Korean power equipment manufacturers are monitoring the implications of a series of measures restricting data center construction that passed in local referendums held alongside the US midterm elections.
Although demand to replace aging transmission and distribution networks is supporting orders, local opposition that delays the start of data center construction could also push back power equipment orders and delivery schedules.
According to US business publication Fortune and election information website Ballotpedia on November 5, 41 data center referendums were held across 10 US states on November 3. Of these, 28 concerned construction bans, temporary suspensions or additional regulations.
In Ohio, which accounted for 21 measures, at least 14 communities opted to ban or restrict data centers.
In Trenton, a city charter amendment banning data centers with power consumption exceeding 25 MW passed with approximately 80% support. With a 250 MW data center project underway in Trenton, whether the restrictions will apply has emerged as a point of contention.
Sunbury also approved a measure banning data centers exceeding 25 MW. Amazon Web Services (AWS) has been pursuing a project worth approximately $2 billion in the area.
Residents have raised concerns about electricity bills, water consumption, noise and emissions from backup generators. In a survey released by Gallup in May, approximately 70% of Americans said they opposed an AI data center being built in their community.
AI data centers boost orders as three suppliers’ backlogs exceed 37 trillion won
Korean manufacturers are focusing on the US data center market because electricity demand is rising rapidly. The US Department of Energy projected that data centers’ share of total electricity consumption would rise from 4.4% in 2023 to as much as 12% in 2028.
Hyosung Heavy Industries’ heavy industry division had a record order backlog of 18.8988 trillion won at the end of the third quarter. The US share increased from 46% a year earlier to 60%.
HD Hyundai Electric’s order backlog stands at $8.843 billion. In July, it signed a long-term framework agreement with a global technology company to supply distribution and power equipment worth up to 1.1212 trillion won.
LS ELECTRIC’s order backlog totals 7.043 trillion won, including 2.2472 trillion won for switchgear. The three companies’ combined order backlogs amount to approximately 37 trillion won.
However, not all these orders are for data centers. Data centers account for 6.3% of HD Hyundai Electric’s new power equipment orders this year. The company expects this share to rise to around 16% next year.
Demand beyond data centers: grid replacement and expansion support orders
The power equipment industry says US demand is not based solely on data centers. Demand to replace aging transmission and distribution networks initially drove orders, with data center investment providing an additional source of growth.
According to the US National Renewable Energy Laboratory, approximately 55% of the 60 million to 80 million distribution transformers in service in the United States were installed at least 33 years ago. Required distribution transformer capacity in 2050 is expected to be up to 260% greater than in 2021.
Capital expenditure planned through 2030 by 51 US investor-owned utilities also totals at least $1.4 trillion. That is more than 21% above the previous year’s survey. In addition to data centers, demand is being driven by replacement of aging equipment, responses to extreme weather, manufacturing investment and electrification.
In September, South Korean exports to the United States of large transformers exceeding 10 MVA reached $115.44 million, the highest monthly figure since 2015. Cumulative exports from January through September also increased 44.2% from the same period a year earlier.
Suppliers expand capacity as data center construction schedules become critical
Korean manufacturers reportedly have not yet received notices of order delays from customers. However, as they expand production capacity to meet North American demand, they are necessarily sensitive to changes in project schedules.
HD Hyundai Electric will begin mass production at its new power transformer factory in Ulsan this month and invest an additional 198 billion won in its Cheongju distribution equipment campus. Hyosung Heavy Industries is investing $157 million in its Memphis plant in the United States to increase production capacity by more than 50% by 2028.
LS ELECTRIC is also investing 250 billion won to expand its Utah plant in the United States. Following the expansion, annual switchgear production capacity will increase to approximately 500 billion won in value.
The issue is that orders for data center equipment are placed in line with construction schedules. Under HD Hyundai Electric’s framework agreement with a technology company, individual orders are also placed according to data center development schedules.
Approval of a referendum does not mean existing projects are immediately canceled. A developer may relocate to another area. However, if construction starts are delayed, transformer and switchgear orders and deliveries could also be pushed back.
Ultimately, the extent to which opposition to US data centers changes project locations and construction start dates, rather than eliminating demand, is expected to become a factor in Korean power equipment manufacturers’ performance.
Original Korean article: inews24.com
English brief by Korea Wind Intelligence, koreawindintel.com
