BofA: data centers need 125 GW and the grid is 100 GW short

“The market is no longer constrained by demand, it is constrained by where power can actually be delivered,” BofA’s analysts write. For a developer, that sentence reprices land. A parcel with a firm interconnection position is no longer a real estate asset with a utility attached; the interconnection is the asset and the dirt is the wrapper. Sites without one are not cheaper versions of the same product, they are a different product with an unbounded schedule.

It also reorders which jurisdictions matter. We reported on July 20 that 142 US sites now face organized opposition, and on July 14 that New York moved toward a statewide moratorium. Stack a power shortfall on top of a siting backlash and the buildable universe narrows from both ends at once.

The numbers

Data centers alone account for about 125 GW of the load growth. Total new generating capacity required over the next five years exceeds 230 GW against roughly 93 GW of planned utility additions, a shortfall of more than 100 GW. Put differently, utilities have planned about 40 cents of supply for every dollar of capacity the demand curve requires.

Developers are already routing around it. There are more than 7.5 GW of data center projects under construction with on-site generation, and more than 60 GW in pre-construction with it. That is roughly an eightfold increase in the pipeline, which makes behind-the-meter power the default assumption for the next development cycle rather than the exception it was two years ago.

The equipment market has closed the easy path. Large gas turbines are largely sold out through 2030, pushing developers toward on-site gas engines. Utilities are responding by deferring or canceling coal retirements, and BofA names Maryland, Wisconsin, Indiana, Utah, Kansas, Nebraska and Mississippi as places where that has already happened.

Utilities have revised demand forecasts upward in each of the past three years.

What’s next

Two things to price. First, on-site generation is now a schedule item, not a contingency: if large turbines are unavailable through 2030 and you are competing with 60 GW of pre-construction projects for gas engines, the equipment order dates the building, not the other way around.

Second, watch retail power prices in the states extending coal. BofA notes that a 10% rise in real electricity prices typically cuts consumption 1% to 2%, which is the mechanism through which a data center siting fight becomes a residential ratepayer fight, and then a moratorium. That sequence is the political risk on every one of these sites. Track the beat at data centers.