US needs more power for AI—but critical equipment is pricey and scarce

Investors and developers are putting financing decisions on hold as they try to determine how much more their projects will cost to complete.

About 28% of planned wind, solar and battery projects have been delayed or canceled, according to an Atlas Public Policy analysis of government energy data. That is about 42,000 megawatts of capacity, roughly on par with the existing solar, storage and wind energy in California.

Delays and cancellations had been growing but recently accelerated, according to the data, which provides a snapshot of existing and planned power generation across the country. Only about 10% of projects, or 12,000 megawatts, were delayed or canceled in 2022.

Efforts to build natural-gas-fired power plants face similar challenges—wait times for turbines can stretch beyond three years, as can those for large transformers.

The bottleneck is causing headaches for the developers that are racing to take advantage of the mania over generative artificial intelligence that has driven U.S. power demand forecasts higher for the first time in two decades.

Utilities say the AI revolution has the potential to be as transformative for their businesses as the advent of air conditioning. Data centers could use as much as 9% of U.S. electricity by 2030, according to the Electric Power Research Institute.

A search on a platform like ChatGPT can use at least 10 times the amount of energy as a google search. Trends suggest that by 2030, data centers for training the largest AI models will require more than five gigawatts of electricity—or roughly enough to power about 5,000 Walmart stores.

President Trump’s trade war has put a wrinkle in some of the development plans. Although he has paused some of his threatened tariffs until July, 25% steel and aluminum levies are still in place, as are 145% duties on imports from China. The U.S. this week also imposed massive tariffs on solar imports from four Southeast Asian countries.

The steel and aluminum tariffs are affecting energy projects of all kinds, from renewable energy to fossil fuels, because they require components like electric motors, compressors, wires or pipe, said Josh Zive, senior principal at the law firm Bracewell.

“Unfortunately many of those items have to be imported from other countries because they are specialized," Zive said. “The U.S. steelmakers don’t make some of these products."

Renewable energy developer Intersect Power is still largely reliant on Chinese imports of battery cells needed to build large-scale storage projects, despite working for years to source steel, solar panels and other materials from U.S. manufacturers.

Chief Executive Sheldon Kimber said Intersect Power is trying to move projects forward despite the economic uncertainty and working to source battery cells domestically, which isn’t yet feasible at scale.

“We’ve absorbed higher costs for many years to buy American, and now we have this one pinhole in our supply chain, and it’s costing us hundreds of millions of dollars," he said. “That’s hard to stomach."

The company plans to break ground this year on projects worth $9 billion and expects its battery storage fleet to exceed 11 gigawatts by 2027.

Himanshu Saxena, CEO of Lotus Infrastructure Partners, said it is especially challenging to determine how costs might rise over the multiyear timelines needed to complete large energy projects. Lotus invests in a range of energy projects including renewables and gas-fired power plants.

“The good news is that the customers are willing to negotiate how to deal with the cost increases, because they need the product," he said. “The bad news is that it’s taking a lot longer because it is a very delicate discussion around who takes the risk of rising costs."

The power industry has increasingly been turning to natural gas to respond to AI’s needs for round-the-clock power.

The capacity of proposed gas-power projects in line to connect to the grid increased more than 70% last year, according to preliminary data from Lawrence Berkeley National Laboratory, as reported by the Federal Energy Regulatory Commission.

Meanwhile, the cost of building a gas power plant has more than tripled in recent years, said John Ketchum, CEO of NextEra Energy.

Manufacturers of turbines—the monster machines needed to turn natural gas into electricity—are boosting capacity while trying to estimate how long the era of high demand will last.

“We have true demand growth," said Bill Newsom, CEO of Mitsubishi Power Americas. But he cautioned that doesn’t mean factories can expand as quickly as turbine orders, which quintupled between 2023 and 2024.

“You can’t just flip a light switch and go from x-number of turbines last year to five times more this year," said Newsom. “It’s not just us, but it’s all of the supply chains underneath us. I can’t just go to them and say, ‘OK, I want this much more steel. I want this many more rotors.’ They’re limited, too."

Mitsubishi Power plans to increase its global gas turbine output by about 30% in the next few years.

Similarly, in the next 24 months, GE Vernova expects to increase its gas turbine output by about 35%. It plans $600 million in investments in U.S. facilities, with half going into the gas-power business.

CEO Scott Strazik said the demand for gas power is going to be “higher for longer, but I don’t know if it’s going to be a lot higher" than the 35% level. Customers are currently ordering turbines for delivery in 2030.

Write to Jennifer Hiller at jennifer.hiller@wsj.com and Katherine Blunt at katherine.blunt@wsj.com