US AI Data Centers Face Power Shortfall by 2028, Morgan Stanley Warns

Overview of the Issue

AI data centers face increasing challenges due to power shortages, as utilities and grid operators struggle to meet the rapid construction timelines of hyperscale projects. According to Morgan Stanley, U.S. data centers may experience a power shortfall of approximately 32 GW, or 34% of the necessary supply, by 2028.

Market Implications

Market pricing suggests increased scrutiny on data center operations may lead Texas to consider a moratorium on new developments. The largest observed change occurred in the January 1, 2028, sub-market, with a 6-point increase, consistent with heightened concerns over energy constraints.

Regional Impacts

Louisiana markets similarly show an increase in the probability of a data center moratorium, reflecting broader regional impacts of power shortages.

Key Players and Watchlist

Key actors such as Texas Governor Greg Abbott and the Texas Legislature could play pivotal roles in potential policy changes. Observers should monitor for legislative sessions addressing energy constraints and any executive orders from Abbott. Additionally, decisions from the Electric Reliability Council of Texas (ERCOT) or the Public Utility Commission of Texas (PUCT) concerning data center interconnections could indicate shifts in regulatory stance. The situation in Louisiana also warrants attention, particularly any executive actions or legislative movements by Governor Jeffrey M. Landry or the Louisiana Legislature that could suggest a moratorium is being considered.