Power-intensive data centers will drive growth in electricity demand in the near future, says the utility serving the most Kentuckians. It plans to meet that demand by continuing to replace coal-fired power with natural gas while potentially adding up to 1,000 megawatts of solar power by 2035.

Investor-owned Louisville Gas and Electric and Kentucky Utilities (LG&E and KU) outlined those steps and others in an integrated resource plan filed Oct. 18 before the Kentucky Public Service Commission (PSC), the state’s utility regulator. Kentucky utilities are required every three years to file plans for how they will meet demand at the “lowest possible cost,” although they are not bound to follow them.

The new plan anticipates adding no new coal-fired generation while building as many as four new natural gas-fired plants plus battery storage systems for solar energy — in addition to a natural gas plant already slated for construction. 

The PSC will consider the new plan as environmentalists in Kentucky push for a faster pivot to renewables and amid urgent calls from climate scientists to halt the burning of fossil fuels to mitigate the worst impacts of climate change. 

There’s also uncertainty over whether new Biden administration regulations that seek to curb nearly all heat-trapping greenhouse gas emissions from power plants will withstand court challenges from utilities, coal advocates and Republican attorneys general including Kentucky’s Russell Coleman. 

Data center growth reflects nationwide boom

The utility’s plan says Kentucky is “well-positioned” to participate in the nationwide boom in data centers thanks to a lower risk of severe weather, available telecommunications infrastructure and water to cool equipment, as well as “favorable tax incentives.” 

Data centers are essentially computer hubs that power the internet, ranging from storing data on the “cloud” to processing credit card transactions and the surge of artificial intelligence services. They need a tremendous amount of electricity, sometimes on par with what an entire coal-fired power plant produces. The Lantern previously reported the parent company of LG&E and KU was in talks with data centers interested in locating to Kentucky, and Kentucky lawmakers passed tax breaks this year to incentivize data centers to locate in Jefferson County. 

“The Companies’ Economic Development team is working with a growing number of data center projects that vary in stages of development, but which mostly have very large power requirements,” the utility states in its planning documents. 

The utility currently needs about  30,000 megawatts of electricity a year. Models forecast that could increase by 30% to 60% by the early 2030s. 

Data centers could increase the utility’s load by 1,050-1,750 megawatts, according to the utility’s modeling. For reference, its forecast peak load in the summer of 2024 was 6,115 megawatts. 

Seeking more natural gas and no new coal 

Burning coal generated 68% of Kentucky’s electricity in 2023, down from more than 90% a decade earlier, according to the U.S. Energy Information Administration. Only two other states, West Virginia and Wyoming, were as reliant as Kentucky on coal for power generation, making Kentucky an outlier in a nation that has generally transitioned to lower-cost natural gas and renewable energy. 

LG&E and KU coal-fired power plants make up over 60% of the utility’s capacity during the summer. The utility anticipates moving away from coal-fired power in favor of new natural gas-fired combined cycle plants. 

Depending on future demand, the utility foresees building two or three new natural gas-fired combined cycle plants to be paired with several utility-scale battery storage systems between 2028 to 2035. The natural gas plants would generate about 1,935 megawatts of summertime load — energy needed to meet demand at a given time — by the early 2030s.  That includes power from another natural gas-fired combined cycle plant the utility already is slated to construct by 2027 after receiving permission from the PSC. 

That new natural gas-fired plant was opposed last year by environmentalists as a costly investment that would lock in ratepayers to decades of fossil fuel instead of pivoting to renewables that don’t create greenhouse gas emissions. Similar opposition has met other utilities’ plans to build natural gas-fired plants including the Tennessee Valley Authority.

The Kentucky utility’s plans for investing in natural gas-fired plants conflict with a call last year by the leader of the United Nations for carbon-free electricity generation in developed nations by 2035 and a phase out of coal-fired power by 2030 in order to prevent the worst harms from climate change. The call was based on research from climate scientists including U.S. institutions such as NASA. LG&E and KU has previously pointed to goals set by its parent company to have net-zero emissions by 2050. 

Burning natural gas, which consists primarily of the potent greenhouse gas methane, for electricity is considered to release less carbon dioxide into the atmosphere compared to the burning of coal, but environmental advocates have raised concerns that methane leaks during production and transportation of natural gas are wiping out progress made by the United States on curbing greenhouse gas emissions by phasing out coal-fired power. 

LG&E and KU already has approval to retire one of four coal-fired units at its Mill Creek Generating Station in Jefferson County by the end of this year and another coal-fired unit at Mill Creek in 2027. The utility estimates that retiring the first Mill Creek unit will shave some pennies from ratepayers’ bills starting in March.

LG&E and KU projections call for retiring the other two units at Mill Creek and a single remaining coal-fired unit at E.W. Brown Generating Station in 2035. 

That would leave Ghent and Trimble County generating stations as its only operating coal-fired plants by 2035. According to the utility, both of those plants would need upgrades to meet existing or anticipated federal regulations on ozone-producing nitrogen oxide emissions and water pollution. LG&E and KU stated it isn’t considering building any new coal-fired power plants because of “the high cost and environmental risk.”

More solar expected, but not until 2028

LG&E and KU’s plans also include more investments in utility-scale solar, potentially adding 500-1,000 megawatts, though the soonest it expects it could add more solar is 2028. The utility is currently planning to build two 120-megawatt solar installations in Mercer and Marion counties; it already has a solar installation in Mercer County at its E.W. Brown Generating Station.

The utility said its agreements to purchase solar power from private companies don’t appear to be moving forward due to issues with getting solar connected to the power grid and cost increases, though adding hundreds of megawatts of new battery storage “could help pave the way for additional new renewable resources in the future.” 

Other utilities across the country are investing heavily in solar installations and battery storage systems, with the Energy Information Administration estimating 58% of all power-generating capacity planned to be installed in 2024 to be solar power. The International Energy Agency considers solar and wind power to be the cheapest form of electricity in most markets in the world. 

Solar power is considered “intermittent,” meaning it produces electricity only during a portion of the day — such as when the sun is shining. But renewable energy advocates have touted battery storage systems paired with solar installations as a way to make the renewable power “dispatchable” and available around the clock.  Solar installations can charge batteries during the day to be used at night.

But LG&E and KU argued that pairing solar with battery systems would be a costly replacement for a“dispatchable” around-the-clock energy source such as coal-fired power. Thousands of megawatts of solar and battery storage would be needed to replace Mill Creek’s 391 megawatts of coal-fired power, the utility’s analysis said.

Advocates and the former PSC chair have expressed concern utilities aren’t able to be held accountable to follow the plans they outline. The last time LG&E and KU presented an integrated resource plan to the PSC, it was chastised by the regulator for not presenting plans that were “actionable” for the future.

LG&E and KU in its latest IRP filing writes the documents are a “snapshot of an ongoing resource planning process” that is “constantly evolving.””

Skepticism about carbon capture, future of greenhouse gas regulations

Looming over LG&E and KU and other coal-reliant utilities are new regulations from the U.S. Environmental Protection Agency that require coal-fired power plants and new natural gas-fired power plants to curb 90% of their carbon dioxide emissions by 2032 if utilities plan to operate them past 2039. 

Challengers are arguing in court that the technology proposed to comply with the regulation isn’t yet commercially viable at a utility scale. Carbon capture and sequestration is a controversial technology that tries to capture carbon dioxide emissions from power plants to prevent release into the atmosphere. LG&E and KU is planning to install and test a carbon capture system on an existing natural gas-fired plant. 

LG&E and KU in its planning documents wrote that implementing carbon dioxide transport and storage “is not achievable” in the timeline set by the EPA. The utility also wrote that converting coal-fired power plants into burning natural gas is also “questionable” because of the time it would take to establish gas pipelines. Retiring coal-fired power plants by 2032 is an option for compliance, LG&E and KU stated, but “retirements require reliable replacement capacity.” 

“Replacing generation at the scale necessary for compliance is not reasonable” under the EPA’s timeline for reducing greenhouse gas emissions, the utility wrote.

LG&E and KU’s integrated resource plan will likely come under scrutiny from a range of stakeholders during PSC review — the attorney general, renewable energy advocates, advocates for industrial and residential ratepayers and local governments in the utility’s territory covering Lexington, Louisville and parts of Eastern and Western Kentucky.