By Lisa Jacobson, President, BCSE and Jeff Dennis, Executive Director, Electricity Customer Alliance, CO2EFFICIENT

The AI race has begun – a race not only to innovate, but to secure investment, train the next generation of skilled workers, collect data, and optimize the energy grid. Driven by growth in AI and data centers, a manufacturing renaissance, and increased electricity use by businesses and households, U.S. energy demand is expected to surge by 35-50% between 2024 and 2040.

Last month, BCSE and member CO2EFFICIENT convened a roundtable discussion in Washington, DC to address the urgent challenges of rising energy demand, especially from large loads like data centers, AI-driven facilities, and new and expanded manufacturing. This was the latest discussion in a series that has met in states across the country – such as Utah – to share solutions that can drive America’s energy expansion.

The roundtable emphasized that demand growth is real, urgent, and complex. Meeting it will require a broad portfolio of solutions and an all-of-the-above energy strategy.

Here are the discussion’s takeaways on the top priorities for meeting demand growth:

 

Priority 1: Smarter forecasting and planning.

Rigorous, transparent, and collaborative load forecasting practices are critical to meeting demand growth. Even small errors compound challenges in planning generation and transmission and present reliability and cost risks to customers.

Key to planning is balancing near- and long-term resources, factoring in both speed and reliability. Renewable sources like solar and storage can be deployed quickly. Sources like natural gas, advanced nuclear, and geothermal require immediate planning in order to be available in the 2030s. Participants called for public-private partnerships to better coordinate state energy planning and economic development initiatives.

 

Priority 2: Faster permitting and interconnection.

Accelerating state and federal processes is urgently needed. Delays in projects of all kinds – from geothermal, to microgrids, to wind, solar, and storage projects – highlight the impact of slow permitting processes on delivering power needed to win the AI race.

This is a key focus in states, which are prioritizing clean firm power, storage, and community energy tools. Federal and state permitting, interconnection delays, and uncertainty remain challenges.

 

Priority 3: Updated market rules to provide incentives to bring on supply-side and demand-side solutions quickly, affordably, and sustainably – without putting more stress on the grid or the energy system overall.

Transmission and distribution costs are rising faster than generation in many areas. Speed-to-power and clear market signals are essential, particularly for large-load customers. At the same time, solutions must keep costs manageable for consumers while meeting rising demand.

These are key priorities for states. There is a continued need for an “all of the above” approach – affordable, reliable, and increasingly clean. Affordability, fair allocation of costs to data centers and other new large loads, new siting strategies, and leveraging demand response programs, particularly to make them more usable to hyperscale facilities – are all under consideration.

Overall, participants agreed that better outreach is needed on supply chains, demand response, behind-the-meter opportunities, and balancing market and regulatory approaches. Competitive markets are preferred by industry, but bilateral contracting and regional/multistate procurement may accelerate near-term solutions.

 

Priority 4: Innovative partnerships between government, industry, and communities.

Cooperative federalism, state-federal partnerships, and innovative contracting models (such as Energy-as-a-Service) are essential to move quickly.

States are taking near-term actions to address reliability, affordability, and the need for speed to market for new large loads. Already, states like Utah, Ohio, Georgia, California, and New York are launching pilot programs on demand response, load management, behind-the-meter generation, and acceleration of financing of transmission and other infrastructure.

Regional markets like SPP are developing conditional transmission services for large customers. Legislative and regulatory actions are needed to scale these initiatives, and federal legislation is needed to set direction and remove barriers to state-level activity.

 

Priority 5: Integration of emerging technologies and AI to enhance flexibility and resilience.

Forecasting and grid management benefit from better data, analytics, and collaboration on load and generation profiles. This is an opportunity to utilize digital tools and AI.

Other technological opportunities to enhance resilience include:

• Behind-the-meter generation and microgrids: Onsite generation, microgrids, and federal installations can provide community resilience and support islanding during emergencies. As noted above, states are prioritizing these investments now.
• Data center flexibility: AI-focused centers may utilize demand response or microgrids to alleviate reliability and resource adequacy concerns, but programs must expand eligibility and align costs with benefits.
• 24/7 zero-carbon and low-carbon energy technologies and carbon management: Opportunities include carbon capture and storage (CCS) with natural gas, advanced geothermal, and carbon capture in regions with appropriate geology.
• Hyper-scaler engagement: Large technology companies can drive investment in clean firm technologies, advanced nuclear, and CCS, aligning private capital with community and state goals.

Of note, demand-side management continues to be underutilized to reduce demand and improve resiliency. Efficiency, demand response, and distributed energy resources can all lower peak loads and allow for faster interconnection of AI-driven loads. Initiatives like demand response programs need modernization to reflect today’s large-load profiles.

 

Conclusion

As our country embarks on an energy expansion, industry leaders are focusing on “power, parts, people, and politics”: interconnection speed, supply chain reliability, workforce development, and bipartisan policy solutions. By leveraging public-private partnerships and making key permitting and siting reforms, America will be able to launch a broad portfolio of solutions to meet energy demand and win the AI race.

 

About the Authors: Lisa Jacobson is the President of the Business Council for Sustainable Energy. Jeff Dennis is a Senior Counsel at CO2EFFICIENT and the Executive Director of the Electricity Customer Alliance, a coalition of large electricity customers dedicated to advancing customer-centric solutions to modernize the grid, support digital infrastructure and manufacturing, and grow the economy.