PG&E Eyes San Jose for Major Power Infrastructure Expansion

San Jose Becomes Central Hub for PG&E’s Energy Expansion

San Jose is emerging as a critical growth area for PG&E, with the utility forecasting that the South Bay’s electricity needs will significantly surpass projected demand increases across its entire service territory. Patricia Poppe, PG&E’s Chief Executive Officer, highlighted San Jose’s unique combination of available land and escalating energy requirements from the burgeoning tech industry. This convergence positions the city as a strategic priority for infrastructure investment and capacity expansion.

The utility is already planning substantial upgrades at two pivotal substations in downtown San Jose: Substation A, situated at the intersection of South Montgomery Street and Otterson Street, and Substation B, located at 260 Coleman Avenue. These enhancements are designed to fortify the city’s power grid and accommodate future growth. Poppe acknowledged a previous misconception within the tech sector that PG&E lacked sufficient capacity. She explained that improved communication about the utility’s capabilities has since corrected this misperception, leading to a surge in demand for new and upgraded power connections.

This newfound understanding has prompted a rapid increase in requests for power, as tech companies recognize the potential for expansion within the region. Jake Zigelman, a PG&E vice president overseeing Bay Area operations, reinforced the long-term outlook for increased electricity demand in San Jose. He noted that the need for power, primarily driven by data centers, electric vehicles, and building electrification, is expected to approximately double across PG&E’s service area by 2040. San Jose is projected to be a primary driver of this growth.

According to Zigelman, approximately 20% of the anticipated data center load growth, totaling nearly 2 gigawatts, is concentrated in San Jose. This massive increase is poised to nearly triple the city’s current energy consumption. While PG&E has received inquiries for power capacity increases from other regions like San Francisco, Sacramento, and the Central Valley, San Jose stands out due to its unique potential. The city’s current energy load is 1 gigawatt, and the projected demand would require an additional 1.8 gigawatts of capacity, bringing the total to around 2.8 gigawatts. Poppe emphasized that wherever land is available, PG&E is prepared to deliver the necessary power.

Meeting the Tech Sector’s Gigawatt Hunger

The tech industry’s insatiable demand for energy, particularly from data centers, is a primary catalyst for PG&E’s strategic focus on San Jose. These energy-intensive operations require vast amounts of electricity to power servers, cooling systems, and other critical infrastructure. The concentration of available land in San Jose, coupled with the presence of major tech players, creates an ideal environment for these facilities to expand. This expansion, while beneficial for regional economic development, places significant pressure on existing power grids.

PG&E’s investment in substations and distribution networks is critical to ensuring a reliable and robust power supply for these enterprises. The utility’s proactive approach in upgrading infrastructure aims to avoid potential energy shortfalls that could hinder the region’s technological growth. The demand pipeline for electricity projects within PG&E’s territory currently totals about 10 gigawatts, with 17 data centers representing roughly 1.5 gigawatts already in the final engineering stages. These data centers are slated to become operational between 2026 and 2030, marking a significant increase in energy consumption.

The utility suggests that residential customers could also benefit from this corporate demand surge. Stephanie Magallon, a PG&E spokesperson, indicated that every gigawatt of new demand from data centers could potentially lower PG&E bills by 1% to 2% under favorable conditions. This is because large energy users contribute a greater share to the fixed costs of maintaining and operating the electric grid. By spreading these fixed costs across a larger customer base, including high-consumption tech entities, the per-customer cost for everyone else could theoretically decrease. Poppe reiterated this point, explaining that sharing the grid with more customers, especially when excess capacity exists due to prior infrastructure investments, can lead to lower costs for all users. This scenario represents a potential win-win, where economic growth is supported, and residential ratepayers see some relief on their utility bills.

However, The Utility Reform Network (TURN), a consumer advocacy group, has expressed reservations about the potential impact of data centers on electricity rates. Mark Toney, TURN’s executive director, voiced concerns that data centers could drive up electric rates for Californians. He stressed the importance of ensuring that these costs are recovered equitably and do not disproportionately affect households already struggling with utility expenses. In September, average monthly PG&E bills for typical residential customers saw a modest decrease of about $5, or 2.1%, which provided some relief after a period of consistently rising rates. The ongoing discussion between utility expansion, corporate demand, and consumer protection remains a crucial aspect of this energy evolution.

Strategic Investments and Future Collaborations

The planned upgrades at Substations A and B are expected to provide crucial support for several significant downtown San Jose developments. These include Westbank’s proposed housing projects within the urban core and Google’s ambitious transit-oriented neighborhood, often referred to as Downtown West. Google’s project, envisioned for the western edge of downtown near the Diridon train station and SAP Center, encompasses a mixed-use village of homes, offices, retail spaces, restaurants, cultural venues, entertainment hubs, and open spaces. Though Google has currently paused development of this village, PG&E affirms its readiness to power such substantial infrastructure.

Poppe confirmed that while Google will provide updates on its specific project, PG&E is actively investing in the necessary substation infrastructure to support major undertakings like Downtown West. This forward-looking approach ensures that when large-scale developments proceed, the essential power supply will be in place. Furthermore, PG&E is exploring innovative proposals, such as those from Westbank, which include building data centers near housing towers and then capturing the excess energy or heat produced by these tech hubs to provide electricity to adjacent residential buildings.

Poppe expressed particular enthusiasm for Westbank’s initiative, noting its “neat heat capture element” that could significantly reduce the electric load required for heating buildings. She described this as a “really wonderful use of new technologies,” highlighting the potential for greater energy efficiency and sustainability. Such integrated approaches exemplify a progressive vision for urban development, where energy consumption is optimized and waste is minimized. These collaborations between utility providers and developers are key to creating more resilient and environmentally conscious urban environments, aligning with broader goals of sustainability and responsible resource management.

The strategic investments by PG&E in San Jose’s power infrastructure are not merely about increasing capacity; they also represent a commitment to supporting the region’s economic vitality and technological leadership. By ensuring a robust and reliable energy supply, PG&E aims to facilitate continued innovation and growth within Silicon Valley. The integration of advanced energy solutions and smart grid technologies will play an increasingly vital role in managing the complex demands of a rapidly expanding urban and technological landscape. This forward-thinking strategy is crucial for San Jose to maintain its position as a hub for cutting-edge industries, while also striving to deliver efficient and affordable energy to all its customers.