States Vie for Power Plants to Meet Soaring Energy Demand
HARRISBURG, Pa. (AP) — Driven by the escalating power demands of a rapidly electrifying world, U.S. states are escalating their efforts to encourage the swift construction of new power plants. Policymakers are increasingly concerned about protecting their economies and residents from the consequences of insufficient power, including rising electric bills and potential outages, as they contend with the energy appetite of Big Tech.
To attract these vital power projects, states are implementing a range of measures, including financial incentives and adjustments to long-standing regulations. These actions are framed as critical steps to address the fundamental needs of residents, prevent economic disruption, and maintain competitiveness in a society increasingly reliant on electricity.
“I don’t think we’ve seen anything quite like this,” said Todd Snitchler, president and CEO of the Electric Power Supply Association.
The surge in electricity demand is significantly influenced by the artificial intelligence boom, with tech companies actively securing real estate for energy-intensive data centers, and federal incentives aimed at rebuilding the manufacturing sector are also contributing. In some instances, Big Tech is even directly involved in its own power projects.
Energy companies similarly seek to capitalize on the first substantial increase in electricity consumption in decades. This creates competition among state political leaders for the new jobs and investment associated with power plant construction.
Governors Aim to Fast-Track Power Plants
These state actions come as the political climate in Washington, D.C., under a fossil fuel-friendly administration, has led to reduced regulations on the oil and gas industries, promoting drilling and the construction of pipelines and refineries to export liquefied natural gas.
States are actively seeking solutions, with groups like the National Governors Association urging Congress to simplify and accelerate the power plant approval process. They have also criticized that the U.S. is among the slowest among developed nations in approving energy projects.
State regulators and regional grid operators largely control the process of greenlighting power plants.
Pennsylvania Gov. Josh Shapiro has proposed an agency to streamline the construction of large power plants and offer hundreds of millions of dollars in tax breaks for projects that feed electricity into the grid.
Shapiro emphasized the state’s and the country’s need for more power plants to secure its position in the artificial intelligence race and ensure a reliable and affordable power supply for residents. He suggested Pennsylvania might leave the regional grid operated by PJM Interconnection.
“It has proven over the last number of years too darn hard to get enough new generation projects off the ground because of how slow PJM‘s queue is,” Shapiro told a news conference on Feb. 27.
Indiana, Michigan, and Louisiana are each exploring ways to attract nuclear power options, while Maryland lawmakers are considering plans to commission a new power plant. In Ohio, lawmakers are considering proposals to limit the influence of electric utilities to encourage independent power producers to build plants to support the state’s expanding tech sector.
States Competing Against Each Other
In Missouri, utilities such as Ameren and Evergy, alongside the Missouri Chamber of Commerce and Industry, labor unions, and the state’s top utility regulator, support legislation to remove a decades-old law that prevents utilities from charging customers for the construction of a power plant until it is operational.
This law was the result of a 1976 voter referendum, when states were wary of utilities burdening ratepayers with upfront costs – including costs associated with inefficient or canceled projects.
Consumer and environmental groups have voiced opposition to the bill, expressing concerns that it would lead to new and potentially more expensive, natural gas plants. Kansas passed similar legislation last year, along with related measures extending tax breaks to new power plants.
Within months, Evergy and state leaders announced plans to build two 705-megawatt natural gas plants. Evergy noted that the legislation would “help Kansas compete with other states for investment and ultimately save customers money.”
John Coffman, the utility consumer counsel for the Consumers Council of Missouri, argues that utilities are playing Missouri and Kansas against each other and were planning to build the plants anyway.
“They’re just looking for opportunities to squeeze more money out of the process.”
Snitchler said that this action is driven by states’ recognition of dwindling power reserves, especially as coal and nuclear plants retire, and a subsequent scramble by power companies to take advantage of the emerging opportunities for profit.
One potential risk he identifies in this race to build plants is the erosion of consumer protections that some states have established to shield ratepayers and place the financial risk of constructing expensive power projects on corporate shareholders.
“The problem, of course, is it shifts the risk back on the people who perhaps should not be bearing it,” Snitchler said.
Sen. Gene Yaw, a Pennsylvania state lawmaker, wants to establish a large power plant-financing fund like Texas, which established a $10 billion low-interest loan program after a deadly winter blackout in 2021. Yaw, a Republican, supports Pennsylvania using financing for power plants, noting that conservative estimates suggest the state will need many more to meet projected demand.
“And what do we have underway or planned right now? Nothing… So we’ve got to do something to encourage people to come here and build in Pennsylvania just to maintain the status quo.”
