Proactive Load Growth Planning 

Context: What is this action and why is it important? 

Electricity demand in the United States, which remained stable over the past two decades, is now projected to rise by at least 5% annually for the next five years. This increase is due to industrial expansion, the rapid growth of data centers, accelerated electrification of buildings, and deployment of electric vehicles (EVs) and their charging infrastructure. This changing energy landscape is prompting grid operators to reassess their plans for load growth and the technical analyses needed to ensure that generation and grid infrastructure can meet future demands reliably and efficiently.  

This renewed focus on load growth offers an opportunity for companies, particularly those contributing significantly to this growth such as data center operators, fleet managers, and manufacturers, to actively engage in the infrastructure planning process. Their involvement is crucial in steering the planning toward incorporating zero-carbon technologies to accommodate the new load demands. 

A new opportunity for proactive planning. Proactive planning for load growth is not a new concept, but its use has declined in recent decades due to relatively stable electricity demand. The large increases in electricity demand anticipated in the coming years are reintroducing the need for proactive planning. This is emphasized by recent updates like the PJM Interconnection's forecast, which tripled its electricity use growth expectations, primarily due to the expansion of data centers and increased electrification. 

Throughout the 20th century, utilities and grid operators planned infrastructure investments based on 10–20-year forecasts. However, these plans often overestimated load growth, and led to unnecessary cost increases for consumers. This issue worsened in the early 2000s as electricity demand growth stalled, partly due to energy efficiency measures. Consequently, many utilities and grid planners switched to reactive planning on shorter 3–5-year cycles, which, though cost-effective in periods of slow growth, primarily addresses immediate needs and overlooks long-term requirements. 

Emphasizing proactive planning under accelerated load growth can guide utilities and grid operators toward solutions that integrate new infrastructure, carbon-free generation, and demand management, and efficiently serve multiple customers in the same geographic area. While such solutions are more complex, they are also cleaner and lower cost than merely incrementally expanding infrastructure upgrades and fossil fuel generation capacity, a likely consequence of retaining reactive planning. For example, multiple companies experiencing new demand needs in a specific geographic area could collaborate with their utility to support the development of a single, large transmission line that could deliver clean energy and support reliability. This approach can offer greater efficiency and sustainability benefits than less coordinated solutions largely reliant on natural gas generation additions.

Differentiating load growth sources. Electricity load growth spans a continuum of scenarios, ranging from incremental load growth through the addition of small, dispersed loads, usually at the distribution level, to large facilities necessitating extensive infrastructure development, which could be connected at either the transmission or distribution level. This continuum shapes how stakeholders approach proactive load growth planning. 

• Managing Incremental Load Growth: Some electricity demand growth occurs through the gradual addition of smaller, dispersed loads at the distribution level, such as heat pumps installed in buildings and passenger EV charging. Challenges for grid operators and planners include managing buildout timelines, anticipating necessary distribution-level upgrades despite different timelines and needs from individual customers, integrating demand flexibility and distributed energy resources (DERs), and creating and implementing tariff incentives for demand flexibility and efficiency. 
• Load Growth from Large Facilities: A distinct form of new electricity demand growth comes from the addition of large, concentrated loads onto the grid, such as those arising from industrial complexes (for example, hydrogen production), data centers, or high-capacity EV charging hubs. These additions cause a distinct set of challenges for grid planners, including transmission or distribution buildout, interconnection processes, risk and cost allocation, renewable energy procurement, and regulatory changes on the timelines required by corporate entities. 

This deep dive focuses on broader issues of proactive planning for load growth from large facilities, especially in areas like transmission buildout and generation interconnection.

Challenges: What obstacles should companies expect to encounter? 

As the energy landscape evolves, utilities, regulators, and grid operators are facing a new set of challenges in the process of readjusting to increasing growth in electricity demand. These challenges could have significant implications for companies, such as data center operators, fleet managers, and manufacturers, seeking to support the adoption of proactive planning approaches. 

Data and Modeling. Utilities and grid operators face challenges in accurately predicting future load growth. While more precise load forecasting models are essential for effective proactive planning, the challenge lies in the creation and validation of these models, which must accommodate the unique demands of sectors like data centers and transportation. Developing these forecasting tools will require new data sets and robust, inter-organizational data-sharing mechanisms, each presenting unique challenges, including data privacy and competition and anti-trust concerns. 

Risk Sharing and Perception. Proactive planning introduces financial risks, particularly if load growth does not occur as expected. Overestimations in load growth can lead to unnecessary infrastructure investments, driving up energy costs for rate payers. These cost increases disproportionately affect low-income households, as they already allocate a higher percentage of their income to energy expenses. Consumer and ratepayer advocates are at the forefront of this issue, voicing concerns in regulatory proceedings and rate cases. Companies, utilities, and grid planners must therefore carefully balance proactive planning for reliable grid decarbonization with managing financial risks for ratepayers, especially those in under-resourced communities. 

Legislative and Regulatory Hurdles. Gaining regulatory approval for proactive grid planning can be a challenging process that involves regulators, utilities, grid operators, rate payer advocates, and possibly legislators. This process will be particularly challenging in jurisdictions requiring new legislative frameworks for cost distribution. Companies will need to work with utilities and grid planners to navigate a complex policy environment where the rules for cost allocation can significantly affect the financial viability of new infrastructure investments and the equitable distribution of costs. 

Solutions: What should companies do to be effective? Who else needs to take action? 

The following are actions that companies can take to foster proactive load planning. 

Policy 

• Collaborate with Grid Planners. Coordination with independent system operators and regional transmission organizations is crucial for integrating anticipated company load growth into regional transmission infrastructure plans. Companies should prepare to discuss how their demand, particularly from large projects, can be met by carbon-free generation and transmission assets. This collaboration may involve participating in stakeholder meetings, contributing to regional planning discussions, data sharing, and voicing support for grid investments that enable this new demand to be satisfied with carbon-free generation. 
• Collaborate with Utilities and State Regulators. Companies can support proactive grid development by engaging with utilities and state regulators, mindful of the longer, often 10-year lead times for transmission compared with their usual annual or 5-year planning cycles. This can be done through submitting load interconnection requests and participating in integrated resource planning discussions. Such engagement helps in planning generation and grid infrastructure development effectively, considering the timing, location, and scale of load growth. It's also crucial to address cost allocation structures in these discussions to minimize risks and potential harm for ratepayers, especially those with high energy burdens. This engagement also allows for the integration of demand flexibility and load reduction strategies (e.g., energy efficiency) given their operational timelines and capacities. 
• Support Proactive Planning Legislation. Companies can champion legislation or supporting policies that favor proactive grid planning. This effort includes engaging with regulators and legislators to support infrastructure investment and grid planning, particularly to accommodate load growth driven by federal and state incentives (for example, the Inflation Reduction Act). Across the United States, legislation is being proposed to mandate more proactive grid planning, indicating growing recognition of the need for systemic changes. For example, California Senate Bill 410, known as the Powering Up Californians Act, would require the CPUC and utilities to proactively plan and build grid infrastructure to support electrification. 

Operations 

• Enhanced Data Practices. Companies can adopt or support platforms and initiatives that enhance data transparency and sharing. This approach enables all stakeholders, from utility providers to policymakers, to access, interpret, and utilize forecasting data effectively. Such precision in forecasting is crucial for informed decision-making, facilitating proactive buildout of necessary infrastructure. 
• Better Load Management. By enhancing load management and flexibility, companies can contribute to overall grid efficiency and cost-effectiveness. This strategy can help reduce the need for additional grid assets, leading to a more efficient system and better utilization of grid resources. It includes: 
  • Improving operational flexibility. Companies can explore operational flexibility, especially with electrified vehicle fleets through managed charging or bi-directional charging (V2G), to adapt to grid signals and enhance efficiency. This approach can significantly contribute to managing peak loads. In an upcoming deep dive on “Supporting Grid-Enhancing EV Charging Infrastructure” we plan to provide additional details around how this can be done through grid-enhancing EV chargers and how companies can support the deployment of the charging infrastructure. 
  • Enhancing building design standards and performance targets. Companies can incorporate specific design standards into their building projects, focusing on load reduction strategies and demand flexibility, especially with HVAC systems, which are a common driver of peak loads. Requiring buildings to be adaptable in their energy usage, especially during peak times, can help reduce the need for grid infrastructure build out and enhance grid resilience. For instance, adopting the latest version of the ASHRAE 90.1 2022 energy code, which includes load management options, and grid harmonization credits from the US Green Building Council’s LEED rating system into standard design requirements, will help ensure that company building portfolios contribute to reducing energy demand and providing grid services, which are essential steps toward the rapid decarbonization of the electricity system.  

Resources

Studies: 

• The Era of Flat Power Demand is Over, a Grid Strategies report, shows how current load forecasting and planning practices are not keeping up with economic growth, driven by investment in new manufacturing, industrial, and data center facilities. 
• Demand-side solutions in the US building sector could achieve deep emissions reductions and avoid over $100 billion in power sector costs, a study highlighting the significance of demand-side contributions in mitigating the need for grid infrastructure expansion, indicates a potential nationwide opportunity of up to $100 billion annually by 2050. 

Tools:  

• Tools like ResStock and ComStock provided by the National Renewable Energy Laboratory (NREL) can allow companies to analyze load profile aggregation and evaluate potential ways to reduce energy and peak load consumption to support load planning. 
• RMI’s forthcoming GridUp tool is designed to provide geographically granular energy and power data from EVs. This data will help utilities and regulators identify specific grid upgrade needs, ensuring readiness for the increasing electrification of transportation.