The Omaha Public Power District is running low on available power capacity for its biggest potential users. That could threaten the region’s ability to develop economically, attract companies, add jobs and grow.
The constraint comes as data centers spike the demand for power across the country, the electric grid needs significant modernization and communities in Nebraska push back against renewable energy developments that could bolster the grid.
OPPD currently projects it has less than 100 megawatts of available power capacity for new or expanding large customers for the next few years. That figure could vary depending on customer commitments and new energy generation coming online. For reference, a large data center could require 1,000 megawatts of capacity, while manufacturing facilities can range from a few megawatts to sometimes over 100 megawatts, experts said. OPPD said the utility has enough power capacity to support typical residential and commercial growth. President and CEO Javier Fernandez said the utility also prioritizes growth from the defense and healthcare sectors.
Essentially, Fernandez said, any new or expanding development requiring two megawatts or more could be at risk.
“To give you an idea, some of the brand new, big, very tall buildings in downtown, those are six to seven megawatts,” he said.
Economic development leaders are concerned that if power capacity in Nebraska’s largest metropolitan area continues to be limited, it could put the Omaha area and the state at a competitive disadvantage.
“We are bending over backwards; we’re trying to figure out creative solutions: How do we bridge this?” Fernandez told the Flatwater Free Press. “Can we buy capacity from other utilities? Literally, no one has excess capacity. Everyone is in the same boat as we are, so now the pinch, so to speak, it’s, well, growth has to slow down, maybe?”
At the same time, OPPD, which serves eastern Nebraska, is doing long-term planning to determine what its energy and system needs will be over the next 10 years. To meet the demand through 2036, the utility and its board face a decision whether to grow OPPD’s energy portfolio by about 1,000 megawatts on the low end or more than double the utility’s portfolio on the high end, according to OPPD’s initial planning results.
If the utility builds too small, the Omaha metro could end up back in the same shortage for economic development. If the utility builds too big and the demand from big customers, like data centers or manufacturers, doesn’t materialize, OPPD’s ratepayers will likely have to eat the cost.
Nailing the projections and actually building new generation – such as renewable energy and natural gas sources – will be a big challenge. Two OPPD board members said it would be helpful if state and local leaders were on the same page with clear economic development plans to guide priorities for energy.
“The biggest question my board is likely going to have to answer is going to be how big of a plan we approve,” Fernandez said. “And that is going to be informed by, OK, state, counties, cities, chambers: How much do you want us to grow?”
Modernizing the grid
Electric grids across the country, including OPPD’s, are in a major transition. Power plants and other infrastructure are aging. Building new and replacing old with today’s high prices is expensive, Fernandez said. It could also take more time as everyone builds at the same time.
Climate change also is straining the grid in real time with more winter storms and longer hot summer days. In 2021, Winter Storm Uri caused utilities to scramble for power. In an effort to preserve the grid, OPPD and others in the Southwest Power Pool rolled blackouts.
Afterward, the regional transmission organization required its members to keep more power capacity in reserve. The requirements caught OPPD off guard and ate into the utility’s available capacity, contributing to its current struggles.
And like many other utilities, OPPD underestimated the growth coming to the area, with more data centers and manufacturing being built and industries electrifying.
And while more generation is coming online after a 2023 board approval, the projections for energy demand remain high today. The utility has nearly 2,000 megawatts of economic development projects actively in its queue through 2031, according to a September presentation. But there are about 5,000 megawatts of other projects on the radar.
Fernandez said the utility knows that not all of the projects will actually come to fruition. However, planning and building for the ones that stick around is where it gets tricky. Initial results show OPPD could decide to add as much as around 7,300 megawatts through 2036, according to a chart presented by the utility. For context, OPPD’s portfolio currently contains about 4,580 megawatts of capacity.
“These (initial) numbers only make sense if you’re building for some hyperscale data centers,” said Kenneth Gillingham, a professor of environmental and energy economics at Yale University. But the question is, he said, “Will all of those data centers be needed?”
OPPD declined to comment on what percentage of its queue is made up of data centers, manufacturers or other types of customers. According to a presentation in March, the utility’s peak demand is made up of 32% industrial customers, 41% residential customers and 27% commercial customers. By 2035, industrial customers are expected to make up 52%.
“Clearly, data centers have been a very, very big force on that increase,” Fernandez said. “We have a very strong manufacturing base here in Omaha. We serve Washington County, they have a very robust industrial community down there, and all the way over our region, they have experienced growth. Clearly not as big as these new data centers.”
Prioritizing economic development projects
As data centers continue to circle, the Greater Omaha Chamber hopes to recruit and expand projects tied to other industries, like manufacturing, said Paul West, chair of the chamber’s board and managing partner at Carson Wealth.
Economic development could help solve big problems – the state budget shortfall, high property taxes and brain drain. But energy is one of the top two reasons that the chamber loses deals.
Chamber President and CEO Heath Mello sent a letter to OPPD’s board in September calling for OPPD to plan further out than 2036 and strongly consider building for more growth.
“We’re missing out on … potentially, if you put them all together, thousands of jobs, if we can’t figure this out in the next five years, that’s what’s at risk,” West said.
Data centers and manufacturing developments both began expanding rapidly in the U.S. a few years ago. But as power has become a hot commodity, these developments are competing for the same resource, said Larry Gigerich, chair of the Site Selectors Guild.
“It’s causing manufacturing companies now to be more proactive and to use their voice more directly with utilities versus the way they have done it for decades,” Gigerich said. “Now it’s a true competition, and we can’t generate enough new power fast enough to meet everybody’s needs.”
Depending on the project, a data center could range in size from a few megawatts to over 1,000 megawatts. Manufacturing, on the other hand, can range in size from a few megawatts to rarely 100 megawatts or more, Gigerich said.
Fernandez understands the demands.
“We have an obligation to serve anyone who comes in,” Fernandez said. “Cities and especially the state, they have taxing authority. They get a chance to incentivize or disincentivize different industries. We’ll just follow whatever they want to do.”
The renewable urban-rural divide
Projecting demand is one thing. Getting projects built is quite another.
Based on initial planning results, OPPD could add more natural gas and renewable energy. OPPD is also a member of the Great Plains New Nuclear Consortium, which is looking at possibly bringing new nuclear power to Nebraska.
Fernandez said he has received questions on why OPPD still plans to retire coal at its aging plant, the North Omaha Station, if capacity for economic development is constrained.
North Omaha Station’s refuel and retirement has been in the works for over a decade, and the plant is not an option for future available capacity, OPPD board member Eric Williams said. It doesn’t provide enough capacity to meet the incoming demand.
“We’re talking about the future of Nebraska, these are thousands of megawatts. That one (North Omaha Station) is just a few hundred,” Fernandez said.
Coal plants like North Omaha Station, which began operating in the 1950s, might have been critical power generation for electric grids when they were first built, but that’s not necessarily the case today.
“We should not be seeing extension of these aging assets that are old and inefficient as a long-term solution, because doing so is costing customers significant amounts of money,” said Jeff Dennis, executive director of the Electricity Customer Alliance. “Expensive power drives away economic development, and the fact that we have hyperscalers and data centers doesn’t change that fact.”
To meet the growing demand and to keep costs low, OPPD is looking at building more natural gas and renewables. The current popularity of natural gas has constrained the equipment supply chain, which means it could take utilities much longer to build. While renewables face some up-front cost increases, they remain the lowest-cost energy source to operate.
However, OPPD has struggled to bring these projects online in Nebraska as some communities have turned them away. As a result, that has cost OPPD potential available capacity.
“Everyone is saying no, and then we end up in a really bad place,” Fernandez said, noting community leaders who have rejected renewable generation have then asked for more power capacity to attract new economic development.
The tension has been developing for years as misinformation has spread and projects were kept secret by developers. Community members also have raised concerns about fire risks, health and safety, impacts to prime ag land and local infrastructure.
“In order to have success getting a community to buy into what you’re trying to do, it’s the hard shoe-leather work of forging those relationships, and that takes time,” said Jon Cannon, executive director of the Nebraska Association of County Officials. “For our folks, the reason that there’s a lot of concern, a lot of thought, and a lot of time that’s taken on these decisions is because they have to live with the results.”
Counties could also benefit from state-level actions like legislation allowing them to negotiate community benefit agreements with developers and increasing the nameplate capacity tax on renewable developments or the share counties receive, Cannon said.
West said state and local officials need to unify around this issue, noting that energy projects outside of Omaha could still benefit the metro and the state as a whole.
With the demand for power growing, something has to give, otherwise OPPD might not be able to generate the power it needs to help Nebraska grow.
“If Omaha doesn’t grow, if Omaha doesn’t prosper, the rest of the state very likely won’t,” Fernandez said. “What the state wants versus what the city wants versus what the chambers want, well, they all want different things, but the one common denominator that I keep hearing is jobs and income.”
The Flatwater Free Press is Nebraska’s first independent, nonprofit newsroom focused on investigations and feature stories that matter.