The years after the Great Recession were a kind of Goldilocks era in Oregon’s power market.

The state’s population and economy were growing robustly, yet power demand was flat. Major advances in power conservation, like LED lightbulbs and more efficient heating and air conditioning, kept a lid on electricity use. That helped hold down rates because Oregon’s utilities could make do with the power they had.

The state’s population growth stalled after the pandemic. Oregon’s job market flatlined and the regional economy fell into malaise. Those are phenomena usually associated with a decline in power consumption.

But something unexpected happened. Oregon’s electricity use jumped.

Data centers, lured by billions of dollars in local tax breaks, turned everything upside down. While consumer and commercial power demand has remained relatively constant for more than a decade, big tech companies have sent electricity consumption soaring from one side of the state to the other.

Power planners say that’s only the beginning. They expect artificial intelligence to trigger a massive increase in power use at new and existing data centers in the years ahead.

The huge uptick coincides with Oregon’s mandate that utilities switch from fossil fuels to renewable energy sources. That leaves fewer options for meeting the surging demand.

Complicating matters, climate change has transformed the way Oregonians use electricity. Many more homeowners are installing air conditioning to cope with sweltering summer temperatures and people are turning up the heat amid extreme winter storms.

A new study commissioned by regional utilities concluded that within five years, the Northwest may need nine gigawatts more than it currently has the capacity to provide. That is an immense amount of energy, roughly equal to all the electricity Oregon uses today.

A shortfall that big dramatically increases the risk of a new power crisis, reminiscent of the one that rocked the region at the turn of the century.

A spike in energy demand during an ice storm or a summer heatwave — particularly during a low water year that curtails hydro operations — could send power costs spiraling up as utilities scramble to meet peak demand. Or they might be forced to turn off power altogether, with rolling blackouts that could last for days to manage the cascading effects of a sudden electricity shortage.

Utilities and energy watchdogs are divided over the scale of the threat. Some feel that regulators and power companies have identified the problems and have a plan to deal with them.

Others, though, say that the state’s clean energy mandates, its fragmented planning network, bottlenecks in approving and building new generation and transmission — coupled with extraordinary Oregon tax breaks that keep luring more data centers — are a recipe for disaster.

“It’s safe to say there’s a lot of concern among the industry in the region,” said Arne Olson, a consultant with the economic research firm E3, who co-authored the new study. The question, he said, is “whether it’s going to be possible to maintain a reliable electric system as we decarbonize it.”

Data center deluge

Oregon’s problem is simply that its supply of electricity isn’t increasing fast enough to keep up with rapidly increasing demand.

Let’s take each side of the equation in turn, starting with demand.

Oregon has benefited enormously from improvements in energy efficiency, especially in the years since 2010. The Northwest Power and Conservation Council estimates that more efficient appliances, better heating and cooling systems in office buildings, new classes of light bulbs and similar advances have saved 3,000 average megawatts of electricity since 2010. (An average megawatt is 1 million watts of electricity, consumed 24 hours a day for 365 days.)

That’s greater than the annual output of the Grand Coulee Dam, the largest power-generating facility in the United States. Such energy savings made it possible for Oregon to grow its economy substantially during the last decade without needing to build big new power plants or add major transmission lines.

The story changed in 2019. State data shows demand surged upward that year and kept climbing rapidly. Power use is now up 30% from 2010, and most of that growth has come in just the past few years.

No one in Oregon government tracks who is buying all that power. But we can find the answer in reports filed by the state’s utilities, starting with the biggest — Portland General Electric.

PGE’s annual financial reports show that residential and commercial electricity demand is essentially unchanged since 2010. Industrial power demand is soaring, though — up 73%.

In a presentation to state regulators this fall, PGE says that energy demand from data centers in its service territory has risen sixfold since 2020. The utility says it’s hard to gauge just how much more power data centers will need in the future, but its base case is that data centers’ power use will more than double by the end of the decade.

There are a wide range of other possibilities, though. If power availability is constrained, PGE says data center power might increase as little as 25% by 2030. Or, if the industry takes off, local data centers might consume five times more power than they already do.

Now let’s look at one of Oregon’s smallest utilities.

The Umatilla Electric Cooperative serves just 11,400 members in a remote patch of northeastern Oregon, including Morrow, Umatilla and Wallowa counties. And yet Umatilla Electric is suddenly Oregon’s third-largest energy provider, delivering 8.6 million megawatt hours last year.

The tiny utility’s electricity sales have soared nearly tenfold since 2010. In that time, Umatilla Electric’s customers are responsible for a little more than half of the growth in Oregon power demand. That’s because the utility is the primary energy provider for Amazon’s data centers near Boardman and Hermiston.

A new report by the data science firm Aterio finds Oregon ranks third nationally in terms of data center square footage and energy use. Big tech companies come to Oregon for many reasons, including ready availability of power, land and communication lines that connect the state to transpacific fiber-optic cables.

The biggest attraction, by far, is Oregon’s tax structure. The state has no sales tax and that saves data centers tens of millions of dollars when they spend $1 billion or more on the high-end computers that run large server farms.

More important, unlike Washington and many other states, Oregon allows local governments to give away unlimited sums in local property tax breaks. It doesn’t require that those exemptions be tied to job creation, either. That’s significant because data centers are not major employers.

Oregon also doesn’t track how much the data centers save in property taxes every year. But The Oregonian/OregonLive does. Savings topped $330 million in fiscal 2025 and are rising sharply as big tech companies expand and upgrade their facilities with more advanced computers for artificial intelligence.

By itself, Amazon will save nearly $200 million in Oregon taxes this year — and billions of dollars in the years to come — through tax breaks granted by officials in Morrow and Umatilla counties.

The ‘nine-gigawatt problem’

Despite forecasts from regional planners more than a decade ago predicting a surge in data center demand, the spike, when it came, caught utilities off guard.

“We haven’t had rising demand for a long time,” Olson said. “So, we’re not used to experiencing rising demand in the Northwest.”

That’s exactly why rising electricity demand could be a crisis.

Data centers use about 11% of Oregon’s electricity today, according to the nonprofit Electric Power Research Institute. It forecasts that artificial intelligence demands will push data centers’ power consumption to a quarter of the state’s total by 2030.

Part of the issue is that technology evolves in unpredictable ways. Artificial intelligence has been part of the zeitgeist at least since Arnold Schwarzenegger suited up for the first “Terminator” movie in 1984. But no one knew just when AI would take off, and few understood the implications for the nation’s electricity grid.

Another issue is that tech companies are very secretive when they site data centers, wary of tipping off competitors about their business plans and favored locations. In Oregon, big tech companies have gone by a variety of code names (“Project Vitesse,” “Maverick” and “Cloud,” among others) to shield their identities before they were ready to build.

For power planners and utilities, that has made it difficult to gauge when data centers plan to open and how much power they’ll take.

Building new power plants can take years. It can be just as difficult to site and win permits for transmission lines, which can travel hundreds of miles over private property and through environmentally sensitive locations.

Data center demand, by contrast, arrives virtually overnight. When a new facility comes online it can draw as much power as a small city. That has earned the largest installations a new industry moniker: hyperscalers.

So as data centers have expanded, Oregon’s energy suppliers have been perpetually behind. As the Northwest plans for its energy future, its leaders have to navigate more than rising demand. They need to coordinate among regulators in various states, the federal government, dozens of private utilities and big energy customers like data centers.

“There’s not one person responsible, and that’s where it gets challenging,” said Jessica Reichers, technology and policy manager at the Oregon Department of Energy.

Complicating matters, in 2019 and 2020 Washington and Oregon each moved to require utilities to shift toward renewable energy in place of plants fueled by natural gas or coal. Washington aimed to move to 100% renewable energy by 2045. Oregon’s mandates kick in faster, with legislation targeting 2040.

It’s been clear from the start those targets would be hard to meet.

Clean technologies are still developing and many sources of renewable energy, like wind turbines and solar, function intermittently when the wind is blowing and the sun is shining. That makes them a poor match for utilities’ firm capacity needs, particularly to meet spikes in demand triggered by extreme weather.

And those extremes are made more frequent by climate change, the very problem the renewable mandates aim to address.

The Bonneville Power Administration, meanwhile, has been strained in recent years by short staffing and exploding demand for new transmission. That hobbled the federal agency that owns three-quarters of the region’s high-voltage grid, making planning arduous even as data center demand surged.

Altogether, the array of developments means the Northwest likely will face a major shortfall of power supply in as few as five years and have a diminished set of tools to address it. That’s how we arrive at the “nine-gigawatt problem,” according to Steve Wright, a former Bonneville director who continues to track the region’s power market closely.

A nightmare scenario

Most forecasts suggest the region is building enough new generation and transmission capacity to keep the lights on nearly all the time. The trouble comes at those peak hours, when temperatures are especially high or especially low.

Homes and businesses will demand more electricity and the capacity to generate more could be limited. Large new battery arrays might be able to manage a surge in demand that lasts a few hours one hot afternoon when solar, wind and hydropower can’t keep up.

What worries Wright and others is the prospect of a heat dome or winter freeze that lasts for several days, in a low-water year when the rivers can’t provide enough hydropower to compensate for rising demand. Batteries can’t solve that problem, he said, because there’s no lull in demand to recharge them.

The result could be something like the western energy crisis of 2000 and 2001, a nightmare period burned into Wright’s brain because he had just taken over as Bonneville’s administrator.

A sudden power shortage could send prices spiraling upward again, straining residents’ pocketbooks and bankrupting employers. Even worse, he warns, it might turn into something like what happened in Texas in 2021, when prolonged blackouts cut off electricity to millions of homes and resulted in more than 200 deaths.

“The five-day outage is the one that creates the greatest threat to human health and safety,” Wright said. “It’s not just, you know, you gotta fix your clocks. This is the one that people die in.”

‘A bridge to the future’

Is this already a crisis? Not everyone thinks so.

E3’s study, the one that forecasts the nine-gigawatt shortfall in future power supply, finds that three gigawatts of new supply are already well into the planning or construction phase. That still leaves a big six-gigawatt gap, but it’s one that utilities and regulators are working to bridge.

Jennifer Light, director of power planning at the Northwest Power and Conservation Council, calls herself “a surprising optimist.” She said the region has the tools to manage its energy future.

“There’s a lot of coordination. A lot of collaboration, trying to think through the challenges together,” Light said.

The council forecasts regional electricity demand and Light says its projections are close to E3’s, suggesting a large gap between the power available now and what’s needed in the future.

In Light’s view, though, the planning process has identified the problem and is creating a path to fix it. Sometimes that will come through new power plants and transmission lines, she said. But the council also expects that new energy efficiency measures, like home heat pumps, will provide efficiency gains similar to those that kept regional power demand down during the last decade.

It’s not clear which efficiency measures will be more cost-effective, Light said, or what new resources the Northwest will need to manage future demand. But she said forecasters are creating a menu of options to ensure the region has the power it needs.

“Our plan is to be robust across all that uncertainty,” she said. “That’s what we’re planning towards.”

Power planners, regulators and lawmakers have begun to plan for the coming power crunch. Last year, Oregon passed a law — one of the first of its kind in the nation — that aims to make data centers pay for their impact on power costs.

It directs the Public Utility Commission to ensure data centers pay the cost of the new electrical plants and transmission lines that serve them. It also requires regulators to begin tracking the impact of large energy users like data centers, a provision that could protect the state from being caught flat-footed again by rising data center demand.

“I believe it gives us the tools that we need to keep our prices as low as possible for our residential and small commercial” customers, said John McFarland, vice president at Portland General Electric.

Consumer watchdogs are skeptical, though. The Citizens Utility Board, which advocates for ratepayers, claims that PGE plans to charge consumers too much to cover the cost of generating more power to account for rising demand — demand the utility board ascribes to data centers. PGE says residential customers are contributing to higher demand during peak times and should cover some of those costs.

Separately, McFarland said that PGE is requiring new data centers to have backup batteries on hand and integrate them into the utility’s power grid.

“We’re able to call on (it) when we need it during one of those peak events,” he said.

Others see a darker future.

“I think our industry has got to be a little bit more comfortable with letting folks know there’s a potential for blackouts,” said Scott Simms, director of the Public Power Council.

The council advocates on behalf of more than 80 publicly and consumer-owned utilities around the Northwest.

“We’re getting less self-reliant and that’s really scary from a reliability standpoint, keeping the lights on,” Simms said.

The region may have to rethink its approach to renewables, according to Simms and some utilities. He argues for retaining natural gas plants for the foreseeable future to handle peak periods that renewables can’t meet.

Geothermal power, small nuclear reactors and other new energy sources could eventually provide a base to augment solar, wind and hydropower. But it’s far from clear how economically and politically practical those options are, and most will take many years to develop.

“The reality we face is we need a bridge to the future,” Simms said, “specifically the near-term future of the next years of now until, say, 10 to 15 years from now.”

Gosia Wozniacka and Ted Sickinger contributed to this article.