by wayne persky |
RSS Feed The U.S. electrical power grid is facing huge increases in demand due to the development of artificial intelligence (AI) systems, bitcoin mining, and increased consumer demand. And the construction of new power generating facilities, and expansion of existing facilities, is lagging behind. The fact that the government has imposed disincentives in the form of emissions controls (raising concerns about their future) on the types of plants that are the easiest, least expensive, and least time-consuming to construct, doesn't help to ensure that new construction will be able to keep up with demand. Will rolling blackouts soon become common as generating plants reach their limits?
The convergence of AI usage, Bitcoin mining, and increased consumer electricity demand, coupled with governmental disincentives for new power plant construction, poses a significant threat to the stability and integrity of our electrical grid. This multifaceted issue encompasses high energy consumption, environmental impact, and infrastructure challenges that need urgent attention — urgent attention that they don't appear to be getting.
The convergence of AI usage, Bitcoin mining, and increased consumer electricity demand, coupled with governmental disincentives for new power plant construction, poses a significant threat to the stability and integrity of our electrical grid. This multifaceted issue encompasses high energy consumption, environmental impact, and infrastructure challenges that need urgent attention — urgent attention that they don't appear to be getting.
Use of AI technology consumes a huge amount of power.
Generative AI technologies, such as OpenAI's ChatGPT, have seen explosive growth, necessitating vast computational power and data storage capabilities. This, in turn, leads to massive energy consumption and water usage for cooling data centers. As highlighted in an article written by David Berreby, and published online in YaleEnvironment360, AI technologies are responsible for significant carbon emissions and the consumption of millions of gallons of fresh water (Berreby, 2024, February 6).1 The energy demands of AI are projected to increase, with data centers' electricity consumption expected to double by 2026, reaching 1,000 terawatts, which is roughly equivalent to Japan's current total power consumption.
Bitcoin mining consumes a huge amount of power.
Bitcoin mining is another major consumer of electricity. The process of mining cryptocurrencies involves solving complex mathematical problems that require extensive computational power, leading to substantial energy use. According to some estimates, Bitcoin mining alone consumes more electricity than entire countries. This immense energy draw strains the electrical grid, especially when combined with other high-demand activities like AI processing.
According to a recent Texas Monthly (magazine) article,
bitcoin mining operations are rapidly multiplying in the Permian Basin area of Texas, because of the proximity of close, cheap power sources (von Oldershausen, 2024, July 25).2 The Permian Basin is not only rich in oil and gas, but it also has wind and solar energy available. The article discusses how the rapid growth of these developments imparts both enthusiasm and confusion among locals. They tend to be enthusiastic about how the high energy consumption helps to prop up sagging energy prices in that area, while being confused about the actual technology involved, and where it might lead.
Most of the energy consumed as a result of bitcoin mining is used for cooling the hundreds of computer servers (miners) used in the process. Each data center consumes as much electricity as a small town. Texas has become a Bitcoin mining hub due to its abundant and cheap energy sources, combined with favorable state policies. Wind and solar farms often produce excess energy, sometimes even paying to offload it, making it an attractive location for energy-intensive Bitcoin mining operations.
The influx of Bitcoin mining has brought jobs and economic activity to sparsely populated rural areas like Pecos County. For instance, the Cormint facility alone created 50 jobs in 2023. Despite the economic benefits, many locals are unsure about what Bitcoin mining entails. Most people in the area are unaware of or do not understand the intricacies of cryptocurrency mining.
Most of the energy consumed as a result of bitcoin mining is used for cooling the hundreds of computer servers (miners) used in the process. Each data center consumes as much electricity as a small town. Texas has become a Bitcoin mining hub due to its abundant and cheap energy sources, combined with favorable state policies. Wind and solar farms often produce excess energy, sometimes even paying to offload it, making it an attractive location for energy-intensive Bitcoin mining operations.
The influx of Bitcoin mining has brought jobs and economic activity to sparsely populated rural areas like Pecos County. For instance, the Cormint facility alone created 50 jobs in 2023. Despite the economic benefits, many locals are unsure about what Bitcoin mining entails. Most people in the area are unaware of or do not understand the intricacies of cryptocurrency mining.
But Bitcoin mining's high energy demands could strain Texas's power grid,
particularly during peak periods such as extreme weather events. However, miners argue they help stabilize the grid by consuming excess renewable energy. Companies like Cormint and Lancium promote their operations as sustainable, leveraging narratives of using stranded renewable energy and providing grid balance.
The profitability of Bitcoin mining is highly dependent on the fluctuating value of Bitcoin, which can affect employment stability in the sector. The political landscape around Bitcoin is contentious, with figures like Ted Cruz supporting the industry despite past criticisms. Mr. Cruz posted an image to Instagram with the caption "I just bought three bitcoin miners that started hashing today in Iraan, Texas". Local officials view Bitcoin mining as a continuation of the region's long history with the energy industry, albeit with a modern twist.
The profitability of Bitcoin mining is highly dependent on the fluctuating value of Bitcoin, which can affect employment stability in the sector. The political landscape around Bitcoin is contentious, with figures like Ted Cruz supporting the industry despite past criticisms. Mr. Cruz posted an image to Instagram with the caption "I just bought three bitcoin miners that started hashing today in Iraan, Texas". Local officials view Bitcoin mining as a continuation of the region's long history with the energy industry, albeit with a modern twist.
And consumers continue to use increasing amounts of electrical power.
The general trend of increased consumer use of electrical power further exacerbates the problem. With the proliferation of electronic devices, smart homes, and electric vehicles, the demand for electricity continues to rise. This surge in consumption puts additional pressure on an already strained grid, making it more vulnerable to disruptions.
The environmental impact continues to rise.
The environmental impact of these activities cannot be overlooked. AI and Bitcoin mining contribute to significant carbon emissions and resource depletion. AI technologies, for instance, use vast amounts of water for cooling data centers, often competing with local communities for freshwater resources. As Berreby notes, the environmental footprint of AI is a growing concern, with legislators and regulators in the U.S. and the EU starting to demand accountability.
New power plant construction faces many disincentives.
Adding to these challenges are governmental policies that disincentivize the construction of new power generating plants. Environmental regulations, community opposition, and financial disincentives make it difficult to expand power generation capacity. As a result, the existing infrastructure must cope with rising demand without the necessary upgrades or expansions, increasing the risk of blackouts and other grid failures.
New power plant construction costs depend on the energy source.
1. Photovoltaic (PV) power plants use solar energy, and cost approximately $1000-$3000 per kilowatt to build.
2. Constructing wind power plants cost between $1200-$2500 per kilowatt for onshore wind turbines, and between $3000 and $6000 per kilowatt for offshore wind turbines.
3. Constructing hydropower plants cost between $1000-$5000 per kilowatt for small plants, and between $1000-$3500 per kilowatt for large hydropower plants.
4. Constructing geothermal power plants costs between $2500-$5000 per kilowatt.
5. Constructing biomass power plants costs between $2000-$5000 per kilowatt.
6. Nuclear power plants cost between $6000-$10,000 per kilowatt to build.
7. Natural gas power plants using combined cycle gas turbine (CCGT) technology cost between $700 and $1300 per kilowatt, whereas simple cycle gas turbine (SCGT) technology cost $400-$900 per kilowatt to build.
8. Constructing coal-fired power plants costs $2000-$5000 per kilowatt.
Comparing these options based on profitability,
it's clear that natural gas power plants, especially SCGT plants are among the least expensive to construct on a per kilowatt basis. Solar and onshore wind power plants have moderate construction costs, whereas offshore wind, geothermal, and biomass power plants fall into a higher cost range due to specific site and resource requirements. Nuclear power plants have the highest construction costs due to complex technology, safety requirements, and long project timelines.
Generating plants using "renewable" power (solar, wind, and hydropower plants) benefit from lower operational costs and incentives, making them financially attractive, even with higher initial construction costs in some cases. Although natural gas plants have lower initial construction costs, they're subject to fuel price volatility and carbon regulations. High upfront construction costs of nuclear plants are offset by long-term operational stability, and low fuel costs, but nuclear plants have to contend with significant regulatory and waste management challenges.
Generating plants using "renewable" power (solar, wind, and hydropower plants) benefit from lower operational costs and incentives, making them financially attractive, even with higher initial construction costs in some cases. Although natural gas plants have lower initial construction costs, they're subject to fuel price volatility and carbon regulations. High upfront construction costs of nuclear plants are offset by long-term operational stability, and low fuel costs, but nuclear plants have to contend with significant regulatory and waste management challenges.
Government disincentives discourage the construction of fossil fuel fired plants (the cheapest and easiest type to construct).
1. In the U.S., the Clean Air Act imposes strict limits on the emissions of pollutants such as sulfur dioxide (SO₂), nitrogen oxides (NOₓ), and particulate matter from power plants. Regulations like the Clean Power Plan (though its implementation has been subject to legal and political challenges) aim to limit carbon dioxide (CO₂) emissions from power plants.
2. Fossil fuel power plants often face rigorous permitting processes under the Environmental Protection Agency (EPA) and other regulatory bodies, which can delay or prevent the construction of new facilities.
3. Regulations on water use and discharge, such as those under the Clean Water Act, can impose significant operational constraints on fossil fuel power plants, particularly those using large amounts of water for cooling.
4. Some regions impose taxes on carbon emissions, making it more expensive to operate fossil fuel-based power plants. For example, some European countries have implemented carbon taxes. Programs like the European Union Emission Trading Scheme (EU ETS) set limits on emissions and require power plants to buy or trade for permits to emit CO₂.
5. Governments have been shifting subsidies away from fossil fuel energy production towards renewable energy sources, reducing the financial attractiveness of fossil fuel power plants.
6. Many states in the U.S. and countries worldwide have implemented RPS, which require a certain percentage of electricity to come from renewable sources. This reduces the market share for fossil fuel power plants.
7. Tax credits, grants, and other incentives are provided for renewable energy projects, making it financially more attractive compared to fossil fuel-based power generation.
8. Fossil fuel power plants are often required to install expensive pollution control technologies, such as scrubbers for sulfur dioxide and selective catalytic reduction (SCR) systems for nitrogen oxides, to comply with environmental regulations. Continuous monitoring and reporting of emissions are mandatory, adding to the operational costs of fossil fuel power plants.
9. There is increasing pressure from investors, activists, and the public for divestment from fossil fuels. This can lead to reduced funding and support for new fossil fuel power projects.
Incentives are available.
Multiple programs are available at city, county, state, and federal levels. These programs offer financial rebates and incentives that can significantly offset the costs associated with constructing and operating new power generation plants.
Although incentives for the construction of commercial electrical power generation plants exist, and can significantly impact the financial viability of such projects, unfortunately, taking advantage of those incentives is typically complex, and requires expert navigation to maximize benefits. Services that manage rebates and incentives can play an important role in helping businesses capitalize on these opportunities, ensuring that projects are not only feasible but also economically beneficial. Despite these incentives, broader policy and regulatory challenges must also be addressed to ensure the sustained development of new power generation infrastructure.
Although incentives for the construction of commercial electrical power generation plants exist, and can significantly impact the financial viability of such projects, unfortunately, taking advantage of those incentives is typically complex, and requires expert navigation to maximize benefits. Services that manage rebates and incentives can play an important role in helping businesses capitalize on these opportunities, ensuring that projects are not only feasible but also economically beneficial. Despite these incentives, broader policy and regulatory challenges must also be addressed to ensure the sustained development of new power generation infrastructure.
So the bottom line is:
will be hodgepodge assortment of incentives be sufficient to encourage the construction of new power generating plants at a rate that will keep up with projections for future power demands? The risks facing the grid in this country (and the world) are obvious, because the projected rapid increase in demand will surely happen, while the construction of new power generating plants that are capable of meeting future demand is an unknown. Will new construction somehow keep up? Or will we be facing blackouts because of grid overloads before our elected government officials wake up and smell the coffee?
References
1. Berreby, D. (2924, February 6). As Use of A.I. Soars, So Does the Energy and Water It Requires. YaleEnvironment360, Retrieved from https://e360.yale.edu/features/artificial-intelligence-climate-energy-emissions
2. von Oldershausen, S. (2024, July 25). Power-Thirsty Bitcoin Miners Are Flooding the Energy Center of Texas. Texas Monthly, Retrieved from https://www.texasmonthly.com/news-politics/bitcoin-mining-permian-basin/?utm_source=texasmonthly&utm_medium=email&user_email_address=0bb3625f943c62810d597ae487e4ba95f52e6d16d551300af3cbfc3d1d6ce007&utm_campaign=TM%20This%20Week%207-26-24&utm_term=TM%20This%20Week
