Blog | “Large Electric Loads”: What They Are, Why They Matter, and What States Can Do

By Melissa Birchard, Mitigation Program Director, and Nate Burnand, Senior Associate

Over the coming months, the Georgetown Climate Center (GCC) will be exploring best practices and policy solutions that can help state and local governments respond to rising demand for electricity while staying on track to meet ambitious clean energy goals.

The Challenge 

Twenty-four states and the District of Columbia currently have 100 percent clean energy goals,^{See footnote 1} and many local governments have ambitious clean energy policies as well, ranging from energy efficiency targets to carbon neutrality targets.^{See footnote 2}  

However, rapidly rising electricity demand — driven largely although not exclusively by the proliferation of large new electrified facilities like data centers — risks slowing progress toward those state and local clean energy goals. At the same time, states are working to ensure electric affordability, grid reliability, and environmental protections while still capturing the economic development benefits that data centers might provide. The good news is that a suite of policy solutions is emerging that can help state and local governments stay on track to achieve their clean energy ambitions alongside other important priorities.

Data centers are the leading edge of the “large load” challenge

The rapid growth of very large electric customers (which energy planners refer to collectively as “large loads”) has become a key challenge for many state and local policymakers over the past two years, with data centers presenting the biggest challenge. While the term “large loads” isn’t limited to data centers — it also covers other energy-intensive industrial facilities, as well as electrified buildings and transportation — data centers are currently by far the biggest and fastest growing piece of the pie. Energy-hungry data center campuses — housing the servers and other hardware for cloud computing, artificial intelligence, and other internet traffic — continue to proliferate across the country. The largest of these facilities can demand around 200 megawatts (MW) of electricity, enough to power hundreds of thousands of homes.^{See footnote 3} 

According to Lawrence Berkley National Lab, data centers accounted for 1.9 percent of overall United States electricity consumption in 2018.^{See footnote 4} By 2022, data centers accounted for 4.4 percent of electricity consumption in the country, a more than 100 percent increase in only four years.^{See footnote 5} Although projections of the pace of rising energy demand from large loads vary widely, there is broad consensus that national demand for electricity will continue to grow as grid planners and utilities work to connect large electricity customers to the grid.^{See footnote 6} 

Large electric facilities like data centers raise four notable challenges for state and local policy makers: climate pollution, electric grid reliability, energy costs, and local impacts. First, meeting growing electricity demand requires additional electric generation. If that generation is powered by fossil fuels like natural gas, it will lead to increased greenhouse gas emissions and other air pollution. Second, rising demand puts stress on an already-stretched electric grid, increasing pressure for expensive grid upgrades. Third, the demand for data centers placed on the electric grid has already contributed to higher electricity bills for residential customers and businesses in some parts of the country. Without sound regulatory policies in place, there is a risk that these types of cost increases will become more severe and widespread. Finally, data centers present a variety of localized impacts, such as air pollution from the diesel generators they often use for backup power, as well as noise pollution and depletion of local fresh water reserves.

Fossil fuel-fired power plants and pollution are on the rise

Large loads like data centers have spurred major new investments in fossil fuel-fired power plants across the country. The added greenhouse gas pollution from these plants will make it harder to achieve state and local climate goals. Energy developers have already broken ground on natural-gas-powered projects primarily intended to serve data centers that will add several gigawatts of generating capacity to the electric grid and emit millions of tons of new CO2 emissions a year.^{See footnote 7} Utilities and data center developers across the country have announced plans to build several more gigawatts of new natural gas plants that will almost exclusively serve data centers, adding millions of tons of new CO2 emissions a year.^{See footnote 8} Importantly, once built, a new power plant typically operates for up to 40 years, locking in carbon emissions for decades to come.^{See footnote 9}  

In addition to emissions from power plants, data centers often use diesel backup generators to make sure they never go dark. These emit greenhouse gas pollution themselves, along with fine particulate matter, ozone, and other air pollutants that threaten public health in nearby communities.^{See footnote 10}  

State, local, and regional solutions are available

Fortunately, there are a range of cost-effective policy tools and emerging best practices available to state and local governments to help address the challenges of rising electricity demand — including data centers — without compromising clean energy goals or local health outcomes. 

At the state government level, state public utility commissions, legislators, governors’ offices, and state agency staff can play a key role. A range of policy options and regulatory tools are emerging that states can leverage to meet the large load challenge. For example, some of the steps that states can take include: 

• Reforming utility tariff designs to ensure large electricity consumers use clean energy and pay for the grid improvements they necessitate: Public utility commissions and state legislatures could require or incentivize large electricity customers to pay the costs of building a clean grid by implementing new tariff designs targeted toward support clean energy generation and cost protections for customers, called a clean energy tariff or a clean transition tariff. (Tariffs are like contracts that govern the relationship between a utility and its customers.)
• Making the most of innovative technologies: For instance, states can bolster the use of virtual power plants, such as networks of home solar and batteries that send electricity onto the grid in a coordinated fashion.
• Squeezing more out of the existing grid: Accelerating the deployment of advanced transmission technologies, which in some cases entail simple, low-cost tweaks to the electric grid, can deliver important impacts by avoiding or delaying the need for new infrastructure and optimizing the benefits of clean energy.
• Incentivizing large loads to become a flexible, clean, and low-cost grid resource:  State governments can require or encourage large loads to develop flexibility capabilities and to participate in demand response programs, in order to reduce demand for electricity when the grid is stressed and emissions rise. Paired with clean primary and backup generation resources, large load demand response can not only reduce grid costs and improve electric system reliability, it can significantly reduce emissions. 
• Planning wisely for the future: State governments can pursue integrated planning that takes into account the full scope of large loads expected to come onto the grid, along with generation and demand management needs. While data centers and industrial facilities present the most immediate source of large load growth, other sources like commercial electric vehicle charging and building electrification are expected to contribute to increases in electricity demand in the coming years, and can be accounted for at the same time.^{See footnote 11}  Taking a long term and inclusive approach to electric system planning can help ensure that all customers can be confident the lights will stay on and that they won’t have to pay for redundant or unnecessary infrastructure.
• Improving information sharing and transparency: State governments can take steps to increase visibility into the level of rising customer demand through measures such as requiring utilities to collect and report information, including during interconnection processes when a customer requests to connect to the electric system. They can also require project developers to demonstrate financial commitment to project completion through financial deposits and documentation.
• Promoting efficiency: Energy efficiency standards for data centers and other large load customers, along with energy efficiency and emissions reporting requirements, can ensure that data centers and other large loads don’t consume more electricity than they really need.

Local decisionmakers can play a vital role as well, through measures like updated land use zoning tailored to data centers and other large industrial customers, and designed to avoid unnecessary climate and environmental impacts. Local governments can also negotiate community benefits with project developers that provide health, environmental, and economic benefits in local communities and beyond.

Because much of the U.S. electric grid is managed across multi-state regions, some solutions may lie primarily at the regional level, but individual states can still have a meaningful influence. For example, regional transmission organizations (RTOs) are often responsible for the pace of connecting new clean energy to the electric transmission system and providing market incentives for clean energy and demand response. States can engage with these RTOs to provide helpful information and press for market design updates that can, for instance, speed up the pace of connecting renewable energy to the grid. (Local governments may also be able to engage in RTO conversations, particularly if they act collectively to reduce the burden on any one locality.)

Conclusions

The challenges before state and local policymakers may be daunting, but the tools and strategies available to state and local governments can make them much more manageable. Demand for electricity is rising fast, and new technologies pose unexpected risks to state and local policies. However, a robust range of policy solutions is evolving, from tariff designs that support clean energy at the state level, to land use planning at the local level. Using tools and strategies like these can help state and local governments stay on track to meet their ambitious clean energy and climate goals, while protecting households and small businesses from increased costs and keeping the lights on for everyone. 

The Georgetown Climate Center will dive into the challenges and solutions of “large loads” in more detail over the next few months. Please watch this space for more publications to come, and reach out if the Center can be of assistance to your state or local government.