Is the U.S. power grid facing a reliability crisis? There is no doubt that the demand for electrical power is increasing, but to what extent is it actually affecting our national grid’s resiliency? Today, The Fusion Report examines what is causing this situation, and where this power grid crisis will first erupt if/when it occurs.

The Supply and Demand for U.S. Power: A Complicated Picture

Prior to 2020, the demand for power in the U.S. was growing very slowly (or even static) for several years. From about 2008 through 2020, total electricity consumption increased by roughly 0.1–0.5% per year on average, far below the growth rates seen in the 1990s and early 2000s. This weak demand reflected efficiency improvements in appliances and buildings, slower economic and population growth compared with earlier decades, and structural shifts in the economy away from some heavy industry. As a result, utilities and planners spent more than a decade assuming very modest future load growth, which shaped grid investment and resource planning until the sharp post-2020 demand uptick began to change those expectations.

This situation changed in 2020, largely driven by the growth in data centers, electric vehicles, and industrial electrification. U.S. electricity demand has risen steadily since a pandemic-related low point in 2020, reversing nearly a decade of flat load growth and marking the start of a new high-demand era. From 2020 through 2026, total U.S. electricity consumption is projected to grow about 1.7% per year on average, with commercial and industrial use growing fastest as factories, data centers, and other large facilities expand. Analysts now expect power demand to continue climbing at roughly 2–3.5% annually through the 2030s and into 2040, much faster than the roughly 0.5% annual growth seen in the 2010s. As a result, utilities and grid operators are planning significant additions of generation and storage capacity—especially solar and battery projects—to maintain reliability while meeting this growing demand.

On the supply side, there has been a pronounced reduction in generation from high-emitting electrical sources such as coal, which has reshaped the power sector and its impacts. Coal-fired generation has fallen to roughly one-third of its 2007 peak. At the same time, natural gas and rapidly growing wind and solar output have replaced much of that lost coal generation, helping keep total electricity supply relatively stable. Overall, the reduction in coal-based generation over the last 10 years has accelerated the shift toward a cleaner, more flexible grid, but it has also highlighted the need for new investment in transmission, storage, and workforce support to maintain reliability and manage regional economic impacts as the sources of power has shifted.

The Impact of These Changes on Power Grid Reliability

A report released earlier this year by the North American Electrical Reliability Corporation highlighted the impact of the increased data center demand and the retirement of coal plants is driving the future potential for regional power shortfalls. According to Mark Christie, a former regulator with the Federal Energy Regulatory Commission (FERC),”We are headed for a reliability crisis, except now the crisis is not over the horizon, but across the street.” The parts of the country most at risk in the short term include Texas, the upper Midwest, the Pacific Northwest and the mid-Atlantic region, according to the report. These areas have already seen notable outages over the past several years, and are expected to become high risk areas for power reliability decreases in 2029 and 2030.

Fixing the Potential Issues of U.S. Power Grid

The weak spots in our grid are well known, if not easy to fix. Some of the recommendations highlighted in this report include:

• Expedite new resources to meet growing demand, and carefully manage generator deactivation: ISOs and RTOs need to have mechanisms that they can employ to extend the service of generators. Regulators must also support new resource development and manage the pace of retirements. Replacement infrastructure must be developed and placed in service to support reliability.

   

  

• Manage reliability risks accompanying large load growth, and leverage new loads to provide flexibility to operators during times of grid stress: Emerging new large loads, such as data centers, present unique challenges in grid planning and operations. ISOs and RTOs should collectively work to create more uniform requirements to address reliability issues associated with data centers.
  

  

• Streamline site/permitting processes to remove barriers to resource and transmission development: Setting and permitting issues are among the most common causes for delayed transmission and infrastructure projects; working with states and ISOs and RTOs to solve these is critical.
• Implement solutions to the planning and operating needs of natural gas electric energy systems: Additional actions for managing natural gas production processing and delivery risks are needed, both from regulators and policymakers at all levels of government.

Conclusion: Managing Changes in Energy Requires New Approaches

The changes in both U.S. electricity demand and production require a new set of approaches. Steep demand increases due to new data center loads will significantly impact regional power requirements. Increasing electrification of residential, commercial and industrial spaces will also increase electricity demand, especially during peak winter seasons. Renewable energy resource availability also complicates the problem until additional battery backup solutions become available. Finally, retirement of existing fossil fuel power plants stresses the supply of electricity in the U.S. Managing these changes requires a new approach from government, ISOs, and power plant operators to avoid negatively impacting the reliability of U.S. electrical power.