The record-breaking heat dome that gripped Europe has crossed the Atlantic and landed in the United States. The U.S. is considered a country where cooling runs at "full blast," with air conditioner penetration reaching 90%. The situation is the exact opposite of Europe, where installing air conditioners has even sparked political debate. So, do Americans have no need to worry about extreme heat? Unfortunately, having plenty of air conditioners does not seem to end the problem.
Power Emergency
The U.S. is bracing for furnace-like heat this week. Temperatures across the country, including the central and eastern regions, are expected to soar to as high as 37.8 degrees Celsius. The U.S. National Weather Service forecast that "it will be the highest temperature of the season." In particular, with the 250th Independence Day on Friday, July 4, bringing various outdoor events, many people are expected to be exposed to the extreme heat.
The power grid has already gone on emergency footing. This is because cooling demand from air conditioners and other equipment could surge, sharply increasing electricity consumption. In fact, PJM Interconnection, the largest power grid operator in the U.S., declared an emergency on Tuesday. It had power plants in its jurisdiction run at maximum capacity and temporarily eased some environmental regulations so that plants could operate at full output. Unlike Korea, where the grid is a single nationwide structure, the U.S. power grid is independently organized by region. PJM Interconnection's jurisdiction covers 13 states, including Washington, D.C., and the U.S. East Coast with many major cities, as well as the Midwest and south-central regions.
According to the U.S. Energy Information Administration (EIA), as of 2020, air conditioner penetration in the U.S. was very high at 88% for homes, and most offices, commercial facilities, hospitals, and schools were also equipped with air conditioners. In particular, the U.S. adopts central cooling systems rather than the individual cooling used in Korea or Japan. The space cooled at one time is large, so cooling power demand rises sharply when a heat wave hits. Of the total electricity consumed by U.S. households, the amount used purely for air conditioning accounted for about 19% (EIA, 2020).
Blackouts, Electricity Bills, and AI
When power demand surges due to extreme heat, the biggest feared risk is a power outage, or blackout. A representative example was the rolling blackout that occurred in California in August 2020. In some areas, cooling demand spiked due to record heat exceeding 42 degrees Celsius, but solar power generation dropped sharply after sunset, and supply failed to keep up. Adding to this is the problem of aging transmission grids, whose average age reaches 40 to 60 years, deepening concerns about grid stability during heat waves.
Electricity bills will also rise as demand grows. According to The New York Times (NYT), the average electricity bill for U.S. households last July was $204, equivalent to about 4% of monthly household income. In the U.S., households that spend more than 6% of their income on energy costs, including electricity, are classified as "energy-burdened households," meaning the situation is already reaching a danger level.
The problem is not just extreme heat. A new source of power demand—AI data centers—is being added on top. Artificial intelligence (AI) is a major variable. In the U.S., power demand is concentrating in areas where AI data centers are installed, leading residents in those areas to pay higher electricity bills than elsewhere. So much so that U.S. President Donald Trump pressured Big Tech companies earlier this year, saying, "Don't just build data centers—you must directly pay for the cost of expanding the power grid." Even so, the data centers springing up like mushrooms have met strong resistance from residents who say they cause problems not only with electricity but also with water resources and the conversion of farmland.
A 'Higher-Order Equation'
In sum, unlike Europe, the U.S. has cooling as basic infrastructure and thus appears to have an advantage in adapting to climate change, but it faces another serious challenge: the burden on the power grid from surging electricity demand and rising electricity bills. If Europe is agonizing over "whether to increase air conditioners," the U.S. is agonizing over "how to handle the increased air conditioners." Adapting to climate change is increasingly becoming a higher-order equation that must factor in energy, the power grid, and cost burdens all together.
*From petroleum (Petro) to electricity (Electro). Energy is a key keyword for understanding the economy, industry, international affairs, and responses to climate change. If you subscribe to the reporter or to the [Cho Yang-jun's Petro-Electro] series, you can find investment insights understood through the lens of energy.
