointed to the core principle of utility regulation: Reliable power at least cost.

"Reliable power means we have to build a lot more generation ... But least cost gets into the equally important issue of how are we going to allocate those costs?" Christie said. "The two most important questions in regulation [are] who pays and who profits."

Christie, a former law professor and utilities regulator in data center-heavy Virginia, will leave FERC in August.

Calls for coordination

Throughout the July 28 general session, officials stressed that federal agencies, state regulators and industry must work in tandem to address shared challenges, including rising costs, outdated permitting processes and mismatched market signals.

Danly made an open appeal to utility regulators and industry leaders.

"If you have great ideas, come to us with them. If you don't know who in the Department of Energy to talk to, reach out to my office ... You need assistance from the labs or you need information? We are available to you," he said.

Lake, too, called for open dialogue.

"We at the federal government want to partner with you all ... Tell us good ideas, tell us what not to do [and] help work with us to solve this problem," Lake said.

Despite the complexity of the challenge, speakers shared a common view: AI is here, its energy demands are only growing, and failure to act swiftly could cede leadership in a critical global race.

"It's a big challenge," Lake said, "but what a great time to be an electric utility regulator."