NRG Energy is returning to Pennsylvania with the acquisition of five natural gas power plants, part of a blockbuster $12 billion deal with LS Power.
Texas-based NRG announced plans to buy the Springdale natural gas power station in Allegheny County, a gas plant in Armstrong County and another in Fayette County, along with two facilities farther east. The Pennsylvania facilities, in addition to plants in six other states, will double NRG’s energy-generating capacity at a time when power demand is sharply rising.
“The demand growth for electricity is real,” NRG’s CEO Larry Coben said on CNBC on Monday. “I’ve been in this business for 40 years and we’ve never seen a demand supercycle like we’re seeing right now.”
Many of the units that NRG is acquiring are peaking plants — that is, less efficient facilities that run only when the grid needs a boost, rather than all the time. But in a call with analysts on Monday, NRG executives said those plants could be outfitted with new equipment and turned into baseload plants, i.e. those that run constantly.
The current electricity “supercycle” is being driven in the short term by data centers.
There are other dynamics that have turned downward facing projection lines into hockey sticks. Vehicle and building electrification is a long-term driver, as is the expected reshoring of manufacturing and development of new heavy industry.
But the jolt delivered by the sudden ubiquity of data center demand is unrivaled.
In explaining the LS Power deal to investors, NRG showed projections for an estimated 31 gigawatts of growth in demand expected to materialize across the PJM footprint by 2030. Of those, 21 gigawatts are expected to come from data centers. PJM is the transmission grid that includes Pennsylvania and 12 other states, and is the largest in the country.
“The data center is so new; nobody could have predicted this even two years ago,” Marjorie Philips, a senior vice president with LS Power Development, said during an energy adequacy conference hosted by Pennsylvania utility regulators in November.
Lawmakers and regulators are worried that the entry of very large new facilities into the grid will lift costs and burdens for residents and other customers that rely on grid power. But Ms. Philips said in November that the data centers are eager to “pay for themselves” as long as they get electricity quickly.
“They’re willing to pay more. There’s a reason we are all chasing them,” she said.
In Indiana County, for example, Homer City Generation plans to build enough natural gas power to pump out 4.4 gigawatts. But about 75% of that power will go directly to the data center clients that it hopes to attract to the campus that is being built out, its CEO told state legislators on Monday.
PJM Interconnection, the grid operator that manages the flow of electricity between power plants and utilities in this area, was so alarmed by possible shortages in the future as the grid transitions from fossil fuel baseload plants to more intermittent renewable sources, that it recently created a kind of high-speed lane for shovel-ready projects that could add reliable capacity to the grid in short order.
Earlier this month, PJM announced the results of that initiative, picking 51 projects across its footprint, including seven in Pennsylvania. Five were uprates of current natural gas plants, one wind farm uprate, and the nuclear restart of Three Mile Island.
LS Power submitted several projects into PJM’s Reliability Resource Initiative, including a proposed uprate of the Armstrong natural gas peaker plant in Indiana County. The project was not selected.
Also unsuccessful were 3.2 gigawatts of proposed new natural gas generation in Pennsylvania. This included the gas power slated to replace the Bruce Mansfield coal power plant in Shippingport. According to PJM’s records, the Shippingport Power Station submitted a proposal to build 1,700 megawatts of gas-fired electricity at the site, but the project did not meet its milestones.
Projects that didn’t make it into this queue can still be considered in the ordinary interconnection process, during which PJM evaluates the impact of connecting or disconnecting assets on the grid.