Meeting the Energy Demands of Economic Competition

Commentary by Joseph Majkut

Published October 29, 2024

This commentary is part of a report from the CSIS Economic Security and Technology Department, titled Staying Ahead in the Global Technology Race. The report features a set of essays outlining key issues on economic security for the next administration, including global technology competition, industrialization policies, economic partnerships, and global governance.

Read the Full Report

As the United States adopts a more assertive approach to economic security and technological competition, it must adapt its energy policy. These efforts promise an economy that will be better able to weather global challenges, revitalizing regions with innovative technology and productive jobs and establishing a strong lead in twenty-first-century technologies. However, realizing the potential of these industries will require more energy, placing demands on the electric grid and necessitating a smart approach in order to be successful.

Under current policies, the United States is building a new industrial base in strategic technologies. Enabled by recent legislation-the CHIPS and Science Act and the Inflation Reduction Act-semiconductor fabs and battery factories now account for 60 percent of manufacturing investment. As these factories come online, they will introduce substantial new power requirements, as documented in a recent report from CSIS. The new TSMC semiconductor fabrication facility in Arizona will require more than a gigawatt of power. In Georgia, where manufacturing is a key driver of economic growth, planners are expecting six gigawatts of additional demand, more than twice what was added by the recently finished Units 3 and 4 at the Vogtle nuclear plant.

For a sector that has seen negligible growth over the past two decades, these are substantial increases, and they do not even account for the rapidly growing power demands involved in artificial intelligence (AI). Akin to factories, AI datacenters transform data and electricity into valuable tokens. The more value AI creates, the greater its associated power demands become. Optimistic projections suggest AI datacenters could consume up to 10 percent of grid capacity by the end of the decade. Such an expansion has the potential to generate immense value but could be hindered by an inability to provide sufficient energy.

To achieve these goals, it is important to continue reducing greenhouse gas emissions. The companies driving growth in AI and advanced manufacturing are committed to clean power. And policymakers, on a bipartisan basis, recognize the advantages of producing goods with lower emissions. Compared to adversaries like Russia and China, the United States produces key strategic goods with fewer emissions. As global markets increasingly prioritize sustainability, cleanliness will become synonymous with competitiveness.

The next administration will be well-positioned to build upon recent industry innovations and policy developments, leveraging U.S. natural resources and ingenuity. Three key areas are particularly important to unlocking the United States' economic and strategic potential:

• Transmission: Building extensive transmission infrastructure reduces power grid costs by increasing efficiency and better utilizing assets. Transmission infrastructure connects markets to geographically diverse power plants, reducing costs during normal operations, keeping the lights on during emergencies, and delivering renewable power from remote regions to manufacturing hubs, thereby reducing both costs and emissions while also contributing to carbon competitiveness. Accelerating the build out of transmission capability requires political leadership to create urgency for delivering these complicated projects, particularly at the state level and through federal permitting reform, which will pay off in future economic opportunities. The Bipartisan Infrastructure Law authorized the Department of Energy (DOE) $2.5 billion for transmission, which will spur a few projects, but the large societal benefits from increased transmission justify tax credit support akin to what is already offered for wind and solar projects.
• Nuclear Energy: Expanding the nuclear fleet is a medium-term option for meeting new demand. Nuclear power emits no greenhouse gas emissions and is highly reliable, making it a key target for technology companies, which are already contracting to restart old reactors. Building new nuclear power plants will be challenging, and potentially expensive, but necessary to achieve national goals. New projects face substantial costs and the risk of budget overruns, but new subsidies are meant to solidify the business case for nuclear energy production and to support project development. As new ventures are deployed, the consequent supply chains and worker experience will reduce costs for later projects and also decrease the timeline and project uncertainty that has plagued projects in the past.
• Natural Gas: Following the shale revolution, natural gas has become the mainstay of the U.S. energy mix. High supplies and low prices mean that at least part of new demand will be met by new gas power plants, the building of which can be left to the market. However, to ensure the gas industry's longevity and to address related climate concerns, policymakers will need to prioritize carbon capture technology, especially by supporting the development of CO₂ pipelines linking new generators with storage reservoirs. Congress has already created the 45Q tax credits to incentivize the capturing of carbon, and the DOE is supporting first-of-a-kind projects to reduce costs. Getting ahead on this infrastructure will enable the United States to meet immediate demands for natural gas in a way that supports longer-term ambitions for sustainability.

To seize these new opportunities, the United States must confront familiar challenges: maintaining affordability, reducing emissions, and protecting reliability. By pursuing immediately available options today and zero-carbon options in the medium term, the United States can realize progress toward strategic goals and improve its competitiveness without sacrificing climate outcomes. By uniting bipartisan support and implementing smart, regionally adaptable solutions, the United States can seize this opportunity to ensure a sustainable and prosperous future for all.

Joseph Majkut is the director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.

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