AEP Sets Strategy in Motion for Meeting Future Data Center Demand

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American Electric Power (AEP), which serves 11 states and owns the largest electricity transmission system in the country, announced on 1/9/25 a strategic partnership between KKR and PSP Investments to acquire a 19.9% equity interest in AEP’s Ohio and Indiana & Michigan Transmission Companies (Transcos) for $2.82 billion.

This deal is important because it will allow AEP to execute its 5-year capital plan, a necessary endeavor to accommodate the expected explosion in demand going forward.

What the Deal Means for AEP

According to AEP, the agreement will support its 5-year, $54 billion capital growth plan, which includes investments in both T&D and generation projects.  These projects are necessary because electricity demand is expected to substantially increase within the utility’s footprint over the next 5-10 years.  By making the necessary capital improvements now, the utility will ensure it is better positioned to maintain or even improve reliability while still meeting this expected spike in demand.

The main reason for the future demand increase is the expected growth in data centers.  According to the EPRI, data centers could gobble up around 9% of the nation’s power generation just 6 years from now, more than double the current amount.  And the state of Ohio, which falls squarely within AEP’s footprint, has become a desirable destination for these facilities.

Thanks to benefits like favorable tax policies and access to a robust pool of talent, there are over 170 data centers in Ohio, which is the fourth highest of all states.  These include facilities owned by Google, Amazon, and Meta.  The result has been that power demand is growing 10x faster in Ohio compared to historical trends.

For these reasons, the utility’s partnership with KKR and PSP, which focuses on Ohio and Indiana, makes a lot of sense.  I believe the capital upgrades facilitated by the deal will improve reliability, reduce outages, and bolster emergency preparedness – well done, AEP!