Data Centers at the Crossroads

Your guide to navigating the key themes reshaping energy dynamics. Join Enverus Intelligence® Research as they dig into the nuances of power demand forecasting for data centers and unravel the economic intricacies of carbon capture and storage deployment that will be required for increased gas-fired power generation.

Enverus Intelligence® Research, Inc., a subsidiary of Enverus, provides the Enverus Intelligence® | Research (EIR) products.  See additional disclosures. 

Select “Get Started” below if you would like to unlock Energy Transition Research’s in-depth reports on the power/supply demands of data centers and other energy transition topics, available exclusively for EIR members.  

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Research Written by:

Riley Prescott, Analyst, Enverus Intelligence® Research

Jeffery Jen, Analyst, Enverus Intelligence® Research

data-center-with-highway
Introduction
Overview of Energy Transition Research Load Forecasts
Data Center Outlook and IPP Expectations
Role of Carbon Capture Storage
Conclusion
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Introduction

In this e-book, you will explore the rising power demand driven by the rapid expansion of data centers, cryptocurrency mining and sophisticated oilfield technologies. As our energy consumption soars to ever-higher levels, the industry faces significant challenges in power generation, with a focus on maintaining reliability and security, and minimizing environmental impact. Amid these changes, natural gas plays a vital role, with its future heavily dependent on the successful implementation of carbon capture and storage (CCS) to achieve sustainable operations. Dive into the analysis with Energy Transition Research (ETR), a branch of Enverus Intelligence® Research (EIR), as they unravel the complexities of power demand, challenge exaggerated predictions and examine the economics of CCS, an essential element for the future of gas-fired power generation.

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Overview of Energy Transition Research Load Forecasts

Zonal Load Forecasts Account for Every Electron

To grasp the intricacies of predicting power usage in the United States, we need to consider the unique characteristics of various regions, as every part of the electricity grid functions differently. ETR divides the country into 56 unique zones that match the independent system operator (ISO) load regions, local weather conditions and the specific types of grids found in each area. This detailed method allows for an in-depth analysis of each zone’s power needs, offering a clear picture of the country’s diverse energy requirements.
Figure1_Zonal-Load-Forecasts
Figure 1 | EIR’s Zonal Load Forecasts Account for Every Electron

Source | Enverus Intelligence® Research, Enverus Foundations P&R

Evolving Baseload Dynamics: Integration of Traditional and Emerging Energy Drivers

All aspects of ETR’s analysis on baseload growth are developed internally, based on their own proprietary models and sophisticated forecasting methods, of which all is made available to clients. They integrate traditional regression analyses, which account for key variables including population growth, temperature changes and seasonal trends, with contemporary factors that influence energy demands, such as advancements in technology and industry shifts. This ensures they stay ahead of emerging trends, not just relying on past data. Critical sectors including data centers, cryptocurrency and innovations in green hydrogen and carbon capture are reshaping energy demands. ETR pays close attention to developments, including the electrification of oil and gas operations in the Permian Basin and the balancing role of residential solar energy, providing depth to their strategic analysis necessary for maneuvering through the evolving energy landscape.

Figure 2 | Baseload Modified With Emerging Load Drivers

Source | Enverus Intelligence® Research, Enverus Foundations P&R

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Data Center Outlook and IPP Expectations

Data Center Energy Supply Trio and Breakthroughs in Chip Efficiencies

The top priority for those developing data centers is making sure they have a steady supply of energy because these facilities can have zero downtime. To ensure they can keep operating without interruption, they’ve been built with redundancy, using backup generators and batteries. It’s not only important to ensure a steady supply of power; environmental impact matters, too. Data center developers are mandated to ensure a certain component of their energy supply is from zero and low carbon sources, like wind, solar or nuclear.

Up until 2023, new technology was advancing at a predictable pace, but Nvidia’s release of the Blackwell chips has really changed the game. These chips have more transistors, which means they can do things like training AI models twice as fast and running them five times faster, making them super efficient. This big improvement doesn’t just mean better performance; it also helps the environment by using less energy, matching up with the data center industry’s goal to be environmentally responsible.

Figure 3 | Major Breakthroughs in Chip Efficiencies

Source | Enverus Intelligence® Research, Nvidia

How Does AI Demand and Growth Materialize?

As the demand for AI increases, it creates a self-sustaining momentum like a flywheel, driven by the creation of better versions of models, such as the sophisticated Chat-GPT. With each new version, the applications become more precise and the use cases, covering both the retail and industrial realms, become clearer. This pursuit of specialized usefulness and the potential for making money leads to a perfect match between products and market demand, which sparks a rise in the number of users. When companies see that their products are hitting the mark in the market, they’re more likely to invest more money. This investment boosts the demand for even better and newer models, keeping the wheel of innovation and practical use turning.
Figure 4 | Flywheel of Compounding AI Demand
Source | Enverus Intelligence® Research

Exponential Data Center Energy Demand and Infrastructure

Data centers need to be within proximity to fiber-optic cables, both on land and offshore, to cut down on costs. It’s predicted that these centers will need five times the current fiber bandwidth to really use all their tech power. But it’s not just about more bandwidth; there are other points to consider, like making sure the computer chips are efficient, connecting different systems effectively, moving through data lines without delays and dealing with the availability of important electrical components like transformers and breakers.

Looking at the data center needs across the contiguous United States, the base forecast expects a 43% jump in the need for processing power. On the more cautious side, the slowest steady increase we might see could be at a 5% yearly rate that’s below this base prediction. On the other hand, the most optimistic scenario suggests a growth rate that’s 5% higher than the base forecast. What’s important to these estimates are two big tasks data centers have: training, which needs a lot of bandwidth to move data around, and inference, which requires fast networks, like those provided by fiber-optic cables, to quickly process data. This shows just how much data centers must balance their operational demands with the fast pace of tech developments.

Figure5_Exponential-Data-Center-Energy-Demand
Figure 5 | Exponential Data Center Energy Demand
Source | Enverus Intelligence® Research, Telegraphy, Baxtel, ITU
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Role of Carbon Capture Storage

EPA Final Rule for Fossil Fuel Power Generation

The growing need for more electricity, driven by the expansion of data centers, means that we’ll continue to use gas-fired power plants to meet this demand. In an effort to reduce emissions, the EPA has proposed a set of regulations on new gas-fired power plants that could require them to start using CCS technology by 2032. To effectively manage this significant transition and ensure we can meet the growing demands for energy while also protecting the environment, it’s crucial to fully grasp the workings of the CCS system.

Interest in tax credits for carbon capture (Section 45Q Production Tax Credit) has jumped since the Inflation Reduction Act was put into action which increased the value of the credit. This boost in value has made investors more confident about getting into this technology. As a result, the United States is moving to promote the use of such technology through regulations such as the one the EPA has implemented on gas-fired power generation.

Figure6_EPA-Final-Rule-for-Fossil-Fuel-Power-Generation
Figure 6 | EPA Final Rule for Fossil Fuel Power Generation
Source | Enverus Intelligence® Research, EPA

CCS Value Chain

Coal and existing gas plants will need to use carbon capture technology to reduce emissions following proposed EPA regulations. When it comes to moving the captured carbon, there are a few choices: pipelines (which are the cheapest), trucks, trains and boats. For storing this carbon, it can be buried deep underground, in places both off the coast and on land. However, it’s important to analyze these elements carefully because if the costs get too high, using CCS might not make financial sense. To deal with these financial challenges, ETR has created economic models that consider the whole value chain of the CCS processes.
Figure 7 | CCS Value Chain
Source | Enverus Intelligence® Research

Efficiency and Strategy in Post-Combustion Carbon Capture

Post-combustion carbon capture is a common technique used in power plants to clean high-temperature exhaust gases at low pressures, often with the help of chemicals called amines to capture the carbon. Natural gas power plants have less CO2 in their exhaust gases compared to coal power plants, making it more complicated and potentially costly to extract the CO2. To cut down on the costs of moving the captured carbon and to get greater financial benefits, there’s a strategy that involves linking several sources of emissions through a large-scale hub network. Moreover, there’s a link between how thick and porous the underground storage formation is and the point at which storing the carbon becomes financially viable. Having a larger porous area in a confined space can lower the costs of monitoring the CO2 plume in the subsurface.
Figure8_Storage-Site-Selection-Is-Critical-to-Economics
Figure 8 | Storage Site Selection Is Critical to Economics

Note | carbon storage break evens are reported in $/tonne CO2 for 1 mtpa injection at a 7,000-foot depth over a 25-year injection life using a 10% discount rate. Height of porosity is defined by reservoir thickness multiplied by porosity.

Source | Enverus Intelligence® Research, FE/NETL CO2 Saline Storage Cost Model, U.S. DOE

Expanding CCUS Infrastructure: Opportunities and Challenges in Key Regions

The fact that emissions are heavily concentrated in certain areas, along with economic hurdles, especially in the northwest and northeast, calls for major upgrades in infrastructure. This means either building pipelines or using expensive storage methods to effectively handle and move the captured emissions. Nonetheless, there’s a big chance for growth in carbon capture, utilization and storage (CCUS) and the construction of new power plants in places like California and Texas. These areas present an optimistic path for developing infrastructure that manages emissions.
Figure 9 | U.S. Storage Potential

Source | Enverus Intelligence® Research, USGS, EPA

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Conclusion

The e-book provided in-depth analysis of how energy use is changing in different areas and what that means for the constant power supply. ETR emphasized the importance of using cutting-edge technology to save energy and enhance environmental approaches, like CCS, to handle the industry’s impact on the climate successfully. Finding the right mix of meeting the increasing demand for energy and keeping our environmental commitments is key to creating an energy infrastructure that will last and remain sustainable for the future.

Here are your key takeaways:

  1. Load growth is going to come from multiple sources. Data centers will be a major contributor. Quantifying demand growth requires a detailed breakdown of the load segments within each region.

  2. The world of electrons and molecules are colliding. Evaluating growth opportunities and risk requires integrating analysis from multiple layers of the energy system.

  3. CCS viability is location specific and understanding all aspects of value chain is needed for CCS deployment. Collocating natural gas power plants with good quality storage reservoirs is a winning strategy.
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