Midwest Could Soon Face Power Shortfalls
CoBank CEO: Electricity Supply an Issue Across Rural America
SAN ANTONIO -- The electricity demands of new data centers are so great that electricity supply and demand "is one of the biggest issues" facing agriculture and rural America, Thomas Halverson, the president and CEO of Colorado-based CoBank, said here last week.
In a speech to the International Dairy Food Association's Dairy Forum, Halverson told dairy processors they should "pay attention" to the electricity issue.
Showing a map, Halverson said one area with the largest mismatch between electricity supply and demand is the Midwest. The map is part of CoBank and North American Electric Reliability Corporation (NERC) reports on the subject.
"A large section of the Midwest will start to see capacity shortfalls as early as 2025. Other regions have a longer runway, but are still at risk through 2034," Halverson pointed out in a LinkedIn post.
Until recently, electricity has operated on flat demand for decades, Halverson said. "2024 wasn't much different than 2010, even though population and economy have grown."
That's because the higher level of energy efficiency in homes put downward pressure on electricity consumption and the economy shifted from manufacturing to service industries, which use less electricity, he said.
But now, data centers to provide power mainly for artificial intelligence and cryptocurrency are being built, and they are ravenous consumers of electricity, Halverson said. The "reshoring of manufacturing since the pandemic," and the adoption of electric vehicles are adding to the demand, he said.
Halverson noted that CoBank is an "enormous lender" to the rural electric co-ops.
On its website, CoBank notes it works with more than 75% of electric distribution, transmission and generation cooperatives for banking and financing projects. CoBank's most recent financial reports highlight roughly $11 billion in loans for electric distribution and more than $3 billion in generation and transmission.
Coal-fired electric plants are going down because they are old, nuclear and hydroelectric plants remain unchanged, and renewables are the new source of electricity, he added.
"Clearly we have competing policy priorities in the country," Halverson said, noting "the transition to cleaner energy and decarbonizing, but also an essential need for reliable power. These are not diametrically opposed but they are in tension. That will require electric utilities as well as people in this room to re-evaluate their options."
Even though the data centers for artificial intelligence require lots of electricity, Halverson said he wanted "to be sure I convey how optimistic I am."
"Artificial intelligence is a game-changing technology. In order to use it, we are going to need way more electricity than we have conceived of in the past."
To vastly increase electric power, there "has to be public policy supports," he said, with the equivalent of a "war effort" in which rural electric co-ops are going to play an important part.
Halverson said he wants the development of artificial intelligence to take place in the United States "rather than elsewhere in the world."
OTHERS SEE SIMILAR POWER NEEDS
As DTN reported last month from the Land Investment Expo in Des Moines, investor Steve Eisman, known for his role in foreseeing the collapse of the U.S. housing market, also raised concerns about the U.S. electrical grid mainly because of the growth of artificial intelligence computer data centers. He noted that five years ago or so there was little growth in electrical demand in the U.S. That has changed dramatically since.
"Because of on-shoring growth in the economy and now AI (artificial intelligence) there is tremendous stress on the grid, and we are probably going to need more."
There is a lot more demand on the grid, and that won't be met by renewable energy, despite the efforts of the Biden administration to focus on wind and solar. Eisman said he expects to see heavy reliance on natural gas to generate more power in the coming years.
"What you're seeing now is kind of another golden age now of gas that's coming, yes, so that's a big deal," Eisman said. "And then you know, there's still going to be greenification, and you add it all up, and there's a whole infrastructure story. Now, the Trump administration is obviously going to go more toward old energy versus new. I think they're going to emphasize on-shore even more. So, there's a whole theme here of, you know, companies who build factories, electrify the factories, automate the factories."
POWER GRID BATTLES ACROSS STATES
Beyond the generation demand, there continue to be battles over power grids. The Grain Belt Express, for instance, is expected to cross four states. There have been lawsuits in Missouri and Kansas, but the company in charge of the power lines reported last week it has begun eminent domain proceedings in Missouri against landowners that have resisted the projects.
DTN Ag Policy Editor Chris Clayton contributed to this report.
CoBank report on data centers: https://www.cobank.com/…
Also see, North American Long-term Reliability Study: https://www.nerc.com/…
Jerry Hagstrom can be reached at jhagstrom@nationaljournal.com
Follow him on social platform X @hagstromreport
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