The rapid proliferation of artificial intelligence and data centers is pushing the U.S. power grid into uncharted territory, prompting one of the nation’s top utility executives to issue a stark warning to regulators: The system is sending warning signals that can no longer be ignored.
Calvin Butler, CEO of Exelon, the nation’s largest utility company by number of customers, compared the current state of America’s energy grid to a vehicle driven to the brink of breakdown, in a conversation with FortuneDiane Brady, executive editorial director of the Fortune Brainstorm AI conference in San Francisco.
“We’re telling policymakers that the warning lights are on,” Butler said. It’s like you’re driving your car, the check engine light is on, and you just don’t want to take it to the store. “You say to yourself, I’m going to keep pushing and no one will pay attention to it until it breaks down,” Butler told Brady. From his perspective, he views dysfunction as inevitable. “I’m telling you, on the hottest day or the coldest day, you could have a supply shortage and people are going to suffer. I’m telling you, you need to fix it now.”
Butler’s warning comes, of course, against a backdrop of historic increases in electricity demand, as the use of AI gobbles up computing, which in turn gobbles up energy across the country. There’s a bit more to it than that, Butler said, with pressure coming from a “convergence” of factors, including the reshoring of manufacturing and the broader electrification of the economy.
“I’ve been in the utility industry for about 25 years…and probably in the last four decades we’ve never had load growth like this,” Butler said.
The supply crisis
The crux of the problem, Butler says, is the mismatch between growing demand and the incentives to build new power generation. Exelon, which spun off its generation business (Constellation Energy) three years ago, now operates as a regulated utility that supplies electricity but does not produce it.
Butler argued that independent power producers currently lack the financial incentive to build new power plants. “Independent power producers have no incentive to build anything new because they are maximizing their assets,” he explained, acknowledging that it is a fair thing to do under current market conditions. But as producers extract maximum revenue from existing infrastructure rather than increasing capacity, the risk of deficit increases, on the one hand, and price increases are also inevitable.
When asked for a forecast for electricity prices for the coming year, Butler offered no comforting ambiguity.
“I can tell you for sure that prices are going to go up,” Butler said.
He pointed to market dynamics within the massive PJM Interconnection – a regional transmission organization serving 13 states and the District of Columbia – as a driving force. State governors in the region have already implemented price caps that have saved customers about $3 billion, but as those caps expire or are adjusted, the removed costs will likely resurface. (Pennsylvania Gov. Josh Shapiro threatened in September that the state would go “its own way” if energy conditions didn’t change.)
A conservative approach to technology
Despite the push to fuel the AI revolution, Butler emphasized that utility companies themselves should not be at the forefront of technology adoption.
“You don’t want your utilities to be on the cutting edge … because when we’re ahead and something goes wrong, bad things happen,” Butler said.
He added that Exelon prefers to be a “follower” rather than a laggard. (Butler did not mention the infamous name Enron, the last major energy innovator and also a famous bust 25 years ago.)
While Exelon uses AI for customer service and proactive network maintenance, Butler said it remains cautious, especially when it comes to cybersecurity. He highlighted the vulnerability of third-party vendors, rating his comfort level with supply chain security protocols at just six or seven out of 10.
Building for Resilience
To address looming capacity issues, the industry plans to invest $1.1 trillion over the next five years. That includes massive infrastructure projects, such as a recently announced 765-kilovolt transmission line stretching 220 miles across Pennsylvania and West Virginia to improve reliability.
However, Butler reiterated that physical infrastructure alone will not solve the problem if the policy framework ignores the “check engine” light. “We are the backbone. We represent 5% of the economy, but we power the next 95%. And we have to get it right.”
