Can AI power America’s Energy Future

The House Energy and Commerce Subcommittee on Energy, Climate, and Grid Security reviewed the role of artificial intelligence (AI) in the energy sector.

By Kell Harpole July 05, 2024

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SUBJECT: Powering AI: Examining America’s Energy and Technology Future

DATE: June 4, 2024

OVERVIEW: The House Energy and Commerce Subcommittee on Energy, Climate, and Grid Security held a hearing titled "Powering AI: Examining America’s Energy and Technology Future." The hearing focused on the intersection of artificial intelligence (AI) within the energy sector, exploring how AI technologies shape energy consumption, grid security, and the future of America's energy infrastructure. Discussions revolved around the prioritization of energy resources, the role of AI in optimizing energy systems, and the strategic competition with China regarding technology and energy innovation.

HEARING RECORDING LINK: https://youtu.be/O4Skit8Jwhw

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Witnesses

  • Philip J. Dion, Sr. Vice President, Customer Solutions, Edison Electric Institute
  • Tom Hassenboehler, Chair, Advisory Committee, Electricity Customer Alliance
  • Dr. Melissa C. Lott, Professor, Climate School, Columbia University

Key Themes & Highlights

  • Republican Concerns:
    • Energy Resource Prioritization: Republicans emphasized the importance of traditional energy sources, such as fossil fuels and nuclear power, as essential for grid stability and economic efficiency. They expressed concerns about the premature retirement of fossil fuel plants due to regulatory pressures and highlighted the need for policies that support a diverse mix of dispatchable energy resources to meet peak demands.
    • Competition with China: Republicans highlighted the strategic competition with China, particularly in the development and application of AI technologies within the energy sector. They argued for enhanced investment in transmission and generation infrastructure to maintain a competitive edge and prevent China from outpacing the U.S. in energy innovation.
  • Democratic Concerns:
    • Diversity and Efficiency in Energy Resources: Democrats praised the benefits of a diverse energy resource mix, including renewable energy sources. They stressed the importance of efficiency upgrades and grid enhancement technologies to meet growing energy demands. Democrats supported non-wires solutions, such as strategic planning and resource balancing, to manage loads more effectively.
    • Role of AI in Energy Optimization: Democrats, along with witness Dr. Melissa Lott, discussed the potential of AI to optimize energy systems, particularly in managing data center loads. They explored how AI could make energy systems more efficient, reduce costs, and respond better to changing demand patterns, thereby supporting a cleaner and more resilient grid.
  • Witness Testimonies:
    • Dr. Melissa C. Lott (Columbia University): Emphasized the necessity of investing in a diverse mix of energy resources and grid-enhancing technologies to meet growing demands, especially from AI and data centers. Highlighted the critical role of AI in optimizing energy usage and managing peak loads more efficiently. Discussed how AI can help integrate renewable energy sources and improve grid reliability.
    • Philip J. Dion (Edison Electric Institute): Addressed the challenges and needs for regulatory reforms to support the infrastructure required for the burgeoning demand influenced by technological advances. Discussed the impact of competition for resources among utility providers, particularly in light of prolonged infrastructure project timelines. Advocated for policies that enable investment in necessary transmission and generation infrastructure.
    • Tom Hassenboehler (Electricity Customer Alliance): Advocated for innovative regulatory and financing strategies to support the development of clean, firm baseload capacity. Highlighted examples are the Duke Energy tariff, which enables large customers to support carbon-free generation through direct contributions. Emphasized the importance of customer choice and market-based solutions in advancing energy infrastructure.
  • Contentious Points:
    • Republicans: Favored prioritizing traditional energy resources, such as coal, natural gas, and nuclear power, to ensure grid stability and meet peak demand. They argued that these dispatchable resources are essential for economic efficiency and reliability. Republicans also expressed concerns that environmental and other regulatory frameworks are leading to the premature retirement of reliable fossil fuel plants, potentially compromising grid stability. They cautioned against regulations that might impose immediate economic costs without clear long-term benefits.
    • Democrats: Advocated for increasing investment in renewable energy sources and grid-enhancing technologies. They emphasized that a diverse energy mix, including renewables, coupled with efficiency upgrades, can meet growing energy demands while reducing environmental impacts. Democrats argued, as well, that regulatory measures are necessary to drive the transition toward cleaner energy sources and to address climate change. They highlighted the long-term benefits of environmental regulations in promoting sustainability and public health.
  • Key Discussions:
    • Infrastructure Modernization: There was a shared recognition of the need to modernize America's energy infrastructure to accommodate new technologies and increased energy demands. Significant investments are required to upgrade the grid and support the integration of AI and other advanced technologies.
    • Balancing Development and Regulation: Both parties emphasized finding the right balance between encouraging infrastructure development and maintaining regulatory oversight. The importance of fostering economic growth while ensuring environmental sustainability and grid reliability was a recurrent theme.
    • Strategic Competition with China: Acknowledged the necessity of enhancing energy investment and AI technologies to maintain a competitive edge over China. Recognized that leadership in these sectors is crucial for national security and economic prosperity.
    • Role of AI in Energy Systems: Agreed on the potential of AI to optimize energy usage, manage peak loads, and improve grid efficiency. AI technologies can help integrate renewable energy sources and support a more resilient and responsive energy system.
    • Customer Choice and Market Solutions: Highlighted the importance of innovative regulatory and financing strategies that empower customers and leverage market-based solutions to advance energy infrastructure and clean energy adoption.

In-Depth Notes

  • While the premise of the hearing was to discuss AI and its future role in the energy sector both in front of and behind the meter, the majority of the discussion revolved around the state of the grid, transmission, and other energy infrastructure development, and estimated demand growth impacts. The secondary focus was AI and data centers.
  • Both Republicans and Democrats were concerned about the accuracy of load growth estimates and the impacts that increased demand, which will be made up of new data centers, will have on the grid, which they all agreed is in dire need of improvements and expansions. They also both agreed that more needs to be done on reforming permitting. They disagreed, though, on the types of resources and solutions that should be prioritized. Republicans championed fossil fuel and nuclear plants, while Democrats lauded resource diversity, efficiency improvements, and grid enhancement technologies (GETs).
  • Democrats and their witness, Dr. Melissa Lott, were confident that growing demand, including data centers and AI utilization, could be met despite fossil fuel plant retirements with a combination of a diverse energy resource mix including renewables, efficiency upgrades, grid enhancing technologies, and non-wires solutions such as strategic planning, voluntary curtailments, and resource balancing. Some members, Doris Matsui (D-CA-07), Nanette Barragán (D-CA-44), and Tony Cárdenas (D-CA-29), also discussed with Lott how AI can work behind-the-meter to optimize energy systems and data center load management by generating analyses more quickly and accurately.
  • Lott stated that solely investing in new energy generation and not also non-wire and other solutions to improve the grid will result in expensive and less reliable electricity. Peak demand must also be addressed since reducing it can result in energy savings and reduced costs. Lott stated that the American Society of Civil Engineers gave the U.S. energy system a C- grade in their 2021 Infrastructure Report Card, which was before the AI boom, stating that “all three major components of the electric grid (generation, transmission, and distribution) have an investment gap.”
  • When asked about the importance of increased interregional transmission by Ranking Member Diane DeGette (D-CO-01) and Rep. Scott Peters (D-CA-50), Lott stated that, without building out interregional connections, costs will be higher to meet increased demands. Peters noted bills to address this that he has led on, the BIG WIRES Act and SPEED and Reliability Act. DeGette additionally brought up FERC’s recent Order 1920 on transmission planning and cost allocations, and Tom Hassenboehler agreed that it is a good first step, but more needs to be done to address local and interregional planning.
  • Rep. Kim Schrier (D-WA-08 stated that we need to restore and grow our domestic transformer manufacturing and asked Philip Dion what it will take amid increasing demand and an already present and worsening shortage. Dion stated that we need regulatory reforms and a “no regrets” strategy for needed infrastructure buildout. He stated that he was just in Seattle for a National Key Accounts meeting on this issue, which they discussed with nine state commissioners and around 20 customers. They are finding themselves in competition with some of the same customers for the infrastructure needed for production. What also used to take two months is now taking 16, and they need the ability to hedge against this.
  • Republicans were concerned about the impact of the EPA power plant and other emissions restriction rules, particularly what they consider the forced early retirement of fossil fuel plant generation. A few members noted that less than 5% of the projects stuck in the interconnection queues are going to use what are considered dispatchable resources. They were also concerned about competing with China on AI and cost allocations for transmission and generation development, especially when it comes to targeted generation development and offtake for data centers.
  • Subcommittee Chair Jeff Duncan (R-SC-03), Rep. Rick Allen (R-GA-12), and Rep. Randy Weber (R-TX-14)  specifically discussed rates and tariffs with the panel. Weber asked Tony Clark how rates and tariffs should be designed so that ratepayers are not paying for infrastructure needed by data centers. Clark stated that there needs to be a transparent process so that there is a record of costs, and they are appropriately assigned to the “cost-causers.” Hassenboehler added that the Duke Energy tariff is a great example of innovative arrangements and structures for clean firm baseload capacity. It allows large customers to directly support carbon-free generation like SMRs and advanced nuclear through innovative financing strategies and contributions that reduce project risk to lower the cost of emerging technologies. It is a voluntary program, and there are protections for ratepayers.
  • Rep. Bob Latta (R-OH-05) relatedly asked what the structure of a co-location looks like, what energy resources they will involve, and for how long. Clark stated that this strategy is a recent development, and we are starting to see data centers co-locating with nuclear. Under those arrangements, the data center and the nuclear unit will strike a PPA and a portion of the capacity is taken off of the grid and goes directly toward serving that particular load. Those parties are making an economically rational choice, but it is going to have an impact on other customers. Clark stated that he would urge state regulators, in particular, who have oversight over retail sales, to consider what that impact is.
  • In China, Chair Cathy McMorris Rodgers (R-WA-05) asked what will happen if electric power is too expensive and unreliable in the U.S. Hassenboehler stated that there will be offshoring. Jobs will be lost, and China will build it. China has priorities to lead in AI growth by 2030. They are building out transmission infrastructure at a more rapid pace than the U.S. We should be addressing this issue with more urgency.
  • Rep. Tim Walberg (R-MI-05) stated that we are in a new “space race” with China in developing AI, and whoever has the greatest computing power will win. He stated that it would take a diverse generation mix and increased coordination to compete. Dion added that this is a national security issue. He stated that when the parts come from China, there will continue to be supply chain delays and other issues, and we will continue to cede ground. He stated that manufacturing has to come back to the U.S.