Something We Take For Granted...

Is Not Guaranteed - Article #119 (with graphs, maps, & tables)

(NOTE: I apologize for the previous premature send that omitted the graphs, maps, and tables that are included in this version.)

In this 12-minute article, The X Project will answer these questions:

I. Why this article now?

II. Why is the current U.S. grid reliability considered unsustainable?

III. How is AI and data center growth reshaping electricity demand projections?

IV. What are the consequences of planned retirements of firm generation capacity?

V. How do traditional grid planning metrics fall short in today’s environment?

VI. What did the DOE’s modeling reveal about regional vulnerabilities?

VII. What solutions does the report propose to maintain grid reliability?

VIII. Why is grid reliability now a matter of national security and economic competitiveness?

IX. What does The X Project Guy have to say?

X. Why should you care?

Reminder for readers and listeners: nothing The X Project writes or says should be considered investment advice or recommendations to buy or sell securities or investment products. Everything written and said is for informational purposes only, and you should do your own research and due diligence. It is recommended to consult with an investment advisor before making any investments or changes to your investments based on information provided by The X Project.

I. Why this article now?

On July 7, 2025, the United States Department of Energy released a report titled “Evaluating the Reliability and Security of the United States Electric Grid.”

Why did the DOE publish this report?

The report explains on page vi, in the section “Background to this Report”:

On April 8, 2025, President Trump issued Executive Order 14262, "Strengthening the Reliability and Security of the United States Electric Grid.” EO 14262 builds on EO 14156, “Declaring a National Emergency (Jan. 20, 2025),” which declared that the previous administration had driven the Nation into a national energy emergency where a precariously inadequate and intermittent energy supply and increasingly unreliable grid require swift action. The United States’ ability to remain at the forefront of technological innovation depends on a reliable supply of energy and the integrity of our Nation’s electrical grid.

EO 14262 mandates the development of a uniform methodology for analyzing current and anticipated reserve margins across regions of the bulk power system regulated by the Federal Energy Regulatory Commission (FERC). Among other things, EO 14262 requires that such methodology accredit generation resources based on the historical performance of each generation resource type. This report serves as DOE’s response to Section 3(b) of EO 14262 by delivering the required uniform methodology to identify at-risk region(s) and guide reliability interventions. The methodology described herein and any analysis it produces will be assessed on a regular basis to ensure its usefulness for effective action among industry and government decision-makers across the United States.

The X Project curates, summarizes, distills, and synthesizes knowledge & learning at the interseXion of economics, geopolitics, money, interest rates, debts, deficits, energy, commodities, demographics, and markets - helping you know what you need to know. Given the title of this article, summarizing DOE’s report, you can guess that the conclusions are not good, and this is something that everyone needs to know.

II. Why is the current U.S. grid reliability considered unsustainable?

The U.S. power grid, despite decades of investment and technological advancement, is under acute strain. The Department of Energy’s report highlights a stark reality: the accelerating retirement of firm, dispatchable power plants, such as coal and natural gas, combined with an insufficient pace of firm replacement capacity, has left the grid vulnerable. While the nation boasts abundant resources—oil, gas, coal, nuclear—the practical deployment of these assets is impeded by market and regulatory dynamics that favor intermittent resources without equivalent firm capacity. As a result, the grid is becoming increasingly dependent on weather patterns to balance supply and demand, a precarious proposition in the face of rising load growth.

A central finding of the DOE report is that the status quo—retiring baseload plants while relying heavily on intermittent renewables—is fundamentally incompatible with the rising demands of modern industry and society. The report highlights how the mismatch between generation retirements and inadequate firm replacements jeopardizes the nation’s ability to meet future power needs, particularly in a context of growing industrial reshoring, manufacturing expansion, and data center proliferation driven by artificial intelligence. Without decisive intervention, the grid risks significant reliability shortfalls, higher costs, and increased vulnerability to extreme weather.

Moreover, the report warns that older planning standards and grid management techniques are ill-suited to address these emerging challenges. Traditional metrics, such as a “1-in-10” loss of load expectation, fail to account for the frequency, duration, and severity of modern grid stressors. The DOE calls for a paradigm shift in planning, demanding new methodologies that simulate grid performance across entire years and under varying conditions. The conclusion is unequivocal: grid reliability is no longer something that can be taken for granted.

III. How is AI and data center growth reshaping electricity demand projections?

Artificial intelligence and the associated surge in data centers are significantly altering electricity demand forecasts. The report describes how multiple industry and research bodies, including EPRI, LBNL, McKinsey, and S&P, project data center load growth to reach between 35 GW and 108 GW of average demand by 2030, depending on assumptions regarding AI adoption rates, efficiency improvements, and hardware trends. DOE chose a conservative midpoint of 50 GW for its modeling, indicating a transformative new load on the system equivalent to roughly 6-7% of the current total U.S. peak load.

This surge in demand is not evenly distributed across the country. The report highlights regional disparities influenced by factors such as state policies, energy prices, infrastructure availability, and siting preferences. For example, PJM, MISO, and ERCOT are forecast to absorb significant portions of the new data center capacity due to their central roles in supporting industrial hubs and technological corridors. In contrast, regions like ISO-NE and NYISO face relatively modest increases, partly because fewer new data centers are planned in those areas.

Notably, the DOE emphasizes that this new load differs from traditional demand growth. AI-driven data centers are highly energy-intensive, require constant uptime, and impose significant reliability demands. Unlike residential or commercial loads, they cannot simply be curtailed during shortages without substantial economic and strategic consequences. The report frames the ability to power AI workloads as a national security issue, linking energy reliability directly to America’s competitiveness in the “AI arms race.” Thus, planning for this surge is not optional—it’s an imperative.

IV. What are the consequences of planned retirements of firm generation capacity?

The DOE report issues a stark warning about the cumulative effects of announced retirements. Between now and 2030, the grid is expected to lose approximately 104 GW of firm generation capacity, including around 71 GW of coal-fired and 25 GW of natural gas-fired capacity. While 209 GW of new capacity is projected to come online, only 22 GW of that will be from firm, dispatchable sources. The vast majority of additions—such as solar, wind, and batteries—are variable and cannot guarantee output during peak conditions or extended periods of unfavorable weather.

This imbalance has tangible consequences. Under the “Plant Closures” scenario modeled by DOE, the average annual hours of lost load (LOLH) leap from 8.1 hours in today’s grid to an astonishing 817 hours in 2030—a hundredfold increase. In extreme weather years, total lost load hours could reach over 1,300 hours. Such numbers reflect not only power outages but also the grid's inability to integrate large new loads, such as AI data centers, which can lead to potential economic disruptions, higher energy prices, and risks to critical infrastructure.

Moreover, even in the “No Plant Closures” scenario—where all retirements are hypothetically avoided—regions like PJM, SPP, and ERCOT still exhibit significant reliability shortfalls. The message is clear: planned retirements, unless matched with sufficient firm replacements, will significantly degrade grid reliability. The report emphasizes that this is not simply a regional issue, but a systemic national challenge that affects America's economic security and technological future.

V. How do traditional grid planning metrics fall short in today’s environment?

Historically, grid planners relied heavily on the “1-in-10” standard, which aimed to limit power outages to one day in ten years. However, the DOE report critiques this metric as increasingly obsolete in today’s energy landscape. The “1-in-10” metric primarily focuses on the probability of outages during annual peak demand periods, but it fails to capture the duration, magnitude, and frequency of outages spread throughout the year. With the rise of intermittent resources and dynamic load patterns—primarily due to AI data centers—system stress no longer occurs exclusively during summer peaks.

DOE’s analysis instead adopts modern metrics, such as Loss of Load Hours (LOLH) and Normalized Unserved Energy (NUSE), which provide deeper insight into both how often and how severely the grid may fail to meet demand. These metrics help quantify the real-world impact of outages, such as the number of hours customers may be without power or the percentage of annual energy demand that could go unserved. For instance, a small percentage of unserved energy might sound acceptable in abstract terms, but can translate into catastrophic consequences if concentrated into critical industrial or data operations.

This shift in methodology reflects the evolving complexity of the grid. As variable renewable penetration rises, the risk of prolonged, multi-day shortfalls grows. Batteries, while helpful, often lack sufficient duration to bridge extended periods of inclement weather. The DOE calls for an overhaul of reliability standards and modeling techniques, emphasizing full-year, hourly simulations, interregional coordination, and more granular analysis of both supply and demand variability. It’s a critical pivot that planners must embrace to ensure reliability in the next decade.

VI. What did the DOE’s modeling reveal about regional vulnerabilities?

The DOE’s regional analysis paints a complex mosaic of grid strengths and weaknesses. Regions such as ISO-NE and NYISO appear relatively stable under all modeled scenarios, mainly because they face limited additional AI/data center load growth and benefit from robust interconnections and imports. By contrast, regions like PJM, MISO, SERC, and SPP face significant risks. In the “Plant Closures” scenario, PJM stands out as particularly vulnerable, with LOLH reaching over 430 hours annually, and in the worst weather year, experiencing more than 1,000 hours of load shedding.

ERCOT, Texas’s grid, is another area of concern. Despite recent winterization efforts following Winter Storm Uri, ERCOT still shows an elevated risk under the DOE’s modeling. The average annual LOLH rises to 20 hours, even without retirements, and peaks at over 100 hours in severe weather years. Meanwhile, MISO’s challenges are magnified in the Plant Closures case, where significant coal retirements, coupled with new loads, drive notable deficits, which are mitigated only through imports from neighboring regions.

The DOE also found evidence of subregional disparities within larger RTOs. In PJM, for example, specific subregions might maintain sufficient resources while others experience severe shortages. This underscores a crucial insight: while transmission can mitigate local shortfalls, it cannot replace the need for adequate firm capacity. The regional findings make clear that national averages can obscure critical local vulnerabilities that threaten overall grid stability.

VII. What solutions does the report propose to maintain grid reliability?

The DOE report stops short of prescribing specific technologies but strongly advocates for what it terms “rapid and robust reform.” It recommends a shift away from business-as-usual resource planning and urges immediate action to accelerate the development of firm, dispatchable capacity. This could mean natural gas plants equipped with carbon capture, advanced nuclear, or other dependable resources that can operate independently of weather conditions. The emphasis is on capacity that can be counted on when intermittent renewables fall short.

Additionally, DOE promotes modernizing grid modeling and planning processes. It calls for uniform, rigorous national methodologies that reflect the realities of a changing energy landscape. This includes integrating hourly simulations across all seasons, incorporating real-world weather data, and leveraging sophisticated tools like the PLEXOS model used in this study. Enhanced regional cooperation and data sharing are also highlighted as essential for effective planning, especially in managing interregional transfers during emergencies.

Lastly, the DOE report emphasizes the importance of ensuring that load growth—especially from AI and data centers—is matched by reliable capacity and infrastructure investments. Delaying plant retirements, while controversial, is floated as a near-term stabilizing measure. However, the report makes clear that simply maintaining the current fleet without new firm additions is insufficient. A balanced and diversified grid is vital to safeguard national security, promote economic growth, and maintain technological leadership.

VIII. Why is grid reliability now a matter of national security and economic competitiveness?

The stakes for grid reliability have risen far beyond keeping the lights on. The DOE frames energy security as integral to America’s national security and its position in the emerging digital and AI-driven global economy. As data centers become central to AI research, machine learning, and cloud services, any grid instability threatens not only commercial operations but also the nation’s ability to lead in critical technological arenas. Losing the ability to power AI workloads could allow adversarial nations to gain a foothold in shaping digital infrastructure and global norms.

Moreover, a reliable, affordable power grid underpins broader economic growth. Reindustrialization, new manufacturing investments, and the reshoring of supply chains all hinge on the availability of abundant, low-cost, dependable energy. The report warns that grid inadequacy could raise the cost of living, stifle economic expansion, and erode America’s competitive edge. In regions like PJM, where outages could become severe, entire industrial clusters could be jeopardized, potentially leading to job losses and economic contraction.

Finally, the grid serves as the first line of defense against geopolitical risks, natural disasters, and cyber threats. A resilient energy system ensures that critical infrastructure—including hospitals, defense facilities, and communications networks—remains operational under duress. The DOE report argues that taking grid reliability for granted is no longer viable; it is a pillar of national resilience. The future of American prosperity and security depends on immediate, decisive action to shore up the electric grid—a system we once assumed would always be there.

IX. What does The X Project Guy have to say?

A few years ago, I read Meredith Angwin’s 2020 book, “Shorting the Grid: The Hidden Fragility of Our Electric Grid.” It scared me into making electricity redundancy a serious consideration when, a year later, my wife and I bought a bigger house and proceeded with a complete “gut rehab.” The house came with a 20 kW natural gas generator, which was in good shape, and so we kept it. However, we also invested in an 11.5 kW solar array, which, after two years of continuous service, provides two-thirds of our electricity on average. Finally, to complement the solar array, we also bought a 10 kW battery.

The system is designed so that when the sun is shining, the electricity generated by the solar array is first used to offset our electricity consumption. If there is a surplus of electricity being generated by the solar array, it is used to charge the battery. If the battery is fully charged, we sell our surplus generation back to the grid at the same retail price we pay when drawing from the grid.

Once we start drawing more power than we are generating, the deficit is first offset by the battery until the battery is discharged to 20% of its capacity, at which point we go back to the grid. If the grid is unavailable, the generator kicks on to power our consumption and charge the battery. Once the solar array generates enough power, the generator turns off and remains off until our draw exceeds the output of the solar array and battery.

I have been prepared for frequent and extended blackouts for a couple of years now, and this DOE report confirms that we made wise decisions with the investments in our redundant systems.

X. Why should you care?

First, there is nothing more frightening than imagining how our civilized society devolves into chaos and disorder during a prolonged electricity outage. I don’t know how long an outage might last before things get out of control, but I imagine it won't be too many days. I hope we never experience anything close to that, but I am prepared for frequent and shorter outages. If you have the means, I strongly suggest making similar investments as I have, as it is worth the peace of mind, especially after reading this article, the DOE’s report, and/or Meredith Anguin’s book.

Second, now that this issue is being recognized as an urgent and dire situation, significant investments will be made to avoid and prevent these potential negative outcomes, and that means there is money to be made. This is why number nine has been part of the investment themes to which I subscribe:

1. Overweight cash and short-term U.S. T-bills for optionality, given expected INCREASING volatility related to the remaining list below.

2. Bullish gold and gold miner equities

3. Bullish Bitcoin

4. Bullish oil and oil-related equities

5. Bullish natural gas and related equities

6. Bullish uranium and related equities

7. Bullish industrial-associated commodities and equities

8. Bullish agricultural-associated commodities and equities

9. Bullish industrial and primarily electrical infrastructure equities

10. Bearish long-dated U.S. and other Western sovereign bonds

NOTE: Real estate is also a real, tangible, hard asset that I believe in and invest in. I think land and productive real estate directly related to any of the themes above are wise investments.

Please note that this is not investment advice or a recommendation to buy or sell securities or investment products. Everything written and said is for informational purposes only, and you should do your own research and due diligence. It is recommended that you consult with an investment advisor before making any investments or changes to your investments based on the information provided by The X Project.

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