Dive Brief:
- Kentucky Utilities and Louisville Gas and Electric recently submitted a request to the state utility regulators seeking approval for a major expansion project. This includes the construction of two gas-fired units with a capacity of 645 megawatts each, a substantial battery storage project, and enhancements to a coal-fired unit, all totaling an estimated cost of $3.7 billion.
- The proposed expansions are driven by the need to support future data center clients and the BlueOval SK Battery Park that is being developed by Ford alongside South Korea’s SK On battery company. Current plans indicate a demand for roughly 6 gigawatts from potential data center clients and another 2 gigawatts from various other sources.
- If these new projects are not approved, KU and LG&E have warned they would have to rely heavily on purchasing power from the wholesale market or risk having to implement blackouts. Such actions would conflict with their commitment to providing reliable service to new and existing customers.
Dive Insight:
The parent company of Kentucky Utilities and Louisville Gas and Electric highlighted in a recent earnings presentation that the pipeline for data center development is expanding in both Kentucky and Pennsylvania. Currently, there are around 48 gigawatts of active data center requests in Pennsylvania and nearly 6 gigawatts in Kentucky.
According to the utilities, attracting data center development is vital to Kentucky’s energy strategy, as emphasized by recent legislative support. They believe their endeavors are starting to yield results, with an anticipated jump of 47% in yearly electricity sales—from approximately 32,800 gigawatt-hours this year to around 48,130 gigawatt-hours by 2032. Furthermore, they expect summer and winter peak demands to rise by nearly 30% in the coming years.
Recent weather patterns, like Winter Storm Enzo, have significantly increased electricity consumption, indicating the necessity for additional power generation capabilities.
Natural gas is becoming the main fuel source for U.S. utilities like KU and LG&E as they plan new generation projects. A company spokesperson noted that natural gas offers the reliability that utilities need for year-round power generation.
The anticipated costs for the gas-fired projects are approximately $2.8 billion, with the associated battery storage facility costing around $775 million and the enhancements to the coal unit projected at $152 million. Construction timelines estimate five years for the gas units and three years for the energy storage facility.
To finance these developments, KU and LG&E plan to use a mix of cash flow and new financing methods and will seek to recover costs in future rate cases. The utilities expect a decision from the regulatory body on their proposal by November.
The need to self-build their battery storage facility also arises from challenges faced with previously contracted solar projects, with some projects canceled and others encountering pricing difficulties. The director of power supply at KU and LG&E acknowledged that these difficulties might hinder their ability to provide reliable service without relying on the proposed new projects.