A GenX Model Analysis of Data Center Load Growth and Impacts of Clean Energy Subsidies on the Western U.S. Grid

Abstract

The rapid growth of AI is increasing the electricity demand from data centers. As climate change accelerates, how this demand is met will play an important role in power sector CO2 emissions. It is essential to understand how data centers can be powered with more renewable energy to fuel the AI Revolution while addressing climate change. This thesis investigates how additional data center demand affects the Western U.S. grid and evaluates how clean energy subsidies shape power system outcomes. Using the GenX capacity expansion model, this study simulates several scenarios in the Western U.S. grid in 2030. The first goal aims to understand how the addition of a 5 GW data center load affects the grid. The second goal is to evaluate how clean energy subsidies under the Inflation Reduction Act (IRA), now no longer in effect, would have influenced system outcomes in the Western U.S. grid. Lastly, this thesis incorporates higher natural gas turbine and fuel prices to reflect expected future market conditions and to better represent more realistic conditions in the Western U.S. grid in 2030. This GenX analysis shows how the described scenarios influence the optimal generation mix, total system cost, and CO2 emissions. The findings reveal that the additional data center load significantly increased total system cost and emissions in the Western U.S. grid. While IRA incentives increased the deployment of renewable energy in the grid without a data center, particularly solar and wind, the additional data center load was largely met by natural gas. However, under higher gas turbine and natural gas fuel prices, the grid shifted towards a greater reliance on solar and battery storage, which supplied a large portion of the data center load. The results highlight the important role of battery storage in supporting data centers to be powered by renewable energy, as cost competitive storage allows intermittent sources to meet constant demand. This case study emphasizes that the cost competitiveness of renewable technology is increasingly important amid rapidly evolving energy market conditions, and that policy incentives such as clean energy subsidies can play a key role in improving economic competitiveness.