The Energy Forward Alliance formed because executives are concerned about whether CPS Energy will have enough capacity for projects in the coming years.
An under-the-radar group spearheaded by executives at companies that build and use data centers is pushing CPS Energy to consider whether it has enough juice to meet demand fueled by the rise of artificial intelligence.
It’s a reality across the country as power-hungry technology faces off against booming population and newly electrified infrastructure from cars to factories — all vying for precious megawatts. “They need power and they need it now,” said Michael Webber, a professor of energy at the University of Texas at Austin. “There’s an AI arms race underway. It’s a good sign of economic activity and more revenue in the long run. But in the short term, there’s a crunch.” The local coalition, dubbed the Energy Forward Alliance, formed late last year and has met with CPS executives multiple times to ask about the city-owned utility’s plans for building infrastructure and expanding capacity for projects in the coming years. It also wants a say in how the costs for doing so would be distributed among commercial and residential customers. RELATED: Demand for data centers — power hogs sprawling across Texas — soaring along with online lifestyles The effort reflects the growing tension between companies expanding their use of AI and rushing to beat competitors in building data centers — sprawling buildings filled with supercomputers that operate around the clock — and already-strained power grids in Texas and elsewhere having to shoulder a skyrocketing amount of demand. Data centers could consume 9% of all U.S. electricity generation by 2030, more than double the current amount, largely because of the power required for AI computing, according to a recent study by the nonprofit Electric Power Research Institute Inc. Such facilities in Texas consumed an estimated 4.59% of the state’s electricity in 2023. “The rapid pace of data center development is testing the ability of electric companies to keep pace,” said Stephen Stella, senior manager of research and development at the institute. The local group is made up of large corporate customers and driven by those that build or operate data centers, said a source familiar with the alliance who requested anonymity to discuss the private coalition’s goals. They are concerned about whether there will be enough power to support more technology capabilities at their companies and construction of more data centers — as well as capacity for businesses considering moving operations to the area, the source said. Executives at Microsoft Corp., Stream Data Centers, CloudHQ, Vantage Data Centers, Tract, Holt Cat, USAA, Pape-Dawson Engineers, Valero Energy Corp., Frost Bank, Port San Antonio, the University of Texas at San Antonio, CyrusOne, Toyota Motor North America, AT&T and Corscale were among the recipients of a June email about one of the group’s meetings. “As the world changes, our utility company will have to change to meet the demands and we thought we’d get ahead of the curve,” said Bill Kaufman of the Kaufman Group, which is helping organize and manage the alliance. “We need to be working with CPS to let them know what our growth plans are, make sure that’s in the queue for planning.” CPS already is gearing up for a tenfold increase in demand from data centers, which are expected to consume more than 3,300 megawatts by 2033, or enough energy to power more than 650,000 homes. The utility’s leaders have been receptive to questions from the group, which has not made specific requests or recommendations so far, Kaufman said. POWER HUNGRY: CPS Energy prepares for tenfold increase in electricity demand from San Antonio data centers CPS declined to respond to questions last week, with a spokesperson citing the utility’s focus on memorializing a lineman who died after being electrocuted while working on a power line Tuesday. Data center boom Demand for data centers is surging in Texas, which has become an attractive location for such facilities because the cost of power is low compared with other parts of the country. There’s also land available, it’s easy to get to from the East and West coasts and severe weather events are infrequent in most of the state’s major cities. Many of the centers are building new AI technology — virtual assistants like ChatGPT take months of computing to accomplish. And every company — such as Spotify, Netflix and Meta — wants to be ahead of competitors as they launch new tools that can take up to nine months of running models to create, Webber said. And those companies aren’t willing to pause that modeling for even 15 minutes during peak summer energy-use periods when the grid is stressed. “That 15 minutes is way too valuable to them,” Webber said, “because they’re in a footrace with everybody else.” The Dallas-Fort Worth area ranks second among U.S. markets by inventory of data centers, behind northern Virginia but ahead of Silicon Valley, according to commercial real estate services firm CBRE. The San Antonio data center market is far smaller but its inventory of data centers is increasing, in part because of CPS’ comparatively low rates and the fact hurricanes are not a major problem. Some companies received tax abatements from the city years ago to build data centers here, a practice officials have since stopped. Despite their size, the facilities have few employees. RELATED: Why San Antonio’s far West Side is a hot spot for data centers The city’s far West Side in particular has become a hot spot for data centers built by companies and agencies such as Microsoft, Valero, Cullen/Frost Bankers Inc., Christus Health, Lowe’s Cos. Inc., Amazon.com Inc. and the federal government’s National Security Agency. Providers there can access power and fiber infrastructure, a half-dozen substations, the topography is fairly flat and it’s not too close to hazards such as airports, dams and water towers. But CPS leaders now are pointing companies away from the far West Side and toward east and southeast parts of the city to spread out the utillity’s power loads and prevent congestion on its distribution system. Webber said data centers are increasingly seeking out cites like San Antonio and Austin because power hookups and access to transmission are more plentiful than in rural areas. They don’t want to wait any longer than they have to for power, but the challenge comes in there being less space for their big facilities. Infrastructure challenges Utilities aren’t operating at the same pace. Data centers can be built in months while it takes years for utilities to construct the infrastructure to expand distribution and generation, the Electric Power Research Institute’s Stella said. Some owners have specific goals for reducing carbon emissions, which puts more constraints on energy supply options, he added. Technology is changing fast. A 150,000-square-foot data center that needed 9 megawatts of power in 2016 needed 60 megawatts in 2023, according to Ellen Buck, vice president of operations services with utility company Oncor in Dallas. That’s not insight utilities had even 18 months ago, she said during a Texas Senate hearing in June. Said Webber: “The scale is changing in a way that is catching utilities off guard.” Some utilities are quoting lengthy wait times for data centers to connect to a grid, which is prompting operators to turn to natural gas-powered microgrid makers such as Enchanted Rock to get operations started more quickly. The company, which has offices in Houston and California, said after the new data centers are able to connect to the regular power grid, the microgrids stay onsite to offer backup power. “There’s growing interest from data centers in microgrid backup power to support their needs now and in the future,” said Allan Schurr, Enchanted Rock’s chief commercial officer. “New data centers are increasing in size so dramatically that the grid cannot keep up.” The influx of demand is also a challenge for the Electric Reliability Council of Texas, which operates the statewide grid, and lawmakers have balked at how much demand it will be taking on over the next decade. ERCOT projected in April that the state’s power load could hit 152,000 megawatts by the end of the decade, up from about 85,000 megawatts currently. At state House and Senate hearings in June, lawmakers questioned whether increasing development of data centers and bitcoin mining operations were straining already-overloaded transmission lines and adding to the crunch. RELATED: Is Texas breaking up with bitcoin miners? As ERCOT faces demand growth, lawmakers challenge crypto. The ongoing influx of new businesses, however, is not from cryptominers but those offering cloud back-up services and AI tools. “Every major metropolitan area that has data needs is going through this transformation where we’re having to think about these really large customers differently,” CPS CEO Rudy Garza told the utility’s trustees in December. In addition to using microgrids as a power source, Webber said data centers can also locate next to new energy sources such as solar farms or battery storage sites, which are rapidly growing in Texas. Cost of growth CPS has said it’s planning further ahead than ever because of the rapid pace of growth in data and other soaring demand. Planning for data centers comes with predictability, though: once they are ramped up, their usage is predictable and stable. CPS has already planned to expand its generation fleet with new, more efficient natural gas plants and by adding more solar, wind and battery capacity. To date, it has added 1,710 megawatts of natural gas generation, 730 megawatts of solar generation and 50 megawatts of energy storage as part of its generation plan. An additional 500 megawatts of storage — such as battery systems — is in the works. Joshua Rhodes, a research Scientist at UT-Austin, said he can understand average ratepayers wondering how their wallets might be impacted by such growth. But the cost to build new power plants should be offset by new revenue from selling the electricity on the ERCOT market, he said. “Whether or not that’s an exact one-to-one is hard to say,” Rhodes added. RELATED: Why is CPS spending so much to keep adding more power plants? ‘It’s the right approach,’ CEO says. Because CPS is owned by the city, San Antonio gets a 14% cut of the utility’s revenue, a fact Webber said should ease pressure on taxpayers because the data centers would increase the utility’s earnings. Already, though, CPS has described the next decade as one of major investments and rate increases to pay for them. CPS trustees in February approved a $1.8 billion spending plan for the fiscal year through January, including a 15% increase in operating costs to help cover the costs of new generation. After intense debate and concerns about further burdening residents in a city plagued by poverty, the City Council last year approved a 4.25% rate increase the utility said it needed to keep up with a rapidly increasing population, replacing aging infrastructure and an out-of-date software program, and investing in other upgrades in grid reliability. The hike was CPS’ second in two years and it expects to pitch another in 2025 that could be as high as 5.5%. “Short term or long term, there’s got to be planning, and we’ve got to be a part of the planning process,” said Kaufman, the Energy Forward Alliance spokesperson. “If you ask what our goal is, have us be a part of the planning process — providing data and metrics to CPS so they can plan in the future.”
CPS Energy Kaufman Group AI Energy Forward Alliance University Of Texas At Austin CBRE Vantage Data Centers Stream Data Centers Electric Reliability Council Of Texas Oncor Valero Energy Corp. Microsoft Corp. University Of Texas At San Antonio Frost Bank USAA Cullen/Frost Bankers Inc. National Security Agency Netflix Lowe's Cos. Inc. Christus Health Amazon.Com Inc. Texas Senate City Council House Michael Webber Bill Kaufman Stephen Stella Ellen Buck Joshua Rhodes Rudy Garza Pape-Dawson Engineers Allan Schurr Meta T Corscale Stella San Antonio Texas Port San Antonio West Side U.S. West Austin East Dallas-Fort Worth Virginia Silicon Valley AT&Amp Toyota Motor North America Enchanted Rock Houston California Cloudhq Holt Cat Cyrusone POWER HUNGRY Chatgpt Spotify
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