“We see a subdued outlook for electrical equipment,” with about 1.5 percent growth for next year and flat in 2027, Donald Leavens, senior vice president and chief economist with the National Electrical Manufactures Association (NEMA), told members during a webinar Wednesday presenting economic indicators and forecasting.
The picture is often one-sided, Leavens said, with makers of electrical equipment for data centers “going 24/7 on production,” while those making electrical equipment for office buildings or the housing sectors are noticeably “not doing as well.”
The rapid development of data centers to power the nation’s AI appetite has become a cause for concern among utilities, regulators and the local communities where they are landing, as the massive whirring computer processing centers consume vast amounts of electricity and, often, water for cooling.
Data center growth is expected to finish the year up 32 percent from 2024; it is expected to rise again 21 percent next year and 16.3 percent in 2027, Leavens said.
“Yes, it could be more, when you talk to the big hyper-scalers. They want more. They want it now,” he said, referring to major tech companies. Headwinds like supply-chain bottlenecks and limitations in areas like labor needed to build the developments could slow this growth, he said.
For all of the headlines data centers are grabbing, the demand for electricity is still concentrated in just three states — Virginia, Texas and Florida, according to Leavens, whose research shows Virginia is home to 643 data centers; Texas, at No. 2, has 395.
“One thing that gets lost in all the discussion is, it sounds as though the whole country is facing this huge demand for electricity from data centers,” he said. “But the reality is, data centers are concentrated in certain regions.”
Electricity demand from U.S. utilities is expected to grow 2 percent annually and to rise 50 percent by 2050, according to NEMA’s estimates. This follows decades of relatively flat growth in demand.
Despite big investments by utilities to expand electric generation, transmission and storage, this increased need should raise red flags for the resiliency of the U.S. electric grid network, said Andy Berke, the former administrator for the U.S. Department of Agriculture’s Rural Utilities Service and a former mayor of Chattanooga, Tenn.
People underestimate what the lack of resiliency can do to the economy and “our long-term viability,” Berke said Sept. 18 in a panel discussion during the weekly podcast from Broadband Breakfast, a news and policy organization focused on broadband technology. More infrastructure coming online, he said, will bring about a fundamental change.
And, obviously, it’s not just AI making demands on the nation’s electric utilities. There are nearly 6.9 million electric vehicles on U.S. roads and plugging into the electric grid, according to statistics from Veloz, an EV policy and advocacy group. NEMA lists transportation second behind data centers as the biggest driver of electric demand. Data centers will drive the largest demand in electricity growth through 2035, NEMA officials said. This surge will be followed by a demand for electric mobility after 2035.
“Certainly, we’ve had some federal policy changes here where we don’t see the stimulus behind it,” Leavens said. Congress has ended federal tax credits for EVs and rolled back fuel economy standards.
“But don’t forget there’s a lot of states out there that still have on the books, e-mobility is a requirement by 2030 or 2035,” Leavens said, “and so there’s still that possibility for EVs to be substantial by 2035, but perhaps not as much as we were forecasting a year ago.”
