The US data center industry is projected to require 1,066 gigawatts (GW) of electricity, an amount equivalent to 83% of the nation's total utility-scale generation capacity at the end of last year. However, only an estimated 28% of this requested power is likely to be realized, according to Wood Mackenzie, largely due to "phantom" projects and long-shot pitches from developers. This inflated demand complicates planning for utilities and grid operators, potentially leading to higher utility bills if infrastructure is overbuilt.
Utilities and grid operators are grappling with a surge of connection requests, many from firms lacking prior experience in building facilities with energy needs comparable to mid-sized cities. Glenn Schwartz of Rapidan Energy Group estimates that only 20% to 30% of the requested power will go to projects that are actually built. This "shotgun approach" from developers is overwhelming grids and creating bottlenecks, stretching approval timelines and threatening US competitiveness in the global AI race. To counter this, some utilities have begun implementing stricter requirements, such as steep upfront application costs and substantial collateral, which has squeezed smaller and mid-sized developers.
Texas has taken a significant step, with Governor Greg Abbott ordering an audit of all data centers seeking access to the state's main grid. This effectively pauses project approvals and could delay almost a fifth of America's data center pipeline, putting $13 billion in industry revenues at risk. The Electric Reliability Council of Texas (ERCOT) is tracking approximately 474 GW of connection requests, with about 90% from data centers, an amount more than five times the system's record peak demand. Exelon Corp., a utility serving customers from Illinois to Delaware, has already cut its pipeline of data center energy demands by nearly 40% to 11 GW by prioritizing viable connection requests. This situation raises concerns for consumer advocates like Tyson Slocum of Public Citizen, who worries that utilities might either under-build, threatening grid stability, or overbuild, leading to higher costs for average Americans.
