Figuring out how to foster an artificial intelligence business ecosystem while meeting its significant energy demands — amid an energy supply-demand imbalance — is a conundrum facing lawmakers in New Jersey.
During a nearly three-hour meeting of the state Senate Legislative Oversight Committee on Monday morning, legislators dug into the needs of the state’s energy infrastructure.
Panelists from utility companies, distributors and others in the energy and artificial intelligence industries noted that the supply now is not able to meet the demand in New Jersey — which consumes more energy than the state generates — and that gap is expected to grow.
State Sen. Andrew Zwicker, the committee’s chair, put the energy usage of data centers into perspective by explaining they already use 2% of the energy globally.
“The environmental impact of AI is remarkable,” he said. “Training a single large language model like OpenAI’s ChatGPT consumes approximately 1,300 megawatt hours of electricity, the same amount used by 130 U.S. homes in a year.”
Zwicker went on to say that New Jersey’s goal should be to “foster AI, not resist it,” and to learn what can be done.
What did utility operators say about AI’s energy costs in New Jersey?
Jason Stanek, the executive director of government services at PJM — the largest power grid distributor in North America — said development of data centers has been the primary driver in increased energy use and the grid has to prepare for continued growth in energy use.
As far as the concept of “BYOE,” or bring your own energy, for data centers, Stanek said many companies want to stay on the grid to be able to rely on their resources.
Joseph Accardo Jr., senior vice president for state regulatory affairs and centralized services at PSE&G, said the rate hike going into effect this summer is “due to the cost of the electricity itself,” and that is “being driven by one main factor, a lack of generation supply to meet expected demand.”
Phil Vavala, the regional president of Atlantic City Electric, said his company understands the need for data centers but advocates for partnering with local and state economic development teams to make sure “we’re not committing to a specific amount of power or availability for a site until the screening evaluates the needs for the surrounding grid infrastructure.”
Exelon, Atlantic City Electric’s parent company, has worked to create tax incentive initiatives in other states and noted that “in the past 10 years, new data centers have not built in states that do not offer data center tax initiatives.”
Where does Gov. Phil Murphy’s ‘AI moonshot’ stand?
Gov. Phil Murphy last year called for what he dubbed an “AI moonshot” — an effort to advance AI use and opportunities to put New Jersey at the forefront of new economic developments.
Since that announcement, he has touted the state’s partnership with Princeton University to create an AI innovation hub, and last summer he signed a law that will set aside tax breaks for businesses that collect more than half their revenue from artificial intelligence, or use more than half their staff for that purpose. Businesses would be eligible for incentives worth up to $250 million.
New Jersey isn’t the only state in the energy game, though. New York created the “Empire AI” consortium of research institutions to “promote responsible research and development, create jobs, and unlock AI opportunities focused on public good.” That effort has raised more than $400 million in public and private funding so far.
Meanwhile, industry leaders, recognizing the overwhelming bandwidth needed to support their operations, have been getting creative as well.
Last fall, Microsoft announced that it had exclusively acquired all of the energy created at the newly reopened Three Mile Island nuclear power plant in Pennsylvania for its data centers.
Trying to stay competitive will require more energy generation, but the Garden State is going in the opposite direction.
“This extreme increase in projected demand compared to our supply, which is actually declining, right, so this is the worst possible situation,” said Stanek, of PJM.
During Murphy’s two terms, or since 2017, five power generation plants have shut down in New Jersey: four coal plants and the Oyster Creek nuclear power plant. In addition, Murphy’s plans for offshore wind have fallen apart as the state has ended four solicitations for projects, with Ørsted abandoning two projects and most of the bidders on the others walking away, particularly in the wake of President Donald Trump’s executive order to freeze the issuance of new offshore wind permits.
One offshore wind project remains in New Jersey: Atlantic Shores South, which has received all its federal approvals and is set to generate 2,800 megawatts as early as 2028.
Natural gas and nuclear energy provided 90% of the state’s total energy generation from 2011 to 2023.
During his budget address last month, Murphy touted that the state’s solar output has doubled since 2017, but renewable sources of energy in New Jersey represent only about 8% of total energy resources. Ninety percent of that is solar.
When asked in January about whether he has concerns about energy generation, especially amid the growth of data centers and artificial intelligence, Murphy said, “It’s a concern in the sense we gotta make sure we’ve got the right amount of it.”
Union leader advocates for more natural gas infrastructure
Greg Lalevee, the business manager of International Union of Operating Engineers Local 825, said natural gas projects that didn’t move forward in recent years would have put New Jersey on a path to more energy stability.
“Data centers thirst for strong, reliable, redundant, latent energy. It’s a necessity, so from that perspective, of course, we stand to lose that competition to Pennsylvania just based on where we are today,” Lalevee said. “Can we dig ourselves out of the hole? … If we had built many of the energy projects that were in the pipeline over the last seven-eight years we’d have a fighting chance at it.”
Lalevee, whose members stand to benefit from the construction of more pipelines, said natural gas could help fill the gaps for now as more renewable resources come online and suggested those pipelines could be transitioned to hydrogen in the future.
“If you build it correctly with the correct materials, it’s not a long stretch before hydrogen can run through the same pipe as natural gas,” Lalevee said.
Companies are currently testing whether they can blend hydrogen with natural gas to move it in existing pipelines. Transporting 100% of hydrogen through existing steel pipelines used to transport natural gas likely isn’t possible because it could cause cracking.
“We’ll never be able to put enough electricity on any grid where we won’t either use it all or need it kind of warming up in the bullpen just in case,” Lalevee said.