US utility large-load pipelines: a reality check

US data centre projects are springing up like mushrooms — but how many of these and other industrial large-load projects will become reality? For investors and financers, accurate information regarding which projects will actually become operational and over what timeframe is essential to making informed strategic investment decisions. 

In a new report, we crunch the data from our Lens Power & Renewables platform to provide a clear assessment of the ‘high-confidence’ large-load pipeline — and the actual capacity being put in place to serve it. Fill out the form to download an extract from the report containing key charts and data, and read on for a brief overview and some highlights from the report. 

How we define ‘high-confidence’ load 

A lack of uniform terminology and consistent granularity makes it difficult to easily and systematically categorise utilities’ large load pipelines. Nevertheless, their public disclosures can be used to provide a reasonable assessment of what we term ‘high-confidence load’.  

High-confidence loads comprise customer facilities under construction or with a grid connection initiated, and projects for which a construction letter of authority (CLOA) has been executed and a financial commitment made to the utility, as well as projects under advanced discussion which the utility his confident will go ahead. It should be noted that even committed capacity — which the utility has a legal obligation to serve — faces risks from potential new regulatory actions, supply chain disruption, or price escalation. 

Nearly three-quarters of high-confidence load is in just two grid operating regions 

The regions covered by the Electricity Reliability Council of Texas (ERCOT) and eastern grid operator PJM together account for 72% of high-confidence load. Markets in these regions are unregulated, meaning that utilities are able to interconnect projects to the grid irrespective of supply availability. This creates the risk that price-sensitive large-load developers may withdraw projects, if supply limitations drive up prices significantly or present a challenge to long-term procurement — or if market or regulatory interventions occur. 

Moves are being made to shore up regulated markets in the face of large-load demand 

Unregulated markets create the risk of inadequate future supply; this could cause reliability issues and price increases for all customers if large loads are added by utilities without sufficient capacity being put in place. The Texas Legislature has passed Senate Bill 6 (SB6), which makes it a requirement for facilities to be able to cope with supply interruption and, like other utility large load tariffs, are withdrawing the ability for large load customers to reduce demand during coincident system peaks (‘4CP’) to avoid paying transmission charges. PJM is pursuing a similar approach via a fast-track rules process, which is likely to produce comparable interventions.  

Utilities are committing to loads ramping up significantly in the next five years 

Utility companies are making huge commitments to connect large loads, with the same two regions again leading the pack. Should all the capacity in advanced discussion in PJM go ahead, the demand created will be equal to more than three-quarters of its entire risked generation pipeline. Meanwhile, in ERCOT utilities are committing to large loads equivalent to 62% of its 2024 peak demand – an amount the market will be hard-pressed to supply. 

The share of high-confidence capacity in pipelines is decreasing 

Utilities don’t disclose individual pipeline entries and exits, limiting the clarity of the pipeline picture available. However, data shows that new large-load requests are outpacing the advancement and withdrawal of existing requests at a number of major utilities. As a result, rather than a trend toward pipeline certainty, we are seeing the opposite. 

Learn more 

Wood Mackenzie’s Lens Power & Renewables platform provides interconnected intelligence across the power value chain to inform your investment decisions. Get in touch to find out more or request a demo - and don’t forget to fill in the form at the top of the page to get your free extract from the report.