Thursday, December 7, 2023

How Reindustrialization Is Boosting U.S. Manufacturing – and Challenging Utilities

Share this article:

A new EPRI report documents ways decarbonization efforts drive regional industrial growth and “point load” electricity demand.

Industrial electricity demand has been flat for most of the last 25 years at 25% of total U.S. demand, with many companies moving their production overseas. But that’s changing in some regions of the United States, where manufacturing activity has started growing again. A range of contributors, from supply chain insecurities arising from the COVID pandemic and the war in Ukraine to rapidly growing investments in technologies related to decarbonization, are driving new factory construction. While this reindustrialization offers broad economic advantages, it could pose challenges for electric companies as they work to deliver the power these high-demand facilities need to keep their lines running.

Decarbonization Driving Growth

While some early examples of this growth were related to low U.S. natural gas prices, the trend has quickened as companies have sought to regain control over their supply chains. Additionally, federal incentives underwritten by 2021’s Infrastructure Investment and Jobs Act and 2022’s CHIPS Act and Inflation Reduction Act are sparking construction in sectors related to semiconductors, solar panels, electric vehicles, and batteries. As a result, more than 155 new or expanded manufacturing facilities were announced, began construction or operation between January 1, 2021, and March 1, 2023, and factory construction spending doubled between January 2022 and April 2023.

These plants may have a limited impact on total U.S. industrial power demand, boosting consumption by about 0.65% compared to 2022’s level. But, with annual demand ranging up to more than 1,000 gigawatt-hours (GWh) annually, they pose big challenges for local utilities – especially given the difference in time required to build a new factory and to develop the transmission and distribution capacity needed to serve that plant. Rob Chapman, EPRI’s Senior Vice President, Energy Delivery and Customer Solutions, notes that challenges are more significant than simply getting power to a service entry.

“A large portion of this new load is going to be 24/7,” Chapman said. “Some may operate Monday through Friday and shut down on weekends. As such, there may be different peaks and valleys, but a large portion will operate 24/7. That can pose a challenge.”

Defining the Issue

Meeting manufacturers’ expectations of power availability could grow challenging for utilities, especially given the difference between the two to three years it might take to develop a manufacturing plant and the three to five years typically needed to extend distribution resources – with up to a decade necessary for building new transmission.

“Companies that are reshoring don’t want to be told they must wait two, three, four years to receive the power needed to support manufacturing development,” Chapman said, adding that the issues don’t stop with power availability. “Another issue that may come into play is power quality. We have seen a resurgence of requests around power quality to help ensure that manufacturing facilities are being properly supported.”

EPRI has been researching just how big an impact this reindustrialization and onshoring trend might have on utility operations. It recently released “Reindustrialization, Decarbonization, and Prospects for Demand Growth,” a report documenting the increase in “point loads” created by new manufacturing facilities that will need to be accommodated by the grid at specific locations. It also covers the longer-term outlook for industrial demand in a decarbonizing economy, leveraging EPRI’s recent Net-Zero 2050 modeling analysis.

Emerging large point loads aren’t a new issue for utilities. However, they often develop over time, like large, planned communities that might eventually house thousands of residents but take years to build out fully. That’s not the case with a new manufacturing plant.

“If they know ahead of time there is a new community that’s going to be built, utilities can plan for it and get all of the approvals,” said Poorvi Patel, manager of strategic insight in EPRI’s Technology Innovation program. “Now, because of all the policies for fast-tracking decarbonization, we don’t have the five to 10 years’ foresight – it’s more like two years’ foresight, which makes it more challenging.”

Patel’s team worked with third-party consultants to gather and collate publicly available data on new plant and expansion announcements. These contributors also interviewed corporate managers on their expansion plans. Since data collection stopped in March 2023, a number of additional projects have been announced, making this a “very dynamic” trend, Patel said.

Among the surprises for Patel in the data was the degree to which new industries behind today’s decarbonization efforts – boosting production of solar panels, electric vehicles, and battery systems for both stationary and transportation uses – are driving manufacturing growth. Also notable is the highly regional nature of where load growth is happening.

“If you look at load growth over the entire U.S., industrialization is just a tiny piece of it. But you can go down to the state level in Arizona and see they’re going to have 10% to 15% load growth because of reindustrialization or industrialization, which means a lot to that area,” Patel said, targeting one particularly impacted state as an example.

Data Center With Multiple Rows of Server Racks

Emerging Data Center Concerns

Data centers are becoming another important point load source for grid planners, but so far, it’s been difficult to know their impact on an affected utility’s operations. And hyperscale data centers are becoming more common to support the machine learning efforts required to develop artificial intelligence capabilities. However, we’re still learning just how large their demand might be. Again, the grid impact for utilities in these expansions will be highly regional, and EPRI is also researching where such hot spots might be located.

“If you dive down to the regional base in a state like Virginia, they may see about 35-45% of their load being consumed by data centers in 2030,” Patel said. “That is going to be a big chunk and will be very constraining to them.”

Given the current reindustrialization and data center construction trends, EPRI is working with regional utilities to help advance their planning efforts. The recent completion of the Integrated Strategic System Planning (ISSP) initiative and the launch of the Integrated System Planning (ISP) Interest Group are two examples, according to Chapman.

“The ISSP Initiative developed a new resource planning framework and supporting analytical toolbox that may be used for planning reliable resource portfolios across the system,” Chapman said, adding that the related ISP interest group will give electric companies options for exchanging best practice information with their peers. “The hope is to help members identify next steps for implementing and improving an integrated system plan within their companies.”

EPRI Technical Expert:

Poorvi Patel
For more information, contact