In the words of Michael Scott, “Would I rather be feared or loved? Easy. Both. I want people to be afraid of how much they love me.” When it comes to data centers, this quote feels oddly relatable. The AI sector is booming, and everyone can’t get enough – myself included. I even used AI to dig up this quote (as if I’d memorized all nine seasons of The Office). Yet, there is something unsettling about the relentless growth of data centers and rising concerns over whether our grid can keep up with this skyrocketing demand, especially as extreme weather events make energy supply more unpredictable.
PJM is currently the ISO under the biggest spotlight as demand forecasts continue to soar due to the rapid growth of data centers and the simultaneous retirement of generation units. The math isn’t “mathing” when we compare the projected demand with available grid supply. ERCOT is not far behind, as they are also seeing a sharp rise in data center activity and overall load growth, with ERCOT’s Large Flexible Load Task Force (the LFLTF) overseeing these exponential increases.
Recently, there has been a surge of attention and numerous articles highlighting a trend of data centers co-locating with power generation units. These centers are being built directly beside generation sites, enabling them to purchase electricity straight from the source. Additionally, data centers are investing in the revival of nuclear facilities, securing dedicated power exclusively for their operations.
Microsoft and Constellation, for instance, signed a power purchase agreement to restart the Three Mile Island Unit 1 nuclear reactor, which will be used to power Microsoft’s AI technology and help meet its carbon-free energy goals. Recently, other options have started to pop up, such as behind-the-meter (BTM) small modular reactors (SMRs). Amazon has partnered to support SMRs, potentially laying the groundwork for behind-the-meter nuclear power solutions that could one day fuel data centers and help the company achieve its net-zero carbon goals.
Many believe co-locating data centers with generators are the tip of the iceberg when it comes to grid reliability challenges, especially within PJM. However, the lack of clear FERC regulations on this topic has created a gray area. Some companies can take advantage of this setup, while others are restricted. This raises concerns about the potential impact on grid capacity, particularly during periods of peak demand.
Recently, FERC blocked the interconnection service agreement (ISA) which would have expanded power sales to the AWS data center connected to the Susquehanna nuclear power plant in Pennsylvania. This agreement would have increased the amount of BTM power sold directly to the data center. However, this was denied due to concerns over national security and grid reliability. In recent months, this issue has become increasingly controversial, as many companies have been relying on co-location arrangements to fuel the data center boom. Operating behind the meter of a generator is a way to avoid paying grid costs, which is a strategy that is seen as unfair by some, as it effectively shifts costs onto other grid customers since this can remove available transmission from the grid for capacity auctions.
Meanwhile, the Biden administration has unveiled a 25-year roadmap to expand the U.S. nuclear fleet, with a goal of adding 200 GW of capacity by 2050. This effort will involve a mix of new gigawatt-scale plants, SMRs, upgrades to existing reactors, and even reopening retired facilities. While nuclear energy offers a promising carbon-free solution, it also comes with significant challenges, including safety risks and the need for rigorous monitoring. As this nuclear expansion continues, we can only imagine that more data centers will be built in the proximity of this new generation with the goal of co-locating in the future. However, it is unknown how this roadmap will progress under the new administration in the coming years.
Data centers are undoubtedly the hottest topic in energy today; their role within our grid will only grow. More regulations will come about to help clarify the exact rules of co-locating with a generator. Co-locating affects the grid by using its ancillary services and taking generation that exists off the grid. This ends up causing reliability and fairness issues, especially in times of high demand. However, this opens the door to an exciting era of BTM technologies. These innovations could play a crucial role in supporting the fast-paced growth of data centers, shaping the next phase in our grid’s evolution.
There are current technologies that can ease the burden of reliability issues from data center demand growth, ones that don’t have to wait for regulations to catch up. By understanding when demand will peak, companies can employ demand response programs and optimize their battery discharge strategies to keep the grid stable. At Amperon, our forecasts incorporate the latest demand and weather data and leverage ML-based models to continuously train and calibrate to detect the growth of BTM technologies or data centers for improved forecast accuracy. While AI is driving major load changes on the grid, AI-powered forecasts are also critical to optimizing power systems and improving reliability during this transition.
Want more information on AI’s role in the energy transition? Watch this video about the double-edged sword and AI.