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A new report finds that utilities are spending more than fossil fuel companies to keep up with data center electricity demand.
The transition to clean energy is largely a shift from molecules to electrons — gasoline in the tank is out, electricity stored in a battery cell is in. It follows, then, that as the transition progresses, the balance of power in the energy industry will shift from oil and gas production to electricity generation.
We may look back on 2024 as the year the scales tipped. Among the top 260 publicly listed energy companies, utilities’ capital expenditures around the globe were slightly higher this year than oil and gas spending, according to a recent analysis from Boston Consulting Group, and the authors expect the trend to grow through the end of the decade. But it wasn’t a sudden spike in EV adoption or home electrification or some other climate solution that put utility spending in the lead. It was the rise in data centers.
“When we went through all the data, all the 260 companies, it was the data centers that were having the biggest impact, most definitely,” Rebecca Fitz, a partner and director at Boston Consulting Group and lead author of the report, told me. “I’ve been in this sector for a long time, and to have such a rapid change in demand outlook, coupled with quick changes to capex, is a big story.”
Boston Consulting Group Center For Energy Impact
The finding was the surprise headline of an annual report that Fitz’ group has completed for the past three years called “Follow the Capital,” an analysis of what’s driving changes in capital supply and demand in the energy sector using data culled from publicly available sources. Data for prior years comes from regulatory and investor fillings. Future years are modeled using public announcements, plans filed with regulators, and a few conservative assumptions, Fitz told me.
Surging demand for electricity from data centers was perhaps the biggest energy story of 2024, and the trend seemed to accelerate as the year went on. In just the past few months, almost every major tech company has signed an agreement to buy power from a nuclear plant, either reviving formerly shuttered reactors or helping to build new ones. GE Vernova, which manufactures energy generation equipment, reported last week that it had secured contracts for 9 gigawatts’ worth of new gas turbines since its previous quarterly report in October, “tied to both load growth in the U.S and … serving the hyperscaler demand associated with AI.” As the “Follow the Capital” authors were wrapping up this year’s edition in November, they found that U.S. utilities had added $50 billion in planned capex during the third quarter alone, mostly due to data center demand growth.
Data center demand isn’t the only factor playing into the above chart. Though utility spending is definitely up, oil and gas companies are also reining in capex growth in favor of shareholder returns, Fitz told me. But oil and gas also sees the winds changing and is making moves to get into the power business. Two weeks ago, during a panel hosted by the Atlantic Council, Chevron CEO Mike Wirth said the company was “looking at possible solutions to build large-scale power generation” that would serve data centers directly, rather than feed into the grid, so that regular electricity ratepayers would not shoulder the costs. “There’s sensitivity to increasing electricity rates for the average person just for the benefit of a few of these tech companies,” he said.
Beating Chevron to the punch, last week ExxonMobil announced that it was “moving fast” on this exact type of project, designing a natural gas plant that would “use carbon capture to remove more than 90% of the associated CO2 emissions” and directly power data centers without connecting to the grid.
“I have no doubt that most of the oil and gas sector is looking at opportunities in this area,” said Fitz.
Though the report covers global companies and spending, the data center demand signal is hyperlocal. Among the 30 largest North American utilities, 65% of demand growth is concentrated within just six of them, the report says. Though the report does not name the companies, Fitz told me that Texas, North Carolina, Virginia, and Ohio were seeing the most aggressive plans.
Artificial intelligence boosters often argue that this demand pull is a boon for the energy transition. By ushering in the age of electrons, the logic goes, tech companies with deep pockets can drive the first deployments of new clean energy technologies like advanced nuclear and geothermal power plants. These early deployments would then help lower costs and give rise to cheaper, cleaner electricity for the rest of us average energy consumers and our future electric cars, stoves, and water heaters.
But that’s not the only potential outcome. “Follow the Capital” found that when the six utilities most affected by demand growth recently revised their integrated resource plans, they increased the amount of natural gas generation they planned to add from 26% of total new generation to 31%. As GE Vernova reported, orders for gas generators are skyrocketing. “I can’t think of a time that the gas business has had more fun than they’re having right now,” the company’s CEO Scott Strazik said during a recent investor update.
As my colleague Matthew Zeitlin reported, the industry is turning to natural gas plants because they can run 24/7 and they are not as dependent on transmission lines as renewables are, so they can be built faster and more cheaply. Renewables paired with energy storage are only competitive with gas if there’s infrastructure to support it, sources told him.
The age of electrons may be nigh, but whether it helps to stop climate change is a separate question altogether.
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President Donald Trump has exempted some — but certainly not all — of the critical minerals necessary for the energy transition from the sweeping tariffs he announced Wednesday. Minerals such as lithium, nickel, cobalt, manganese, and copper are key components of clean energy infrastructure such as lithium-ion batteries, which are used in electric vehicles or stationary storage, and copper wires, which conduct electricity in solar panels and wind turbines.
The White House has published a complete list of hundreds of products that are exempt from tariffs. We combed through the list looking for key transition minerals. Here are the ones that caught our eye, plus some that were notably left off. If you see anything on the list you think we missed, my inbox is open.
A renewables fight in Arizona turns ugly.
Autumn Johnson told me some days it feels like she’s shouting into a void.
Johnson is the executive director for the Arizona branch of the Solar Energy Industries Association, the nation’s pre-eminent solar power trade group. Lately, she told me, she’s seeing an increasing number of communities go after potential solar farms, many of them places with little or no previous solar development. There’s so many she’s had to start “tracking them on a spreadsheet,” she tells me, then proceeding to rattle off the names of counties and towns like battles in a war. Heatmap Pro data reveals how restricted Arizona is today, with six out of the state’s 15 counties showing a restrictive ordinance on solar and/or wind energy.
One of those battles: Chino Valley, a small town in northern Arizona. For two years, Johnson and others in the solar industry worked to try and massage the town into enacting restrictions on solar that wouldn’t all but ban the industry. But a town council meeting in mid-March turned ugly, as a debate over the restrictions ultimately devolved to heckling and hollering. “I’m surprised they didn’t throw things,” she recalled to me over the phone.
Playing back tape of that meeting, I watched as anyone who even spoke up in favor of solar was booed. When Johnson got up to speak and say SEIA recommended a smaller setback than drafted – 150 feet – audience members loudly laughed at her. Ultimately she was interrupted so many times that her time to speak expired before she finished her comments.
She asked the Chino Valley town council: “Could I finish my thought since I had to stop several times?” BOO! The audience wasn’t having it. And neither was the town council, who declined to let her continue.
After another hour-plus of testimony, the town council was swayed: Chino Valley dropped the regulation their staff spent years on and instead instructed them to draft a complete ban on all solar – as well as battery storage and wind farms.
If enacted, this regulation would all but doom Draconis, a large-scale utility solar farm proposed by bp in Chino Valley. A bp representative briefly testified at the town council meeting to say members of the public who’d previously spoken had mischaracterized the water usage required for the solar farm, but was booed off the microphone. The company did not immediately respond to a request for comment.
Johnson told me Arizonans in many pockets of the state are starting to turn on solar for two major reasons. One: There’s a partisan affiliation with renewables and climate change due to the Inflation Reduction Act and Joe Biden’s involvement in crafting the law. The other motivation? “Part of it is old school NIMBYism,” Johnson told me. “We’re acting like this is a new thing but NIMBYism is not new. Everybody wants electricity but nobody wants the infrastructure that is necessary to facilitate their use of electricity.”
She added: “The way things are moving, the number of cities and counties that have restrictions is going to be more and more.” While some communities may be accepting utility-scale development now, she is concerned they’ll hit a “saturation point where people start to build up some kind of resentment about the quantity of projects.”
“It’s domino-y,” Johnson confessed.
I’m no Arizonan. But to me, what’s happening in Arizona is essentially one big redux of an infamous prank TV segment from the show “Who Is America?” in which actor Sasha Baron Cohen plays a coastal liberal stereotype posing as an economic development entrepreneur.
Cohen’s character visits Kingman, Arizona, a town northwest of Chino Valley. In that prank, Cohen walked Kingman residents through a presentation about a promising new source of tax revenue and local employment, only to reveal… he’s talking about building a mosque in Kingman funded by the Clinton Foundation.
Kingman is in Mohave County, which happened to be the first county Johnson mentioned when we spoke. Mohave – represented in Congress by far-right Republican Paul Gosar – is one of the sunniest parts of the country, smack dab in the Mohave Desert. It’s also one of the counties with a restrictive ordinance that routinely rejects solar farms, despite a willingness among local officials to approve new fossil energy. Why? Well, in the view of some folks out there, you might as well be building a Hillary Clinton-branded mosque. Not to mention Mohave has quite a few telltale signs of being tough to develop, according to Heatmap Pro – it’s an extremely white county with an economy heavily dependent on tourism and agriculture, making land use and property value pronounced day-to-day concerns.
Stan Barnes, a lobbyist in Arizona who represents large-scale solar developers, told me that for “so long, renewable energy has been tightly embraced – even bearhugged – by the center-left side of the political spectrum.” Barnes said this fact alone has made it much harder to build in rural areas of Arizona that voted heavily for Donald Trump. “The center-right side of the political spectrum feels like it needs to resist.”
Developers are finding ways around this sticky wicket, Barnes said, but it requires being “wise” and “a certain degree of authenticity on the ground with local officials.” He noted the Palo Verde energy hub, a federally-designated energy and transmission project area in a mostly remote area that expands off of an existing power plant. Barnes also mentioned Mohave, where utility-scale solar is not banned outright but restricted to light industrial areas, as a place where development is still possible.
“There likely will not be that kind of development in Chino Valley and that’s the way it’s going to be in some jurisdictions," he said. “In other jurisdictions there’s going to be thoughtful ordinances that accommodate a variety of interests.”
And more of the week’s top renewable energy fights.
1. Long Island, New York – We begin today with a crucial stand-off for the future of energy off the coast of New York City: Rep. Chris Smith – one of the loudest anti-wind voices in Congress – is asking the Trump administration to shut down active work on the Empire Wind project.
2. Gulf of Maine – American floating offshore wind is now taking one more step backwards, as Mitsubishi pulls out of the test arrays it was working on under Biden with researchers at the University of Maine.
3. Nantucket County, Massachusetts – Speaking of bad wind news, the town of Nantucket has sued to block the SouthCoast offshore wind project.
4. Washington County, Rhode Island – If you want a small piece of good news for offshore wind, the primary lawsuit against Revolution Wind’s environmental review suffered a major setback this week.
5. Lackawanna County, Pennsylvania – In another piece of good news, Scranton, Pennsylvania, approved the city’s first solar project, despite nearby residents speaking in opposition to it.
6. Carroll County, Arkansas – Less positive solar news: they’re banning solar and wind in the Ozarks.
7. Noble County, Indiana – Landowners opposed to plans for a Geenex solar farm are escalating their war on the project to a lawsuit against their board of supervisors, alleging conflicts of interest around solar decisionmaking.
8. Olmstead County, Minnesota – It seems local control won’t win the day over a Ranger Power utility-scale solar project in the Gopher State.
9. Van Zandt County, Texas – A Texas County is issuing a stop work order on a Taaleri Energia battery project alleging it is violating the local fire safety code.
10. Sacramento County, California – A D.E. Shaw Renewables utility-scale project is taking one step forward after a local planning council recommended county officials give it the green light.
11. Shasta County, California – Elsewhere in California, ecological concerns about renewables are winning out over the pace of decarbonization.
12. Ada County, Idaho – We conclude today’s hotspots with, as Jon Stewart likes to say, a ‘Moment of Zen’: the city of Boise is rejecting a challenge to battery storage development.