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Data Centers Demand More Power Than Utilities Can Supply—For Now
04/09/2025
US Utilities Struggle to Keep Pace with Big Tech’s Soaring Power Demands for Data Centers
As Big Tech accelerates its investments in artificial intelligence, U.S. electric utilities are facing an unprecedented challenge: how to supply the massive energy demands required to power next-generation data centers.
A Reuters review of 13 major U.S. utility earnings calls found that nearly half have received power inquiries from data center developers requesting power supply that, if added to current peak demand, would exceed their generation capacity—a signal of how rapidly digital infrastructure is expanding.
Billions in Utility Investment Plans
To respond, utilities have announced billions of dollars in new capital spending in 2025 alone, with some doubling their five-year investment forecasts. The stakes are high: underestimating demand could destabilize the grid and increase the risk of blackouts. Overestimating it, however, could result in unnecessary costs passed on to consumers.
A new trend further complicates the planning process: tech companies are soliciting bids from multiple utilities across state lines for the same project, inflating demand projections.
“What we're seeing is this huge proposed influx of these abstract projects that nobody knows anything about,” said Jon Gordon, director at clean energy trade group Advanced Energy United, representing both renewable power providers and major energy users like data centers.
Secrecy and Scale Obscure Forecasting
The confidential and competitive nature of tech-sector energy requests makes it difficult for utilities to plan infrastructure needs accurately.
“The data center process is to have a competitive bid from three companies in many markets,” said James Richmond, CEO of e2Companies. “That one-third, automatically, is going to win, and two-thirds will drop out.”
Real-World Power Requests: Numbers That Stagger
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Oncor Electric, a Texas utility under Sempra, has received requests for 119 gigawatts (GW) of power from data centers. This figure is nearly four times the current peak load on its entire system.
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Based in Allentown, Pennsylvania, PPL Corporation has received 50 GW of data center power inquiries. At least 9 GW are in advanced development stages—already exceeding PPL’s 7.2 GW generation capacity.
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Evergy, operating in Kansas and Missouri, reported that its pipeline of data center-driven demand nearly doubled to over 11 GW by late 2024, slightly more than the utility’s forecasted 2025 peak system demand.
These requests are not yet included in capital spending unless formal contracts are signed and backed by financial guarantees.
“We believe these agreements help incentivize accurate information sharing and the certainty of project planning,” said Kerri Dunn, spokesperson for Oncor.
A PPL spokesperson added that spending is only authorized after signed agreements.
States Begin to Monitor Power Demand Surge
States are beginning to explore solutions to avoid overbuilding or planning blindly. According to Jacob Finkel, Deputy Secretary of Policy for Governor Josh Shapiro, Pennsylvania is considering establishing a centralized “clearinghouse” for data center power requests.
“It’s something that we’re looking at pretty intensely,” Finkel said during a recent panel.
Cost Pressures, Inflation, and Build Delays
Rising costs are also slowing the massive buildout required to meet demand. In 2024, the average cost of building one megawatt of capacity was nearly $12 million, a figure that has continued to climb.
Ongoing inflation, high interest rates, and land scarcity contribute to project delays and cancellations. In some regions, tariffs on steel and other materials further increase costs.
“There is risk of overbuild,” warned Nick Campanella, analyst at Barclays. “Capital limitations could restrict how much utilities can realistically construct.”
Changing AI Models May Alter Power Needs
Next-generation AI could ultimately shift energy forecasts. New models like DeepSeek are designed to operate with significantly fewer chips, reducing power usage and cooling system requirements.
These trends are already influencing some of the world’s largest AI investors. Microsoft, for example, had planned to invest $80 billion in AI data centers this year. However, TD Cowen analysts say the company has pulled back from projects totaling 2 GW of electricity demand across the U.S. and Europe over the past six months.
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