Electricity Sources and Consumption in the US – The Raging Rhino of U.S. Energy & Why We Must Act Now

I’ve been studying the energy sector to develop an investment strategy. At first, I focused on stock cycles and technical indicators, but the fundamentals of energy grabbed my attention. As you may have noticed from my recent posts, I’m particularly interested in small modular reactors (SMRs) and high-assay low-enriched uranium (HALEU).

Three Mile Island, the site of the worst nuclear disaster in the United States, is reopening. It will exclusively sell power to Microsoft as it searches for energy sources to fuel its AI ambitions.

Constellation Energy announced Friday that its Unit 1 reactor, which closed five years ago, is expected to be revived in 2028, dependent on Nuclear Regulatory Commission approval. Microsoft will purchase the carbon-free energy produced from it to power its data centers to support artificial intelligence.

Financial terms of the 20-year agreement, which Constellation called its most significant ever, weren’t disclosed.

A general overview would be helpful before exploring those areas in depth. This is the first in a series on the topic.

The Raging Rhino of U.S. Energy: Why We Must Act Now

Electrical power is America’s lifeblood. It fuels our homes, factories, hospitals, and cities. Without it, modern life grinds to a halt. But as we look ahead, we see a massive problem—a “raging rhino” charging straight at us. This looming crisis is our growing electricity demand, and if we don’t prepare now, the consequences for the United States will be dire.

The U.S. Energy Landscape: Current Sources

America generates electricity from three primary sources: fossil fuels, nuclear power, and renewable energy.

1. Fossil Fuels: Coal, natural gas, and oil currently supply about 60% of U.S. electricity, with natural gas alone making up around 40%. While fossil fuels are dependable, they have significant downsides: air pollution, greenhouse gas emissions, and reliance on finite resources. The U.S. must wean off this dependency as climate change and energy independence become more critical.
2. Nuclear Power: Roughly 20% of U.S. electricity comes from nuclear power. It’s clean in emissions and can produce massive amounts of energy, but safety concerns, costly infrastructure, and long lead times for building new plants limit its expansion. The U.S. must figure out how to balance these benefits with the risks.
3. Renewable Energy: Renewable sources like wind, solar, and hydro account for about 20% of U.S. electricity generation. The technology is rapidly improving, and costs are dropping, making renewable energy more attractive. However, renewables still face obstacles, especially in storage and grid integration.

U.S. Electrical Grid: A Critical Weakness

The U.S. electrical grid is aging. It was mostly built decades ago and shows signs of wear. More than 160,000 miles of transmission lines and thousands of power plants form this massive, fragile system. As demand for electricity increases, especially during extreme weather events, the grid is already struggling to keep up.

Key Issues:

1. Aging Infrastructure: Much of the grid was designed for the energy needs of the past, not the future. Upgrading this infrastructure is a massive, expensive task but vital. Rolling blackouts, like those seen in Texas during the 2021 winter storm, are a warning sign of what could happen nationally.
2. Capacity Shortfalls: The grid wasn’t built to handle the growing demands from electric vehicles, AI data centers, and increased heating and cooling. The U.S. Energy Information Administration (EIA) predicts that by 2050, electricity demand in the U.S. could increase by 30%. Our current grid won’t be able to handle this without serious upgrades.
3. Vulnerability to Cyberattacks: As the grid becomes more digitized, it becomes increasingly vulnerable. In 2021, a ransomware attack on Colonial Pipeline showed how easily critical infrastructure could be compromised. A more robust, more secure grid is essential for national security.

U.S. Future Energy Demands: A Growing Problem

The United States faces a steep rise in electricity demand over the next few decades. As more sectors of the economy electrify—transportation, industry, and even agriculture—the strain on the grid will grow.

1. AI Data Centers: Artificial Intelligence requires huge amounts of computational power, and the data centers that support this technology are highly energy-intensive. By some estimates, global energy consumption by data centers could reach 8% of the total by 2030. The U.S., as a leader in tech, will bear much of this load.
2. Heating and Cooling: In the U.S., heating and cooling make up 30% of energy use in homes and buildings. As climate change leads to more extreme weather, this demand will increase. We will need more electricity to power air conditioning in hotter summers and heating in colder winters.
3. Electric Vehicles (EVs): The shift toward EVs is essential for reducing carbon emissions, but charging millions of EVs will add a huge load to the grid. By 2040, electric cars could represent over half of all passenger vehicle sales in the U.S. If we don’t plan for this increased demand, the grid will buckle under the pressure.

Weather Vulnerability and Renewables

Renewable energy sources like wind and solar have made significant progress, but they are challenging. Their biggest weakness is their reliance on weather conditions. Wind turbines only generate power when the wind blows, and solar panels require sunlight to produce electricity. This makes them highly vulnerable to weather patterns.

In regions with long periods of cloudy weather, solar power production drops significantly. Similarly, during windless days, wind farms can’t generate electricity. The U.S. experienced this vulnerability in Texas during the 2021 winter storm, when solar panels were covered by snow and wind turbines froze. While storage technology is improving, capturing and storing renewable energy for use during low-production times remains a critical challenge.

Climate Change and the Decline of Fossil Fuels and Replacement Needs

Fossil fuels are in decline. Coal plants are being retired, and natural gas, while cleaner than coal, still contributes to greenhouse gas emissions. The U.S. is on track to reduce its reliance on fossil fuels, but the big question is what will replace that energy. Renewable sources are growing, but they need to expand rapidly to fill the gap left by fossil fuels. Nuclear power could be part of the solution, but it faces public opposition and high costs.

As fossil fuels decline, the U.S. must ensure it can generate enough electricity from other sources. That will require a massive buildout of renewable energy, new nuclear reactors, and improved energy storage technologies. Without this, we face a dangerous energy shortfall.

Terrorist Attacks, EMPs, and Critical Resource Impacts

One of the most dangerous threats to the U.S. electrical grid comes from terrorist attacks and electromagnetic pulses (EMPs). A successful attack on crucial power stations or substations could cause catastrophic outages, leaving vast regions without electricity for days or weeks. This could severely disrupt daily life, affecting the power supply and other critical resources like natural gas, water, and communication networks.

Natural Gas: Natural gas is vital for heating, electricity generation, and even cooking in many homes. A widespread grid failure could shut down natural gas distribution, cut off power plants that depend on it for electricity production, and impact homes and industries that rely on it.

Water Systems: Water treatment facilities and distribution systems depend heavily on electricity. Without power, the pumps that move water through the pipes and the treatment plants that clean it would stop working. This would lead to water shortages, compromised sanitation, and a public health crisis. During prolonged blackouts, the ability to provide clean drinking water would be severely affected.

Communications and Emergency Services: A loss of power would also disrupt communication systems—everything from cell towers to internet servers—impacting emergency services and the ability to coordinate disaster response. Hospitals and emergency medical facilities could be rendered powerless without backup generation, leading to potentially life-threatening situations.

Food Supply Chain: Cold storage and refrigeration systems used to preserve food would be compromised. Grocery stores, restaurants, and warehouses could lose significant food stocks during extended outages, leading to shortages and increased costs.

Electromagnetic Pulses (EMPs): EMPs pose a unique and severe threat. A high-altitude EMP, caused by a nuclear detonation in the atmosphere, could knock out electrical systems across a wide region. Unlike regular power outages, which can be fixed by repairing damaged infrastructure, an EMP could permanently damage electronic components. Rebuilding after such an event would take months or even years, leaving the country without power for a prolonged period and putting every critical system—food, water, healthcare, and national security—at risk.

Solving the U.S. Energy Crisis: Tackling the Raging Rhino

To avoid a disaster, we must address the growing demand for electricity in the U.S. Here’s how:

1. Modernizing the Grid: The U.S. must invest in a smarter, more resilient grid. This means updating old infrastructure, integrating renewable energy sources, and using advanced technology to manage electricity flow effectively. The Biden administration’s infrastructure bill includes $65 billion for grid modernization, but much more will be needed to truly upgrade the system.
2. Energy Storage: Renewables like solar and wind are crucial but aren’t always available when we need them most. Large-scale energy storage solutions, like utility-scale batteries, will help capture excess renewable energy and release it during peak demand times. The U.S. is making strides in this area, but more investment is required to meet future needs.
3. Demand Response Programs: These programs encourage consumers to shift their electricity use to off-peak times, reducing the overall strain on the grid. For example, EVs could be charged at night when demand is lower, helping avoid overloading the grid during peak hours.
4. Decentralization and Microgrids: Microgrids are local systems that can operate independently from the national grid. They protect against outages and allow for more flexible integration of renewable energy. Microgrids are especially important for critical facilities like hospitals and military bases. California, for example, has already started developing microgrids to prevent power outages during wildfires.
5. Expanding Nuclear Energy: Nuclear power could play a more significant role in the U.S. energy mix. While new nuclear plants are expensive and take time to build, small modular reactors (SMRs) offer a promising solution. SMRs are safer, more flexible, and quicker to construct than nuclear reactors. This offers, IMHO, the optimal solution, with several large data-centric companies recently contracting for SMRs. Plus, nuclear energy is as clean as possible if you want to cut the carbon footprint drastically.
6. Scaling Up Renewable Energy:  Some say the U.S. needs to rapidly scale up its renewable energy capacity. By 2050, we will need more solar and wind power to meet rising demand. The International Energy Agency (IEA) suggests that the world’s solar capacity alone needs to grow 20-fold to meet global climate goals. For the U.S., this means continued investment in renewable energy infrastructure, policies to incentivize clean energy, and research into improving efficiency. And solar/wind power is subject to the vagaries of weather.

Conclusion: The Time for Action Is Now

The U.S. faces a “raging rhino” in the form of its future energy demands. As we shift to electric vehicles, power AI data centers, and deal with the rising need for heating and cooling, our aging grid won’t be able to keep up without significant changes. Investing in grid modernization, energy storage, renewable energy, and nuclear power is essential to prevent the crisis from hitting full force. If the grid goes down due to weather, terrorist attacks, or an EMP, the impact will ripple through critical systems like natural gas, water, and communications. The time to act is now.

Sources:

1. CNN Business, “Three Mile Island is reopening and selling its power to Microsoft“.
2. U.S. Energy Information Administration. “Electricity in the United States.“
3. U.S. Energy Information Administration. “What is U.S. electricity generation by energy source?“
4. International Energy Agency. “Renewables 2023: Analysis and forecast to 2028.“
5. U.S. Department of Energy. “The U.S. Electric Grid: Current Status and Future Trends.”
6. Scientific American, “The AI Boom Could Use a Shocking Amount of Electricity“.
7. MIT News, “Minimizing electric vehicles’ impact on the grid“.
8. International Renewable Energy Agency. “Global Energy Transition: Outlook 2050.”
9. International Energy Agency.  “Renewables 2024, Analysis and forecasts to 2030“.