According to IEEFA, data centers drive buildout of gas power plants in the southeastern states of the USA

According to IEEFA, Southeast states utilities and pipeline companies are planning a major buildout of natural gas infrastructure over the next 15 years, largely driven by forecasted demand for data centers, but there is a real threat of overbuilding power plants and pipelines. A new report from the Institute for Energy Economics and Financial Analysis shows that ratepayers are subsidizing the costs of proposed electrical infrastructure that will only worsen if it is overbuilt.

The report focuses on Virginia, North Carolina, South Carolina and Georgia. Utilities in the four states are planning to build more than 20,000 megawatts (MW) of natural gas power plants by 2040. Meanwhile, pipeline operators are currently proposing or constructing more than 3,300 million cubic feet (MMcf)/day of new pipeline capacity through these states. More than 75% of the new capacity is destined for electric utilities. The question of whether the forecasted data center demand will materialize represents a major risk – one that is likely to be borne by consumers.

“There is a serious risk of overbuilding electrical infrastructure to meet data center demand that may not materialize. Utilities already are financially incentivized to overbuild infrastructure, and this risk is exacerbated by the uncertainty surrounding data center demand, particularly as it relates to AI,” said Cathy Kunkel, IEEFA energy consultant and author of the report. “In the absence of proactive decisions by utilities or regulators, electric ratepayers will subsidize the building of new infrastructure that would not be needed in the absence of data centers and will be on the hook for overbuilt infrastructure.”

The Southeast utilities profiled in this report are forecasting a level of load growth unprecedented in the last two decades and planning major investments in gas infrastructure to meet that load growth. Building out electrical infrastructure – especially gas infrastructure – to serve data centers that may not ever exist is slowing the energy transition.

To read the full report click here.