The Grid Strain Solution Gaining Bipartisan Support
With artificial intelligence data centers dramatically increasing power consumption across the United States, a policy solution called “demand flexibility” could help ease grid strain while lowering household energy bills, according to reports. This bipartisan approach essentially rewards customers for using less power during periods of high demand or for selling excess energy from home solar panels back to the grid.
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Analysts suggest this strategy arrives at a critical moment, as peak power demand is expected to grow by 20% over the next decade. This surge is driven not only by AI infrastructure but also by manufacturing onshoring, increasing electric vehicle adoption, and growing cooling needs during hotter summers. The escalating demand has already contributed to a 9.5% increase in average household power prices this year, with Missouri experiencing a dramatic 38% jump.
Preventing Blackouts While Meeting Climate Goals
Rising energy demand threatens both grid reliability and climate progress, sources indicate. States including California and Texas face higher risks of life-threatening blackouts during extreme weather events. Meanwhile, the current administration’s response has focused on boosting new gas infrastructure and attempting to delay closures of coal-fired power plants, extending the lifespan of fossil fuel generation.
Demand flexibility could provide substantial relief, according to a Duke University study published this year. The report states that the U.S. is expected to add 100GW of new data center demand by 2035, but adopting flexibility policies could add over 100GW of new capacity. To understand the scale, 1 gigawatt can power hundreds of thousands of homes, making this additional capacity equivalent to adding 30,000 utility-scale wind turbines or 50 Hoover Dams.
Implementation Across States and Utilities
According to Tim Profeta, co-author of the Duke study and executive in residence at Duke’s Nicholas Institute for Energy, Environment and Sustainability, data centers need proactive plans before coming online to avoid drawing excessive energy. “The biggest incentive is speed to interconnect to the grid,” he said, noting that regulators can require data centers to create flexibility plans in exchange for jumping connection queues.
Jigar Shah, energy entrepreneur and former director of the U.S. Department of Energy’s loan programs office, emphasized that demand flexibility represents one of the few tools deployable at scale in the coming years to prevent rate increases nationwide. “There’s a tension here between for-profit utilities with shareholders and keeping bills as affordable as possible,” Shah noted, explaining that utilities often prioritize capital projects that guarantee returns rather than efficiently using existing infrastructure.
State-Level Action and Setbacks
Advocacy groups are pushing for state laws requiring utilities to improve use of existing infrastructure. In California, which has the nation’s second-highest power rates, clean energy group Deploy Action pushed for legislation requiring regulators to study demand flexibility. However, Governor Gavin Newsom vetoed the bill on October 3, citing excessive workload for regulators.
California’s delay contrasts with action in other states. North Carolina Governor Josh Stein signed an executive order in August creating a task force to address skyrocketing energy demand. Profeta, who serves on the task force, stated, “We are definitely looking at how to create flexible load structures as a first order question.”
In Texas, following the deadly 2021 winter storm, new regulations now require large energy users including data centers to enable remote disconnection during emergencies and report backup generators. This approach to managing electricity demand from major consumers represents a significant shift in grid management strategy.
Successful Models and Future Potential
Other countries have demonstrated demand flexibility’s effectiveness. During the 2023 global energy crisis, the UK used smart meters to reward households with bill discounts for reducing consumption during high-demand periods, providing 24-hour notice of “saving sessions” to allow planning.
In the U.S., the vast majority of demand flexibility programs have been adopted in Republican states, primarily through rural electric cooperatives and municipal utilities. Shah highlighted Rocky Mountain Power in Utah, which pays residents $300 per kWh for use of solar power captured by installed battery storage systems, helping maintain some of the country’s lowest power bills.
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Democratic states also show promising examples. In Maryland, Baltimore Gas Electric offers rebates for smart thermostat installation and pays EV owners for utility access to their batteries as backup power. These industry developments demonstrate how flexibility policies can create win-win scenarios for utilities and consumers amid related innovations in energy technology.
As the U.S. scales up other clean energy solutions like geothermal, analysts suggest flexibility policies can immediately meet new demand. “That seems to be a very attractive concept, no matter where you are in the political spectrum,” Profeta said, highlighting the bipartisan appeal of this approach to managing the nation’s evolving energy challenges through recent technology integration and market trends in energy distribution.
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