Increasing electricity demand is no longer a prediction of the future, it is happening now. The latest Short Term Energy Outlook published by the Energy Information Administration (EIA), estimated electricity demand from all sectors grew by 2% in 2024 and expects this growth to continue over the next two years. This would mark the first three years of consecutive growth since 2005–2007 and is the result of growing power demand in the industrial and commercial sectors. Industrial growth is expected to come from new battery and semiconductor chip manufacturing facilities that are currently under development, while commercial growth is being driven in part by data centers. The recent concern that there might be a more energy-efficient way to train large language models (LLMs) only affects one part of this equation. The underlying elements driving a resurgence of electricity demand growth is a sunsetting of efficiency initiatives (incandescent bulbs to LEDs – dragged demand down by ~1%/yr over past 20 years), reshoring of industry, broad-based electrification (transportation & space heating), and aforementioned AI data centers. Longer-term doubt about future demand growth may decrease the value of out of the money options like new build nuclear but improves the outlook for the more flexible alternative natural gas (shorter lead time and lower capital commitment).
Increasing electricity demand is no longer a prediction of the future, it is happening now. The latest Short Term Energy Outlook published by the Energy Information Administration (EIA), estimated electricity demand from all sectors grew by 2% in 2024 and expects this growth to continue over the next two years. This would mark the first three years of consecutive growth since 2005–2007 and is the result of growing power demand in the industrial and commercial sectors. Industrial growth is expected to come from new battery and semiconductor chip manufacturing facilities that are currently under development, while commercial growth is being driven in part by data centers. The recent concern that there might be a more energy-efficient way to train large language models (LLMs) only affects one part of this equation. The underlying elements driving a resurgence of electricity demand growth is a sunsetting of efficiency initiatives (incandescent bulbs to LEDs – dragged demand down by ~1%/yr over past 20 years), reshoring of industry, broad-based electrification (transportation & space heating), and aforementioned AI data centers. Longer-term doubt about future demand growth may decrease the value of out of the money options like new build nuclear but improves the outlook for the more flexible alternative natural gas (shorter lead time and lower capital commitment).