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Building new capacity isn’t always as straightforward as it sounds.
When you think of companies whose valuations are soaring due to artificial intelligence, the ones that come to mind first are probably the chip designer Nvidia, whose shares are up 180% this year, or Elon Musk’s xAI, which its investors recently valued at $50 billion.
But aside from those, some of the best performing companies of this year have been those that own or supply equipment for the power plants that generate the energy to run all that AI infrastructure in the first place.
GE Vernova’s gas turbine orders have almost doubled so far this year, chief executive Scott Strazik said in an October earnings call; since then, the company has secured orders for another nearly 9 gigawatts’ worth of turbines in the U.S., the company said in an investor presentation Tuesday. “I can’t think of a time that the gas business has had more fun than they’re having right now,” Strazik told investors. The company’s stock is up almost 150% from the end of 2023.
Vistra, which owns over 40,000 megawatts of generation assets, including around 6,500 megawatts of nuclear power plants and more than two dozen gas-fired power plants, is planning on developing 2,000 megawatts of natural gas capacity, its chief executive Jim Burke said in November; its share price is up 272% for the year. The utility Entergy, which last week signed a deal with Meta to power a planned data center in northeastern Louisiana, is up 45%. Compare those impressive results to the S&P 500, which is up a healthy but comparatively modest 27% on the year.
Much of that enthusiasm comes from huge expected increases in energy demand. Grid Strategies, an energy policy consulting firm, last week updated its forecast for energy demand growth over the next five years, raising it from an increase of 39 gigawatts as of the end of 2023 to a rise of 128 gigawatts. That works out to annual projected growth of around 3%, compared to less than 1% annual growth in the first two decades of this century.
Where will all that additional energy come from? “Quite frankly, in the next five years, we’re going to see a lot of new gas turbines being built,” Cy McGeady, a fellow at the Center for Strategic and International Studies, told me, adding that the “prospects are good for a natural gas boom.”
The data centers that are driving renewable demand tend to require a constant flow of energy at all times — except when their power demands surge — while renewables are intermittent and may be far away from planned load growth. While so-called hyperscalers such as Amazon, Meta, and Google have made deals to support the development of 24/7 clean power sources like nuclear, the most optimistic time frame for any of these new developments to start producing power is sometime in the early 2030s.
Rob Gramlich, the president of Grid Strategies, told me the technology companies generating all this demand growth typically want it satisfied with renewables, but “they really need transmission in order to do that.”
“If everyone had done this 10 years ago, we could have connected a lot of generation a lot quicker. It could have been a lot cleaner generation mix,” Gramlich told me. Now, though, even if a utility wants to build solar, wind, and storage that can provide power at costs comparable to new gas, “it’s only available as an option if you build the grid infrastructure ahead of time,” he said.
McGeady agrees. “It’s the only path forward,” he said of natural gas. “Nobody is willing to not build the next data center because of inability to access renewables.”
But therein lies the difficulty: While natural gas plants are not as transmission-dependent as renewables, some analysts worry that even gas generators won’t be able to respond quickly enough to the increase in demand.
“When we look at the hot spots of Data Center development, in the U.S. and around the world, we see a significant overlap with regions that have favorable policy support for natural gas,” Morgan Stanley analysts wrote in a note to clients. And yet, “there will in our view be a significant shortfall in available U.S. power grid access relative to the magnitude of new data centers needed to ‘absorb’ the AI equipment purchases over the next several years, with the bottleneck becoming apparent in mid-to-late 2025,” the analysts wrote.
The utilities in these areas — places like Georgia, Arizona, and North Carolina — are indeed building new natural gas capacity. In other places where the laws and regulations aren’t as favorable to gas development, however, analysts expect to see more data centers sited at existing power plants. Some of those may be powered by fossil fuels, as in the case of a New Jersey facility recently taken over by the cloud computing company Core Weave, while others may wind up taking zero-carbon power off the grid, as Amazon attempted to do with the Susquehanna nuclear station in Pennsylvania.
Building new natural gas capacity is more difficult in the PJM Interconnection, the country’s largest electricity market, which spans the Eastern Seaboard and a large chunk of the Midwest. Its leadership is hoping high prices can lure new gas generation, but the complexity and uncertainty of the system’s reward structure for companies that agree to supply failsafe capacity has hindered the massive new investment PJM says it needs.
Some clean energy advocates argue that utilities are being short-sighted in their plans to develop new gas resources that could be around for decades — well past corporate, state, or national goals for electric system decarbonization.
“They’re used to building gas plants more so than they’re used to building other things. It reflects a lack of creativity on their part,” Michelle Solomon, a senior policy analyst at Energy Innovation, told me.
But until the system for building and paying for transmission can be reformed to clarify who pays for what and what transmission can be built where — as federal regulators and Congress are trying to do — utilities will likely default to what they know best.
“The difficulty of building transmission certainly can constrain utilities’ ability to serve new load, and it can constrain the ability to serve the load with clean generation,” Gramlich told me.
Chris Seiple, Wood Mackenzie’s vice president of energy transition and power and renewables, echoed Gramlich’s thought in a note from October. “The constraint is not the demand for renewables,” he wrote, “but the ability to get through permitting, interconnection, and building out the transmission system accordingly.”
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A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.
Long Islanders, meanwhile, are showing up in support of offshore wind, and more in this week’s edition of The Fight.
Local renewables restrictions are on the rise in the Hawkeye State – and it might have something to do with carbon pipelines.
Iowa’s known as a renewables growth area, producing more wind energy than any other state and offering ample acreage for utility-scale solar development. This has happened despite the fact that Iowa, like Ohio, is home to many large agricultural facilities – a trait that has often fomented conflict over specific projects. Iowa has defied this logic in part because the state was very early to renewables, enacting a state portfolio standard in 1983, signed into law by a Republican governor.
But something else is now on the rise: Counties are passing anti-renewables moratoria and ordinances restricting solar and wind energy development. We analyzed Heatmap Pro data on local laws and found a rise in local restrictions starting in 2021, leading to nearly 20 of the state’s 99 counties – about one fifth – having some form of restrictive ordinance on solar, wind or battery storage.
What is sparking this hostility? Some of it might be counties following the partisan trend, as renewable energy has struggled in hyper-conservative spots in the U.S. But it may also have to do with an outsized focus on land use rights and energy development that emerged from the conflict over carbon pipelines, which has intensified opposition to any usage of eminent domain for energy development.
The central node of this tension is the Summit Carbon Solutions CO2 pipeline. As we explained in a previous edition of The Fight, the carbon transportation network would cross five states, and has galvanized rural opposition against it. Last November, I predicted the Summit pipeline would have an easier time under Trump because of his circle’s support for oil and gas, as well as the placement of former North Dakota Governor Doug Burgum as interior secretary, as Burgum was a major Summit supporter.
Admittedly, this prediction has turned out to be incorrect – but it had nothing to do with Trump. Instead, Summit is now stalled because grassroots opposition to the pipeline quickly mobilized to pressure regulators in states the pipeline is proposed to traverse. They’re aiming to deny the company permits and lobbying state legislatures to pass bills banning the use of eminent domain for carbon pipelines. One of those states is South Dakota, where the governor last month signed an eminent domain ban for CO2 pipelines. On Thursday, South Dakota regulators denied key permits for the pipeline for the third time in a row.
Another place where the Summit opposition is working furiously: Iowa, where opposition to the CO2 pipeline network is so intense that it became an issue in the 2020 presidential primary. Regulators in the state have been more willing to greenlight permits for the project, but grassroots activists have pressured many counties into some form of opposition.
The same counties with CO2 pipeline moratoria have enacted bans or land use restrictions on developing various forms of renewables, too. Like Kossuth County, which passed a resolution decrying the use of eminent domain to construct the Summit pipeline – and then three months later enacted a moratorium on utility-scale solar.
I asked Jessica Manzour, a conservation program associate with Sierra Club fighting the Summit pipeline, about this phenomenon earlier this week. She told me that some counties are opposing CO2 pipelines and then suddenly tacking on or pivoting to renewables next. In other cases, counties with a burgeoning opposition to renewables take up the pipeline cause, too. In either case, this general frustration with energy companies developing large plots of land is kicking up dust in places that previously may have had a much lower opposition risk.
“We painted a roadmap with this Summit fight,” said Jess Manzour, a campaigner with Sierra Club involved in organizing opposition to the pipeline at the grassroots level, who said zealous anti-renewables activists and officials are in some cases lumping these items together under a broad umbrella. ”I don’t know if it’s the people pushing for these ordinances, rather than people taking advantage of the situation.”