Introduction: Recently, a newspaper article noted that electricity rates across the state are going to rise as supply is failing to keep pace with demand.
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After years of little or no demand growth, a federal push for electric vehicles and household appliances such as stoves to replace those using fossil fuels, has boosted the demand for electricity. In conjunction with the retiring of fossil fuel plants such as the one in Springdale Boro, Allegheny County and Homer City in Indiana County, the demand began to outstrip supply. An increase in electricity price was inevitable.
Data centers
The former site of the Homer City power plant is now being reimagined as a data center campus and a similar idea is being floated for the Springdale site. The Homer City proposal will include its own natural-gas powered 4.5 gigawatt generation plant, which will make it the largest in the state by 3.5 gigawatts. This underscores the need for a tremendous increase in the supply of electricity to make the data center possible.
Data centers are among the fastest growing industries in the country, if not the world. They are tremendous users of electricity, and the electric-generation industry is struggling to keep pace. In a 2024 white paper, the Electric Power Research Institute (EPRI) notes that “between 2017 and 2021, electricity used by Meta, Microsoft, and Google—the main providers of commercially available cloud computing and digital services—more than doubled.”
Indeed, in late 2024, Microsoft entered into an agreement with Constellation Energy to purchase energy from a rebooted Three Mile Island Unit 1 in Eastern Pennsylvania, which had been shuttered since 2019. This follows up with a $1 billion investment in a new nuclear power plant Microsoft made in Wyoming. Both will support the tech giant’s further move into Artificial Intelligence (AI).
The growth in AI use for both business and daily life is greatly adding to the demand for electricity. The EPRI paper also notes that, currently, AI applications only account for about 10-to-20 percent of data center electricity usage. However, that percentage is expected to increase dramatically as AI becomes more popular. “AI models are typically much more energy-intensive than basic data retrieval, streaming and communications applications that drove data center growth over the last two decades.”
For example, the AI chatbot ChatGPT is a language-based program, such as Apple’s Siri and Amazon’s Alexa, where a user can ask a question directly and it will provide an answer. According to EPRI, “at 2.9 watt-hours per ChatGPT request, AI queries, are estimated to require 10X the electricity of traditional Google queries, which use about 0.3 watt-hours each; and emerging, computational-intensive capabilities such as image, audio, and video generation have no precedent.”
EPRI estimates that data centers currently account for 4 percent of U.S. electricity consumption (2023) and expect that ratio could increase to as much as 9 percent by 2030.
Construction of new data centers
According to the EPRI paper, new data centers are being built that would consume anywhere from 100 to 1,000 megawatts of energy—roughly the equivalent of 80,000 to 800,000 homes worth of electricity. The mismatch of demand and available supply will occur when data center construction, typically one to two years, outpaces electricity generating facilities construction, which can take several years to develop and connect. Even connecting new centers to current electricity companies can take four or more years to plan, permit and construct new transmission lines to handle this new demand.
EPRI lists the top 15 states for data center growth. These 15 states account for 80 percent of the national data center load. Pennsylvania occupied the 10th spot ahead of neighboring New York (11th) and New Jersey (12th). Virginia finished first on that list, followed by Texas and California. It’s worth noting that Virginia, Pennsylvania and New Jersey are all on the same electric grid operated by PJM Interconnection which runs a wholesale power market where utilities buy electricity.
States with the right conditions are likely to see more growth in data centers. “Data centers favor sites where internet conditions are strong; where electricity prices, land costs, and disruptive events are low; where skilled labor is available; near population centers and users; and where centers can develop backup power to ensure power supply (usually natural gas or diesel generators).”
EPRI lists Pennsylvania’s strengths as its strategic location near major East Coast markets and relatively low energy costs. It would be worth adding skilled labor, thanks to the plethora of top universities and colleges along with lower land costs and an abundance of natural gas due to the shale formations beneath the commonwealth. Challenges include an aging infrastructure along with regulatory scrutiny and the demand for green energy solutions.
EPRI estimates that, as of 2023, the total percentage of electricity consumed by data centers in Pennsylvania was 3.16 percent. They offered four scenarios to show how that percentage could increase by 2030. It goes from low-growth (3.78 percent); medium-growth (4.11 percent); high-growth (5.61 percent) and highest-growth (7.49 percent).
Conclusion and recommendations
The question is, will Pennsylvania be ready for any of these growth scenarios?
The EPRI criticism of Pennsylvania’s aging infrastructure is accurate. That challenge will require coordination between the energy producers and Harrisburg. Pennsylvania has a strong regulatory climate that tends to bog down projects. This is one time when slowing down the upgrade of the electrical infrastructure cannot happen if the state wants to cash in on the data-center movement and the jobs and economic growth that come with them.
All forms of electric generation need to be considered and will be needed. But Pennsylvania is fortunate to have an incredible supply of natural gas, as the second largest producer in the country, that can provide the energy needed to facilitate data center growth.
As old coal-fired power plants are decommissioned and demolished, new generating facilities should be encouraged to take their place on the same site, like the gas-powered proposal at Homer City. Provide these facilities with a quick-permitting process and eliminate the political hurdles they face to get up to operational speed as quickly as possible.
Most importantly, Pennsylvania’s leaders must refrain from awarding taxpayer subsidies to boost companies in this growing industry (the Homer City project received a $5 million Redevelopment Assistance Capital Program grant for a natural gas pipeline improvement project).
Outside of a role to ensure the safety of its citizens as the electrical capacity and transition takes place, it is important that these leaders avoid political overreach and instead provide a proper free-market environment to encourage this industry to grow and prosper.
