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This is the third article in our four-part series “Boon or bane: What will data centers do to the grid?”
The world’s wealthiest tech companies want to build giant data centers across the United States to feed their AI ambitions, and they want to do it fast. Each data center can use as much electricity as a small city and cost more than $1 billion to construct.
If built, these data centers would unleash a torrent of demand for electricity on the country’s power grids. Utilities, regulators, and policymakers are scrambling to keep pace. If they mismanage their response, it could lead to higher utility bills for customers and far more carbon emissions. But this mad dash for power could also push the U.S. toward a cleaner and cheaper grid — if tech giants and other data center developers decide to treat the looming power crunch as a clean-power opportunity.
Utilities from Virginia to Texas are planning to build large numbers of new fossil-gas-fired power plants and to extend the life of coal plants. To justify this, they point to staggering — but dubious — forecasts of how much electricity data centers will gobble up in the coming years, mostly to power the AI efforts of the world’s largest tech companies.
Most of the tech giants in question have set ambitious clean energy goals. They’ve also built and procured more clean power than any other corporations in the country, and they’re active investors in or partners of startups working on next-generation carbon-free energy sources like advanced geothermal.
But some climate activists and energy analysts believe that given the current frenzy to build AI data centers, these firms have been too passive — too willing to accept the carbon-intensive plans that utilities have laid out on their behalf.
It’s time, these critics say, for everyone involved — tech giants, utilities, regulators, and policymakers — to “demand better.” That’s how the Sierra Club put it in a recent report urging action from Amazon, Google, Meta, Microsoft, and other tech firms driving data center growth across the country.
“I’m concerned the gold rush — to the extent there’s a true gold rush around AI — is trumping climate commitments,” said Laurie Williams, director of the Sierra Club’s Beyond Coal campaign and one of the report’s authors.
Williams isn’t alone. Climate activists, energy analysts, and policymakers in states with fast-growing data center markets fear that data center developers are prioritizing expediency over solving cost and climate challenges.
“I think what we’re seeing is a culture clash,” she said. “You have the tech industry, which is used to moving fast and making deals, and a highly regulated utility space.”
Some tech firms intend to rely on unproven technologies like small modular nuclear reactors to build emissions-free data centers, an approach that analysts say is needlessly unreliable. Others want to divert electricity from existing nuclear plants — as Amazon hopes to do in Pennsylvania — which simply shifts clean power from utility grids to tech companies. Yet others are simply embracing new gas construction as the best path forward for now, albeit with promises to use cleaner energy down the road, as Meta is doing in Louisiana.
Meanwhile, several fossil fuel companies are hoping to convince tech firms and data center developers to largely avoid the power grid by building fossil-gas-fired plants that solely serve data centers — an idea that’s both antithetical to climate goals and, according to industry analysts, impractical.
But a number of tech firms and independent data center developers are pursuing more realistic strategies that are both affordable and clean in order to meet their climate goals.
These projects should be the model, clean power advocates say, if we want to ensure the predicted AI-fueled boom in energy demand doesn’t hurt utility customers or climate goals.
And ideally, the companies involved would go even further, Williams said, by engaging in utility proceedings to demand a clean energy transition, by bringing their own grid-friendly “demand management” and clean power and batteries to the table, and by looking beyond the country’s crowded data center hubs to places with space to build more solar and wind farms.
The basic mandate of utilities is to provide reliable and affordable energy to all customers. Many utilities also have mandates — issued by either their own executives or state policymakers — to build clean energy and cut carbon emissions.
But the scale and urgency of the data center boom has put these priorities on a collision course.
As the primary drivers of that conflict, data centers have a responsibility to help out. That’s Brian Janous’ philosophy. He’s the cofounder of Cloverleaf Infrastructure, a developer of sites for large power users, including data centers. Cloverleaf is planning a flagship data center project in Port Washington, a city about 25 miles north of Milwaukee.
Cloverleaf aims to build a data center campus that will draw up to 3.5 gigawatts of power from the grid when it reaches full capacity by the end of 2030, “which we think could be one of the biggest data center projects in the country,” Janous said. That’s equivalent to the power used by more than 2.5 million homes and a major increase in load for the region’s utility, We Energies, to try to serve.
Together with We Energies and its parent company, WEC Energy, Cloverleaf is working on a plan that, the companies hope, will avoid exposing utility customers to increased cost and climate risks.
“The utility has done a great job of building a very sustainable path,” Janous said. WEC Energy and Cloverleaf are in discussions to build enough solar, wind, and battery storage to meet more than half the site’s estimated energy needs. The campus may also be able to tap into zero-carbon electricity from the Point Beach nuclear power plant, which is now undergoing a federal relicensing process, he said.
The key mechanism of the deal is what Janous called a “ring-fenced, bespoke tariff.” That structure is meant to shield other utility customers from paying more than their fair share for infrastructure built to meet data centers’ demand.
“This tariff puts it completely in the hands of the buyer what energy mix they’re going to rely on,” he said. That allows Cloverleaf — and whatever customer or customers end up at the site it’s developing — to tap into the wind, solar, and battery storage capacity WEC Energy plans to build to meet its clean energy goals.
To be clear, this tariff structure is still being finalized and hasn’t yet been submitted to state utility regulators, said Dan Krueger, WEC Energy’s executive vice president of infrastructure and generation planning. But its fundamental structure is based on what he called a “simple, just not easy,” premise: “If you come here and you say you’ll pay your own way”— covering the cost of the energy and the transmission grid you’ll use — “we invest in power plants” to provide firm and reliable power.
“We make sure we can get power to the site, we make sure we have enough capacity to give you firm power, and then we start lining up the resources that can help make you green,” he said.
WEC Energy’s broader plans to serve its customers’ growing demand for power haven’t won the backing of environmental advocates. The Sierra Club is protesting the utility’s proposal to build or repower 3 GW of gas-fired power plants in the next several years, and has pressed Microsoft, which is planning its own $3.3 billion data center in We Energies territory, to engage in the state-regulated planning process to demand cleaner options.
Krueger said that the gas buildout is part of a larger $28 billion five-year capital plan that includes about $9.1 billion to add 4.3 GW of wind, solar, and battery capacity through 2029. That plan encompasses meeting new demand from a host of large customers including Microsoft, but it doesn’t include the resources being developed for Cloverleaf.
Janous said he agreed with the Sierra Club’s proposition that “the biggest customers should be using their influence to affect policy.” At the same time, Cloverleaf is building its data center for an eventual customer, and “our customers are looking for speed, scale, and sustainability,” in that order. Cementing a tariff with a host utility is a more direct path to achieving this objective, he said.
Similar developer partnerships between utilities and data centers are popping up nationwide.
In Georgia, the Clean Energy Buyers Association and utility Georgia Power are negotiating to give tech companies more freedom to contract for clean energy supplies. In North Carolina, Duke Energy is working with Amazon, Google, Microsoft, and steelmaker Nucor to create tariffs for long-duration energy storage, modular nuclear reactors, and other “clean firm” resources. In Nevada, utility NV Energy and Google have proposed a “clean transition tariff,” which would commit both companies to securing power from an advanced geothermal plant that Fervo Energy is planning.
“In the near term, to get things going quickly, we’re looking at solar and wind and storage solutions,” said Amanda Peterson Corio, Google’s global head of data center energy. “As we see new firming and clean technologies develop, we’ve planted a lot of seeds there,” like the clean transition tariff.
Insulating utility customers from bearing the costs of data center power demand is a core feature of these tariffs. Broader concerns over the costs that unchecked data center growth could impose have triggered pushback from communities, politicians, and regulators in data center hot spots. But Janous highlighted that Cloverleaf’s Wisconsin project will have “no impact on existing ratepayers — 100% of the cost associated with the site will flow through this tariff.”
That’s also good utility-ratemaking policy, said Chris Nagle, a principal in the energy practice at consultancy Charles River Associates, who worked on a recent report on the challenge of building what he described as “adaptable and scalable” tariffs that can apply to data centers across multiple utilities. “In the instances where one-off contracts or schedules are done, they should be replicable,” he said.
At the same time, Nagle continued, “each situation is different. Some operators may place more value on sourcing from carbon-free resources. Others may value cost-effectiveness more. Utilities may have sufficient excess generation capacity, or they may have none at all.”
Right now, top-tier tech companies appear willing to pay extra for clean power, said Alex Kania, managing director of equity research at Marathon Capital, an investment banking firm focused on clean infrastructure. He pointed to reports that Microsoft is promising to pay Constellation Energy roughly twice the going market price for long-term electricity supply for the zero-carbon power it expects to secure from restarting a unit of the former Three Mile Island nuclear plant.
Given that willingness to pay, “I think these hyperscalers could go further,” Kania said, using the common term for the tech giants like Amazon, Google, Meta, and Microsoft that have the largest data centers. With their scale, these companies can “go to regulators and say, ‘We’re going to find a way for utilities to grow and make these investments but also hold rates down for customers.’”
But cost is not the primary barrier to building clean power today.
In fact, portfolios of new solar, wind, and batteries are cheaper than new gas-fired power plants in most of the country. Instead, the core barrier to getting clean power online — be it for data centers or other large-scale power buyers, or even just for utilities — is the limited capacity of the power grid itself.
Across much of the U.S., hundreds of gigawatts of solar, wind, and battery projects are held up in yearslong waitlists to get interconnected to congested transmission grids. Facing this situation, some data center developers are targeting parts of the country where they can build their own clean power and avoid as much of the grid logjam as possible.
In November, for example, Google, infrastructure investor TPG Rise Climate, and clean power developer Intersect Power unveiled a plan to invest $20 billion by 2030 into clusters of wind, solar, and batteries that are largely dedicated to powering newly built data centers.
With the right balance of wind, solar, and batteries, topped off by power from the connecting grid or from on-site fossil-gas generators, Intersect Power CEO Sheldon Kimber says this approach can be “cleaner than any part of the grid. You’re talking 80% clean energy.”
And importantly, that clean energy is “all new and additional,” Google’s Peterson Corio said. That’s important for her employer, which wants to “make sure any new load we’re building, we’re building new generation to match it.”
Think tank Energy Innovation has cited this “energy park” concept as a neat solution to the twin problems of grid congestion and ballooning power demand. Combining generation and a big customer behind a single interconnection point can “speed up development, share costly onsite infrastructure, and directly connect complementary resources,” policy adviser Eric Gimon wrote in a December report.
And while many existing data center hubs aren’t well suited to energy parks, plenty of other places around the country are, said Gary Dorris, CEO and cofounder of energy analysis firm Ascend Analytics. Swaths of the Great Plains states, “roughly from Texas to the Dakotas,” offer “the combination of wind and solar, and then storage, to get to close to 100%” of a major power customer’s electricity needs, he said.
That’s not to say that building these energy parks will be simple. First, there’s the sheer amount of land required. A gigawatt-scale data center may occupy a “couple hundred acres,” Kimber said, but powering it will take about 5,000 acres of solar and another 10,000 for wind turbines.
And then there are the regulatory hurdles involved. Almost all U.S. utilities hold exclusive rights to provide power and build power-delivery infrastructure within the territories they serve. The exception is Texas, which has a uniquely competitive energy regulatory regime. Intersect Power plans to build its first energy park with Google and TPG Rise Climate in Texas, and the partners haven’t disclosed if they’re working on projects in any other states.
Cloverleaf’s Janous highlighted this and other constraints to the energy-park concept.
Getting the workforce to build large-scale projects in remote areas is another challenge, he added, as is accessing the fiber-optic data pipelines needed by data centers serving time- and bandwidth-sensitive tasks.
“We think the market for those sorts of deals is relatively small,” he said.
On the other hand, the task of training AI systems, which many hyperscalers are planning to dedicate billions of dollars to over the next few years, doesn’t require the same bandwidth or latency and can be “batched” to run at times when power is available.
“Historically a lot of data centers have landed close to each other to make communications faster, but it isn’t clear that the data centers being built today have those same constraints,” said Jeremy Fisher, principal adviser for climate and energy at the Sierra Club’s Environmental Law Program and co-author of Sierra Club’s recent report. “To the extent that the AI demand is real, those data centers should be closer to clean energy and contracting with new, local renewable energy and storage to ensure their load isn’t met with coal and gas.”
The Sierra Club and other climate advocates would prefer data center demand is met with no new fossil-fuel power at all. But few, if any, industry analysts think that is realistic. So, the question becomes how much gas will be necessary.
A growing number of companies are targeting data centers as potential new customers for gas-fired power, including oil and gas majors. ExxonMobil announced plans to enter the power-generation business in December, proposing to build a massive gas-fired power plant dedicated to powering data centers. A partnership between Chevron, investment firm Engine No. 1, and GE Vernova launched last month with a promise to build the country’s “first multi-gigawatt-scale co-located power plant and data center.”
President Donald Trump has also backed this idea of building fossil-fuel power plants for data centers. “I’m going to give emergency declarations so that they can start building them almost immediately,” he told attendees of the World Economic Forum in Davos, Switzerland, last month. “You don’t have to hook into the grid, which is old and, you know, could be taken out. … They can fuel it with anything they want. And they may have coal as a backup — good clean coal.”
The federal government doesn’t regulate utilities and power plants, however — states do. And even if that weren’t the case, Janous and Intersect Power’s Kimber agreed that building utility-scale gas power plants solely for data centers is a nonstarter. “We’ve been pitched so many projects on building behind-the-meter combined-cycle gas plants,” Janous said. “We think that’s absolutely the wrong approach.”
Kimber said that Intersect Power’s energy-parks concept does include gas-fueled generators. But they’ll be relatively cheap, allowing them to earn their keep even if run infrequently to fill the gaps at times when solar, wind, and batteries can’t supply power. Eventually they can be replaced with next-generation storage technologies.
That’s quite different from building a utility-scale power plant that must run most of the time for decades to pay back its cost, he said. “Our solution is more dynamic: It exhibits less lock-in, and it’s faster and more practical.”
Nor can large-scale gas power plants be built quickly enough to match the pace that developers have set for themselves to get data centers up and running. Multiple energy analysts have repeated that point over the past year, as have the companies that make and deploy the power plant technologies, like GE Vernova, which is reporting a three-year, $3 billion backlog for its gas turbines.
Utility holding company and major clean energy developer NextEra Energy announced last month that it was moving into building gas power plants with GE Vernova. But CEO John Ketchum noted in an earnings call that gas-fired generation “won’t be available at scale until 2030 and then, only in certain pockets of the U.S.,” and that costs of those power plants have “more than doubled over the last five years due to the limited supply of gas turbines.” Renewables and batteries, by contrast, “are ready now to meet that demand and will help lower power prices.”
Marathon Capital’s Kania agreed with this assessment. “Time-to-power is the true bottleneck,” he said. “But if you can figure out how to pull a rabbit out of a hat and get power resources up in the next few years, that’s going to be very valuable — because that’s very scarce.”
In the fourth and final part of this series, Canary Media reports on how flexibility can help the grid better handle data centers.
This is the fourth and final article in our series “Boon or bane: What will data centers do to the grid?”
Tom Wilson is aware that the explosive growth of data centers could make electricity costlier and dirtier. As a principal technical executive at the Electric Power Research Institute, the premier U.S. utility research organization, he’s studied the risks himself.
But he also thinks conversations about the problem tend to miss a key point. Data centers could also make the grid cleaner and cheaper by embracing a simple concept: flexibility.
“Data centers are not just load — they can also be grid assets,” he said. Turning that proposition into reality is the goal of his most recent project, DCFlex, a collaborative effort to get data centers to “support the electric grid, enable better asset utilization, and support the clean energy transition.”
DCFlex is short for “data center flexibility,” a term that encompasses all the ways that these sprawling campuses and buildings full of servers, cooling equipment, power-control systems, backup generators, and batteries can reduce or shift their power use.
Since its October launch, DCFlex has grown from 15 to 37 funding participants. On the data-center side are tech “hyperscalers” like Google, Meta, and Microsoft; major data center developers like Compass and QTS; and AI computing and power equipment suppliers like Nvidia and Schneider Electric.
On the grid side are utilities such as Duke Energy, Pacific Gas & Electric, Portland General Electric, and Southern Company; power plant owners like Constellation Energy, NRG Energy, and Vistra; and five of the continent’s seven grid operators, which manage energy markets serving electricity to two-thirds of the U.S. population.
The range of participants reflects the broad interest in solving the pressing challenge of powering the data centers being proposed around the country without driving up grid costs and emissions.
That won’t be easy. From Virginia’s “Data Center Alley” to emerging hot spots in Arizona, Georgia, Indiana, Ohio, and beyond, utilities are being inundated with demands for round-the-clock power from data center projects that can add the equivalent of a small city’s electricity consumption within a few years. Meanwhile, it usually takes four or five years to connect new power plants to the grid.
Flexibility could make a big difference, however, said Tom Wilson, who’s worked on climate and energy issues for more than four decades, including advising projects at the Massachusetts Institute of Technology and Stanford University and serving at the White House Office of Science and Technology Policy during the Biden administration.
That’s because the impacts of massive new utility customers like data centers are tied not just to how much power they need but specifically to when they need it.
Utilities live and die by the few hours per year when demand for electricity peaks — usually during the hottest and coldest days. By refraining from using grid power during those peak hours, new data centers could significantly reduce their impact on utility costs and carbon emissions.
If data centers and other big electricity customers committed to curtailing their power use during peak hours, it could unlock tens of gigawatts of “spare” capacity on U.S. grids, according to a recent analysis from Duke University’s Nicholas Institute for Energy, Environment & Sustainability.
Realizing that spare capacity will be challenging, though. For starters, every new large power customer would have to agree not to use grid power during key hours of the year, which is far from a realistic expectation today. What’s more, utilities would need some serious proof that those big customers can actually follow through with promises to not use power during those peak times before letting them connect, because broken promises in this case could lead to overloaded grids or forced blackouts.
And flexibility can’t solve all the power problems that massive data center expansion could cause.
In a December report, consultancy Grid Strategies found that key data center markets are driving an unprecedented fivefold increase in the amount of new power demand that U.S. utilities and grid operators forecast over the next half decade or so. While that analysis “really focused on the peak demand forecast,” the sheer amount of power needed over the course of a year is “potentially just as big of a story,” said John Wilson, Grid Strategies’ vice president.
Still, for utilities struggling to plan and build the generation and grid infrastructure needed to support data centers, flexibility is worth exploring. That’s because data centers could make their operations flexible a lot faster than utilities can expand power grids and build power plants.
It typically takes seven to 10 years to build high-voltage transmission lines and four to five years to build a gas-fired power plant — “even in Texas,” Tom Wilson pointed out. The concept of relying on big customers to avoid using power instead of building all that infrastructure is just starting to take hold in utility planning, but it could play a major role in managing the surge in power demand.
Flexible data centers may also be able to secure space on capacity-constrained grids more quickly than inflexible competitors, Tom Wilson said. A U.S. Department of Energy report released last year included interviews with dozens of utilities, and one key takeaway was that “electricity providers often can accommodate the energy and capacity requests of a data center for (say) 350 days but need to find a win-win solution for the remaining 15 days.”
“If you have two projects in the queue, and one says they can be flexible and the other says they can’t be flexible, and they’re about the same size, then the one that can be flexible is more likely to be successful,” Tom Wilson said.
That’s not lost on Brian Janous, cofounder of Cloverleaf Infrastructure, which develops what the company describes as “clean-powered, ready-to-build sites for the largest electric loads,” mainly data centers.
“You need to understand, when a utility says, ‘I can’t get you power,’ what they mean is, ‘There are certain hours of the day I can’t get you power,’” he said. The data center industry “lacks visibility into this, which is kind of shocking,” given that data center flexibility is nothing new.
In fact, back in 2016, when he worked as energy strategy director at Microsoft, Janous helped structure a deal for a data center in Cheyenne, Wyoming, to use fossil-gas-fired backup generators to reduce peak grid stress for utility Black Hills Energy. That promise, combined with Microsoft’s agreement to purchase nearly 240 megawatts of wind power, got that deal over the line.
Janous thinks many utilities are eager for similar propositions today. One unnamed utility executive told him recently that the backlog for connecting large data centers to its grid is now at least five years. “I asked, ‘What if the data center could be dispatchable?” And he said, ‘Oh, we could connect them tomorrow. But nobody’s asking me that.’”
Getting utilities and data centers together to ask those kinds of questions is what DCFlex is all about. Project partners are now developing five to 10 demonstration projects, Tom Wilson said, none of which have been announced. But he described the scope of work as ranging from the development stage to “existing sites that are ready to roll.”
As for how these projects will help the grid, he laid out two broad methods: They’ll use on-site power generation or storage to replace what they’d otherwise pull from the grid, or they’ll use less electricity during peak hours.
Janous thinks on-site generation is the simpler approach. To some extent, it’s already happening today but typically with dirty diesel generators. Janous, Tom Wilson, and other experts say these diesel generators are not a viable option for hyperscalers, however. They’re simply too dirty and too expensive to rely on, except during grid outages or other dire situations.
Biodiesel and renewable diesel could work for some smaller data centers, Tom Wilson said. But it’s not yet clear whether air-quality rules would permit generators burning those fuels to run during nonemergencies. Nor are the economics viable for larger-scale data centers, he said.
Fossil-gas-fired backup generators like those Microsoft used in Cheyenne are another option — albeit one that still pollutes the local air and warms the planet. Still, a growing number of data center developers are looking to use them as a workaround to grid constraints. “We’re in the process of developing sites in many parts of the country,” Janous said. “Every one of them has access to natural gas.”
It would be a problem for the planet — and for meeting the climate goals major tech companies have committed to — if data centers planned to use fossil gas for a majority of their power. But if relied on sparingly and strategically, this choice might be less harmful than the alternatives: If a data center burns fossil gas just to power itself during grid peaks, that might reduce pressure on utilities to keep old coal-fired power plants open or to build much larger gas-fired plants that would lock in emissions for decades.
Other gas-fueled options for on-site power might be less damaging to the climate — although this remains a hotly debated topic. Microgrid developer Enchanted Rock plans to install gas generators at a Microsoft data center in San Jose, California, which will burn regular fossil gas but will offset that usage by purchasing an equivalent amount of “renewable natural gas” — methane captured from rotting food waste. It claims this will make the project emissions-free.
And utility American Electric Power has signed an agreement to buy 1 gigawatt of fuel cells from Bloom Energy, which it plans to install at data centers. The firm’s fuel cells still emit carbon dioxide, but they avoid the harmful nitrous oxides caused by burning gas.
Batteries are another option — and the one that has the greatest potential to be clean. Most data centers have some batteries on-site to help computers ride through grid disruptions until backup generators can turn on, but relying on batteries for backup power and to provide grid support is a far more complex and costly endeavor.
“There are all kinds of trade-offs in terms of reliability, in terms of emissions, in terms of cost, in terms of the physical footprint,” Tom Wilson said. “In a storm situation that brought the grid down, you’d want something that can be dependable.”
A small but growing number of hyperscalers are looking to batteries for both backup power and grid flexibility. Google’s battery-backed data center in Belgium is one example.
“We built out battery storage as a way to displace part of our diesel gensets, to provide grid services, and to provide relief during times of extreme grid stress when we needed backup,” said Amanda Peterson Corio, Google’s global head of data center energy.
In the U.S., a Department of Energy grant is supporting a battery installation at an Iron Mountain data center in Virginia that’s meant to test the potential to store clean power for backup and grid-support uses.
It’s one of a number of DOE programs launched under the Biden administration whose purpose is to explore ways that “battery energy storage systems can provide similar levels of reliability, and without a lot of the challenges that diesel gensets or other backup power sources have,” Avi Shultz, director of the DOE’s Industrial Efficiency and Decarbonization Office, said in an October interview.
The other big idea for making data centers flexible focuses not on the power they can generate and store but on the power they use, Shultz said.
“Demand response” is the utility industry term for the practice of throttling power use during times of peak grid stress, or of shifting that power use to other times when the grid can handle it better, in exchange for payments from utilities or revenues in energy markets.
Historically, data centers haven’t been interested in standard demand-response programs and markets. The value of what they do with that electricity is just too high compared with the potential rewards.
But if a data center’s participation in a demand-response program is the difference between it getting a grid connection or not, the programs become a lot more appealing.
Shultz highlighted two key data center tasks that are particularly ripe for load flexibility.
The first is “cooling loads and facility energy demand,” he said. Data centers use enormous amounts of electricity to keep their servers and computing equipment from overheating, and quite a bit of that energy is lost in the process of converting from high-voltage grid power to the low-voltage direct current that computing equipment uses.
Data center operators have invested heavily to make this cooling and power conversion more efficient in recent decades. Further advances in efficiency — and technologies that can store power for cooling for later use — could become “part of the routine best practices of data center operations,” Shultz said.
The second big target for load flexibility is “the core of the computational operation itself,” he said. Not all data centers need to run their computing equipment 24 hours a day, and “they may not be being operated in a way that’s optimized from an energy point of view. I think there’s an opportunity there to develop more innovative and flexible operational processes.”
Again, this isn’t a new idea. Cryptocurrency mining operations in Texas have been earning millions of dollars for not using electricity during grid emergencies, even as lawmakers, regulators, and neighbors of crypto mining operations have been raising alarms over that industry’s rising hunger for power. Google has also carried out some version of this through its “carbon-intelligent computing” program, which shifts certain data center operations to use cleaner power. In recent years, Google has touted how it can also shift computing load to relieve grid stress.
“Our carbon-aware computing platform started as how we can shift nonurgent compute loads to times when the grid is more clean,” Google’s Peterson Corio said. “We’ve also done that to support utility partners in times of extreme weather events.”
But last year’s DOE report on data center power use stated that aside from Google’s activities, contributors to its research “identified no examples of grid-aware flexible operation at data centers today” in the U.S. That absence of evidence “may result from the fact that electricity providers only recently started having to say no to data center interconnection requests.”
Plus, not every data center conducts tasks that can be easily postponed, Tom Wilson emphasized. “Data centers are all different. If you are Visa, in Virginia, their data center is transacting, I think, 80,000 credit approvals per second. You don’t want to say, ‘I’ll approve your credit when the sun is shining.’ That’s the kind of thing where you don’t have much flexibility. You need to deliver.”
Other tasks are better suited, he said, including, critically, much of the work of training the AI models that constitute the largest single source of increasing power demand from data centers. “There is potentially flexibility there — and a fair amount of it.”
Taking advantage of that flexibility is the idea behind Verrus, a company launched last year by Sidewalk Infrastructure Partners, a firm spun out of Alphabet. Traditional data centers separate their computing capacity into individual “halls,” each of which has its own power conversion, cooling, and backup generation. Verrus, by contrast, is planning data center complexes with “a centralized battery in the center of all the data halls, with a sophisticated microgrid controller that allows it to think about all the data halls as interruptible and schedulable,” Jonathan Winer, a Sidewalk Infrastructure Partners cofounder and the former co-CEO, said in an interview last year.
Not every “hall” will be dedicated to tasks that can be interrupted, he explained. But some of them will be — and “with AI training, I can press pause on it. These are multi-day, sometimes multi-week training runs, and you can press pause and resume.”
Verrus hasn’t built one of these data centers yet, but it is targeting Arizona, California, and Massachusetts as its first markets. In a white paper last year, Sidewalk Infrastructure Partners explained why this kind of flexibility is a must for new data centers. As Winer said, “The data center industry has realized how much it needs to be a power-led model.”
It’s not clear how many data center developers are building flexibility into their grid interconnection requests to utilities. But that doesn’t mean it’s not happening.
Data center developers tend to be secretive about their hunt for sites and the nature of the discussions they have with utilities. Developers may be talking about flexibility with one utility while also shopping around for a more traditional interconnection that gives them access to the power they want at all hours of the day.
Flexibility deals are most likely to emerge in data center markets where unimpeded interconnections simply aren’t possible anymore due to grid constraints, said Aaron Bilyeu, Cloverleaf’s chief development officer. What’s changed is that “we’ve quickly run out of those opportunities,” he said.
Utilities in grid-constrained parts of the country are beginning to take on the complexities of creating “flexible interconnection” policies and tariffs — the rules and rates for customers — that could provide data center developers some clarity on what a commitment to flexible operations could be worth to them. That’s a big part of the work underway at DCFlex, Tom Wilson said.
“We have three main workstreams. The first is aimed at defining the flexibilities that are possible and creating a taxonomy — each utility and RTO [regional transmission organization] has different words for the same things,” he said. “The second piece is aimed at incentives, rate structures, and regulatory issues on the utility side, looking at how they could effectively orchestrate flexibility.”
“The third piece is how to build the planning and operational tools that incorporate flexibility,” he added. That means figuring out how to calculate the impact of flexible versus non-flexible large customers on long-term planning for power plants, grids, and other infrastructure investments, which traditional planning processes don’t do today. “You need new tools, or to evolve tools, to think about and utilize the new opportunities that flexibility can provide.”
That work will be critical to giving regulators the tools they need to challenge utilities’ claims that they must build new fossil-gas power plants and keep coal plants open to serve peak loads, the Sierra Club wrote in a September report. Big customers “can have an outsized impact in avoiding new fossil fuel investment (or enabling coal retirements) by participating in demand management programs that allow utilities to subtract some or all of the customer’s load from its peak obligation,” the report notes.
That aligns with the needs of tech companies like Amazon, Google, Meta, and Microsoft that have aggressive clean energy goals. These companies are negotiating with utilities in hot data center markets like Georgia, arguing that letting data centers build clean energy, on-site power, and load flexibility into load forecasts could obviate some of the new dirty power that utility Georgia Power wants to build.
Putting the question of clean versus dirty power aside, data center developers can’t expect utilities and regulators to allow the costs of supplying them with round-the-clock power to fall on regular customers’ shoulders, Bilyeu said. “We believe data centers should pay their own way.”
Since 2017, sweeping legislation in Illinois has sparked a solar-power boom and launched ambitious energy-equity and green-jobs programs.
Now, for the third time in under a decade, state lawmakers, advocates, and industry groups have their sights set on ensuring that clean energy momentum.
The focus this legislative session is the electric grid. Stakeholders worry the state’s clean energy progress will stagnate if it can’t expand and fortify its infrastructure for moving and storing electricity.
Advocates are backing a wide-ranging bill known as the Clean and Reliable Grid Affordability Act, or CRGA, which they describe as the successor to the 2017 Future Energy Jobs Act and the 2021 Climate and Equitable Jobs Act. Solar and energy-storage industries are backing another bill that includes even more ambitious goals for building out new transmission and energy storage.
There’s widespread agreement that Illinois’ current grid is not ready for the state’s mandated transition to 100% clean energy by 2050, especially as overall electricity demand climbs thanks to the proliferation of data centers in Illinois. As in other states, Illinois’ long interconnection queues and lengthy transmission planning processes through the regional transmission organizations make it hard to connect renewable energy sources.
CRGA, introduced Feb. 7, aims to make more efficient use of existing grid infrastructure through a transparent audit of the current system and the adoption of grid-enhancing technologies. It would facilitate new transmission buildout by making it easier for merchant transmission developers to get state permits and by allowing high-voltage transmission lines to be built in highway rights-of-way. It also calls for 3 gigawatts of new energy storage to be added to the grid.
“Transmission is crucial to a reliable and affordable grid because it allows us to move clean energy from place to place and be more resilient in cases of extreme weather,” said James Gignac, Midwest policy director for the Union of Concerned Scientists’ climate and energy program.
The industry-backed transmission and storage bill (HB 3758), introduced Feb. 7, calls for 15 GW of new energy storage, which the bill’s backers say would save consumers $2.4 billion over 20 years. The bill calls on the Illinois Power Agency, which procures energy for the state’s utilities, to also procure energy storage. Gignac said studies by advocacy groups indicate 3 GW of storage is sufficient for the near-term. Both industry and advocacy groups backed a “skinny bill” that passed in the legislature’s January lame-duck session, launching an analysis of energy storage needs by the Illinois Commerce Commission, due on May 1.
Stakeholders generally agree that new energy legislation is especially crucial given the Trump administration’s rollbacks to clean energy incentives and mandates.
“A lot of federal funding we just don’t know the future of, so the role of states and local governments is more important than ever now,” said Jen Walling, executive director of the Illinois Environmental Council.
Illinois does not do the type of comprehensive planning for energy use and transmission that electric utilities do in states with vertically integrated energy markets. In Illinois, separate companies generate and transmit electricity, with the idea that the open market will match supply with demand. But experts say centralized planning is necessary to ensure that clean energy can meet the state’s needs.
“The market is not necessarily going to get us where we need to go on resource adequacy and reliability,” said John Delurey, Midwest deputy program director of the advocacy group Vote Solar.
CRGA calls on the state to undertake a clean-resource planning process involving the commerce commission, state Environmental Protection Agency, and Illinois Power Agency, similar to what utilities in other states do with integrated resource plans.
The bill also mandates public studies of the grid to determine where it is underutilized and how the latest technology could more efficiently move electrons around — increasing the grid’s capacity without building new wires.
“A lot of incumbent transmission owners have confidence in their traditional approaches and tend to rely on those” instead of adopting new grid-enhancing technology, said Gignac. As an example, he pointed to software that can help grid operators reroute power through less congested pathways, a tool reminiscent of Google Maps for road traffic.
“There’s potentially a financial disincentive for [companies to embrace] some of these technologies,” Gignac added, “because they can often be cheaper solutions” than building new transmission, which earns companies a guaranteed profit from ratepayers. Clean energy advocates say more transmission lines are needed, but they want a comprehensive study to know exactly where and how much.
“We are at a point in transition where we have to get even more precise,” said Delurey. “That precision is crucial for affordability. How do we make sure we build exactly what we need? No more, no less.”
Last year, companies hoping to build new high-voltage transmission in Illinois backed a proposal for creating renewable energy credits to incentivize it, similar to those that helped Illinois grow its solar capacity manyfold to over 3.5 gigawatts in less than a decade since the passage of the Future Energy Jobs Act.
CRGA does not include such incentives, but it would make it easier for companies that have not previously built transmission in Illinois to get authority from state regulators to do so, Gignac explained.
This could help the company Soo Green construct its planned 350-mile underground transmission cable connecting Iowa and Illinois. Such merchant transmission lines don’t have to go through the lengthy bureaucratic process that new projects built through regional grid operators’ planning programs do.
Meanwhile, both CRGA and the industry-backed storage bill would create a virtual-power-plant program, wherein companies would aggregate and market the capacity of individual batteries owned by residents, businesses, industries, and even vehicles plugged into the grid.
CRGA would also create an Illinois Storage for All program, mirroring the existing Illinois Solar for All initiative, which helps income-qualified customers, nonprofits, and government entities get solar for little or no cost. The same pot of state funds could subsidize batteries for residents, schools, churches, and others.
“That person is now a resilience hub for the neighborhood,” said Delurey. “Neighbors can come over and stay cool in summer, keep medicine cold in the fridge. For the nonprofit and public facility program, it’s the same idea on a larger scale.”
The bill also greatly expands energy-efficiency mandates for the state’s electric and gas utilities. It increases the amount of energy savings that electric utilities are required to achieve each year to the equivalent of 2% of their annual sales. The utilities do this through funding programs like home weatherization and subsidized efficient appliances.
Under the legislation, downstate utility Ameren would have to meet the same targets as Chicago-area utility ComEd, closing a gap between the utilities’ requirements. It would also more than double the savings mandates for natural gas utilities, and it would end the current ability of large industrial users to opt out of paying into a fund for energy efficiency.
“These are important ways to be moving the needle and prioritizing affordability across the board and even more so for Illinoisans who are financially challenged, historically disadvantaged,” said Kari Ross, Midwest energy affordability advocate for the Natural Resources Defense Council. “Investment in energy efficiency is critical for affordability and … getting the grid reliable and moving toward a clean energy future.”
CRGA has planning requirements and transparency mandates specifically for rural cooperatives and municipal utilities. This is especially important since residents who are member-owners of those entities may understand little about contracts they get locked into, said Andrew Rehn, climate policy director of the Prairie Rivers Network, an environmental group in downstate Illinois. One example of such an agreement is the highly controversial and financially troubled Prairie State Energy Campus, a massive coal plant.
“It’s good governance, trying to make sure the way cooperatives are operating is transparent and interested members can have clear pathways to engaging, understanding what’s going on, having a voice,” Rehn said.
“We think if they did some of this planning we’d see different outcomes. We would be looking at a more diverse portfolio,” changing the fact that “a lot of these municipal utilities and co-ops are still on coal, [and] they will be the last in the state still on coal.”
Two separate bills have been introduced related to the municipal-utility and rural-cooperative transparency demands and to help muni and co-op customers more easily install solar. A Solar Bill of Rights for such customers was also introduced last year.
Advocates say they expect energy bill negotiations to continue throughout the spring session, as they try to gain industry support for CRGA and add elements — like provisions related to data centers — that were discussed but not included in the current legislation.
“In a Trump world nothing feels certain,” said Rehn. “But this feels real. This is the state being able to set our own direction and offset a lot of the horrible things that are going to happen on the federal level. It’s a way we can fight back and do important climate and community-focused work.”
PJM Interconnection, the organization that manages the transmission grid delivering electricity to about 65 million people from the mid-Atlantic coast to the Great Lakes, badly needs more power. In fact, its inability to connect projects languishing in its interconnection queues — most of them solar, wind, and batteries ready to replace closing coal-fired power plants — has spiked the cost of power, is threatening state clean power goals, and may put grid reliability at risk before decade’s end.
Last week, PJM won approval from the Federal Energy Regulatory Commission for two dramatically different approaches to solving these problems. But clean energy companies and advocates say one of the plans is unfair and won’t work — and they’re hoping the grid operator will focus on the cleaner, faster, and more realistic alternatives at hand.
The plan critics take issue with, known as the Reliability Resource Initiative, allows PJM to fast-track some “dispatchable” generation resources — most likely, fossil gas–fired power plants — ahead of all the other projects that have been waiting for years to get connected, the vast majority of which are wind, solar, and batteries.
Power plant owners, utilities, and state regulators support the RRI. But opponents say it runs counter to fair and open grid access and market competition rules, could complicate already-clogged interconnection processes, and will likely fail to deliver the fast grid relief PJM is looking for.
At a FERC meeting last week, the RRI proposal passed by a 3-1 vote, with the fifth commissioner, Lindsay See, a Republican, abstaining. But only Mark Christie, a Republican who was named FERC chair by the Trump administration last month, voted in support of the plan without expressing reservations.
Willie Phillips and David Rosner, the two Democrats who voted in favor of RRI, said in a concurrence to the decision that their approval was a “one-time emergency measure” and that the plan is “not a substitute for a well-functioning interconnection process.” Judy Chang, a Democrat who voted against the plan, wrote in her dissenting statement that RRI “presents a risk of the worst of both worlds: It compromises the Commission’s open access principles with no guarantee it will resolve PJM’s reliability issue.”
One problem with RRI, Chang wrote, is that it seeks to fast-track the kind of power plants that are the hardest to build quickly: ”large generators, which are the most challenging to develop, acquire the necessary environmental permits, and obtain adequate material supplies and labor for construction.”
Another problem is that PJM’s methodology for choosing which projects get fast-tracked primarily rewards large ones, rather than prioritizing criteria like whether they can be brought online before 2030 or built at sites with existing “headroom” on PJM’s grid, even though those are “arguably the two most critical factors to meeting its identified reliability needs,” Chang wrote.
Critics have expressed similar concerns since PJM launched the RRI plan in October. The grid operator predicted that the plan could spur 10 gigawatts of new power plants by 2028. But industry observers say it’s highly unlikely that many gas-fired power plants could be built or connected that quickly.
Just getting the new gas turbines needed for these power plants can take four to five years given current order backlogs, according to industry experts. Last month, renewable energy developer NextEra Energy announced plans to build gas power plants with GE Vernova. But CEO John Ketchum noted in an earnings call that gas-fired generation projects not already well along in the procurement and construction process “won’t be available at scale until 2030 and then only in certain pockets of the U.S.”
Nor are large power plants likely to fit easily onto a PJM grid that’s already too congested to connect most projects, at least not without significant and costly grid upgrades, said Caitlin Marquis, managing director at clean energy trade group Advanced Energy United.
Letting up to 50 projects leap to the front of the line “could raise interconnection upgrade costs” for the many other projects that have been waiting to get onto the grid, she said.
Even the Electric Power Supply Association, a trade group representing companies that own and develop gas-fired power plants, has voiced reservations about the RRI plan. “All resources play a role in the evolving energy landscape; this limited tool is only necessary to address short-term interconnection queue bottlenecks and the current supply crunch,” Todd Snitchler, the group’s president and CEO, said in a statement last week. “We anticipate that PJM’s queue reform process will resolve these challenges, making such measures unnecessary in the future.”
All of these drawbacks make the RRI plan a nonstarter, critics say. But there are many other options that PJM could pursue, according to Marquis.
“Those solutions that don’t upend market expectations are the pathway you should take, rather than turning to a solution that’s going to have a lot of disruption and market risk and still yield uncertain outcomes,” she said.
The second PJM plan approved by FERC last week, known as Surplus Interconnection Service, is one such option. In simple terms, it lays out rules for existing projects to add new resources — like batteries to wind and solar farms — to provide more power when the grid needs it most.
That proposal won broad support from groups that have fought over RRI, including clean energy advocates and fossil fuel power plant owners who are usually at odds. The new plan, clean energy advocates point out, is much improved from PJM’s previous SIS regime.
“In the past, the surplus interconnection rules were very restrictive,” said Katie Siegner, a manager in the carbon-free electricity practice at think tank RMI. “Now it’s been opened up to be applicable to a much bigger set of resources.” For example, “we’ve heard from independent power providers that adding storage to existing or soon-to-be-operating renewables is now a real use case.”
In fact, an RMI analysis submitted as part of a FERC filing from environmental groups Sierra Club and Appalachian Voices calculated that by 2030, PJM projects using SIS could add between 5.3 GW and 13.2 GW of “unforced capacity” — a term for the amount of power available during times of peak grid demand that drive PJM’s resource-adequacy needs.
That’s not the only way PJM can unleash more power on the grid, Siegner said. Beyond SIS, PJM has put forward a bevy of ideas to deal with what it has described as a looming grid reliability crisis. Another proposal that’s won ample stakeholder support and is now awaiting FERC approval would let newly built resources more quickly reuse the grid connections left open at power plants, most of them coal-fired, that are now closing across the region.
According to RMI’s analysis, this “generator replacement interconnection” option could add from 3.3 GW to 10.2 GW of unforced capacity to PJM’s grid by 2030. That’s not just a neat way to replace dirty generation with much cleaner resources — RMI has estimated that the technique could enable up to 250 GW of clean energy across the country by 2032. It would also help resolve PJM’s core challenge of replacing power plants closing under state climate mandates or economic pressures.
Projects in Massachusetts, Minnesota, and North Carolina have all installed batteries that use the grid connections at shuttered coal-fired power plants. Environmental groups and Maryland state officials attempted to get PJM to consider such a plan to avoid paying a set of coal plants in Maryland to stay open past their planned closure dates, only to founder on PJM’s lack of a workable set of rules to allow this approach to move forward.
PJM won’t be trying something new if it pursues these pathways, Siegner added. The Midcontinent Independent System Operator and Southwest Power Pool, two grid operators that together manage grids covering or touching 18 states, have added nearly 7 GW of capacity using their own versions of surplus interconnection service, and a combined 13.3 GW of capacity through generator replacement, according to RMI’s analysis.
Finally, if PJM simply completes and executes long-promised reforms to its notoriously slow and backlogged process for managing its interconnection queue, that could make a big dent in its generation deficit, Siegner said. What’s more, PJM and all other U.S. grid operators are under FERC mandate to undertake interconnection reforms that should drive further improvements.
All of these changes will “allow resources to be fairly evaluated and interconnected faster,” she said. Taken together, they can more than make up the capacity shortfall PJM is forecasting for 2030 and that is spurring its RRI proposal.
Backers of fast-tracking gas-fired power plants aren’t against these other reforms. As Electric Power Supply Association’s Snitchler said in last week’s statement, “What matters most and what we hope to see going forward is a fair, efficient interconnection process that gives developers reasonable certainty while ensuring the grid has the power it needs—now and in the future.”
At the same time, the conflicts that have emerged over PJM’s menu of plans to solve its grid challenges match up with a broader political division between fossil fuel supporters and clean energy groups.
Last month, Republicans in Congress introduced bills that would require FERC to quickly review and decide on grid operator proposals that, like PJM’s RRI plan, push certain “dispatchable” power plants ahead of other projects in interconnection queues. The Electric Power Supply Association supports the legislation, which was introduced by lawmakers representing Ohio, North Dakota, and Indiana, three Republican-controlled states with policies that support fossil-fuel power plants.
At the same time, major grid failures during winter storms over the past four years have revealed that gas-fired power plants aren’t always able to provide the electricity that plans like these assume they will, said Sarah Toth Kotwis, a senior associate on the markets and grids team at RMI’s carbon-free electricity program.
PJM’s RRI proposal presumes that “larger resources are more likely to contribute to reliability. But in fact, we’ve seen time and time again that just because a resource is dispatchable doesn’t mean it’s reliable.”
Such proposals will likely face legal challenges. FERC’s decision last week rejected complaints by clean energy groups that PJM’s RRI plan violates legal precedent over making changes to existing rules and rates. But policies that privilege some types of power plants over others in the competitive markets managed by grid operators could certainly be seen as a violation of the “open access” principle that’s been core to federal electricity policy for decades, according to Rob Gramlich, president of consultancy Grid Strategies who previously held senior positions at FERC.
“For those who think they have an easy one-time fix or a way to get a quick solution here, maybe they’ve not been in court proceedings very often. But those don’t get resolved quickly, especially when you’re going after the core principle of FERC and Federal Power Act policy,” Gramlich said during a December webinar.
Gramlich didn’t dismiss the challenges that PJM and the country at large face in expanding power supply to serve data centers, factories, electric vehicles, and other drivers of growing electricity demand. But “I would suggest people might look for other ways to speed things up,” he said.
Consumer and clean energy advocates in Indiana are calling for a moratorium on new “hyperscale” data centers, which are driving a huge surge in power demand, until state leaders can study their potential impact on the electric grid and utility bills.
Indiana is projected to see a boom in data center construction in the coming years, with one recent report estimating that within a decade the facilities could consume more electricity than the state’s nearly 7 million residents combined. That projected demand has spurred utilities and state lawmakers to plan to ramp up natural gas–fired generation and build small modular nuclear reactors.
A state House committee this month approved a bill that would create tax breaks for small modular reactors on top of existing state tax breaks for data centers. That’s a risky approach, said Citizens Action Coalition program director Ben Inskeep. In addition to cutting state revenue, tax breaks have the potential to shift costs onto residential electricity customers, the consumer protection group warns.
The coalition demands that rather than scrambling to build more fossil-fuel and untested nuclear generation, lawmakers pass a moratorium on new hyperscale data centers so the issue can be studied further.
“The General Assembly should press pause on giving out additional subsidies to trillion-dollar big tech companies and ensure hardworking Hoosiers are protected and prioritized,” Inskeep said. “A moratorium strikes a reasonable balance, recognizing that we need time to understand the full impacts of the extraordinary data center growth already underway and make adjustments to current policies to protect consumers, taxpayers, and the environment while still allowing the possibility for sustainable data center growth in the future.”
Indiana is a particularly attractive state for new AI-focused data centers since it offers access to fiber optic cables, high-voltage transmission, and major information-demand regions like Chicago. The state has relatively cheap land and access to water needed for cooling.
It also draws power from both the PJM and MISO regional grids, meaning added electricity capacity and resilience, and is at relatively low risk of natural disasters that could interrupt electricity supply.
Meanwhile, a 2019 state law exempts large data centers from paying sales and use tax, including on the electricity they consume.
Two Microsoft data centers and an Amazon data center are in the works for Northwest Indiana near the shore of Lake Michigan, a region home to steel mills, a massive BP oil refinery, and other heavy industry. Google is planning a data center in Fort Wayne, also in northern Indiana, and Meta has proposed two data centers farther south in the state. Last year, a real estate and investment firm scrapped plans for a $1.3 billion data center in northern Indiana’s Chesterton amid intense opposition from residents.
While Meta says its data centers will be powered by 100% renewable energy, and Google and Microsoft also have ambitious clean energy goals, the companies have not provided specifics on clean energy for their Indiana centers. Plans filed with the state regulatory commission by two utilities — Northern Indiana Public Service Co., or NIPSCO, and Indiana Michigan Power, or I&M — indicate gigawatts of new natural gas–fired generation will be built to meet demand driven by data centers.
“Regardless of whatever accounting tricks Amazon and Google might try to claim, their data centers are very likely to be directly causing an enormous addition of fossil fuel resources,” said Inskeep, echoing analyses by experts in other states.
Google and Amazon did not return requests for comment for this story, and a Microsoft spokesperson declined to comment. Utilities NIPSCO and I&M did not return requests for comment.
Plans already filed by utilities show major increases in natural gas–fired generation. In testimony filed in December with the state’s regulatory commission, I&M consultant Caleb Loveman noted that the utility expects its Indiana load to grow by 4.4 GW by 2030 largely because of data centers. The utility is proposing scenarios including new natural gas–fired generation and shifting power from Michigan to its Indiana customers through an ongoing regulatory process. NIPSCO has proposed more than 3 GW in new natural gas generation over the next decade, according to regulatory filings.
There are currently no nuclear reactors in Indiana, and critics note that small modular reactors are a relatively untested technology that has not been deployed at commercial scale.
Meanwhile, nationwide, data center demand has meant coal plants converting to natural gas generation or staying open longer and continuing to burn coal.
Utility Hoosier Energy announced plans to close the Merom coal plant in Indiana in 2023 but then sold it to a company called Hallador Energy that is keeping the plant open and reportedly making a deal with a data center developer.
Experts note that ensuring data centers are actually using renewable energy around the clock is extremely difficult since they draw energy from fossil fuel–heavy local grids at times when the sun isn’t shining and wind isn’t blowing. Indiana got 45% of its electricity from coal in 2023, according to the Energy Information Administration, making it the nation’s second-largest coal consumer after Texas.
“We’re unilaterally opposed to data centers, especially hyperscaler ones,” said Ashley Williams, executive director of Just Transition Northwest Indiana. She described data centers as “an investment in an extractive economy, doubling down on it, when what we’re advocating for is regenerative and renewable energy.”
An analysis by Ivy Main, a lawyer and renewable energy co-chair for Sierra Club’s Virginia chapter, found that Amazon’s data centers in Virginia — the world’s largest data center market — have likely increased the burning of fossil fuels in the region, despite the company’s claims to have reached 100% renewable energy worldwide.
“The self-styled climate hero turns out to be a climate parasite,” Main wrote in an opinion piece for Virginia Mercury. A Virginia legislative audit predicts data centers could increase the state’s electricity demand almost three-fold between 2023 and 2040.
The situation is similar in Wisconsin and Illinois, where a data center boom is keeping fossil-fuel generation running and making it harder for the states to meet their ambitious clean energy goals. Customers are better insulated from possible bill increases in Illinois, where the deregulated energy market means power companies can’t directly charge ratepayers for building new power plants.
Nationwide, states have adopted tax breaks and other incentives to attract data centers. At least 16 states offer sales tax exemptions, and some also offer property tax breaks, according to Data Center Dynamics, an industry publication. A recent Policy Matters Ohio study found that local sales tax breaks given to Microsoft, Google, and Amazon for data centers could have totaled almost $1.6 billion over the last two years. States including Virginia and Alabama make tax breaks contingent on wage and job creation requirements.
Along with exempting data centers from sales and use tax, Indiana’s 2019 law allows individual counties and municipalities to offer property tax breaks. In 2023, Fort Wayne, Indiana, approved a more than $55 million property tax break over 10 years for a data center with the code name Project Zodiac, to be built by a mystery developer that turned out to be Google. The South Bend Tribune estimated that a proposed Amazon data center’s property tax abatements could eventually reach $4 billion.
Data center opponents say subsidies are unnecessary and unhelpful for the local economy. Kasia Tarczynska, senior research analyst at the national corporate watchdog organization Good Jobs First, during a webinar cited a statement from Microsoft executive Bo Williams in The New York Times that subsidies have not been a determining factor in where the company locates data centers.
Google, Amazon Web Services, and Microsoft signed an agreement in November with I&M, Indiana’s Office of Utility Consumer Counselor, and Citizens Action Coalition meant to make sure that the cost of new generation and grid upgrades isn’t unduly passed on to regular customers.
Under the agreement, in I&M territory these companies developing data centers must provide collateral during early years of operation, sign contracts of at least 12 years, and agree to pay at least 80% of their expected demand each month. Advocates consider such safeguards especially important in the new world of AI-driven data centers because if a facility’s energy demands end up being much lower than expected or if it closes prematurely, customers could end up paying for stranded assets — grid and generation investments made by the utility.
I&M’s large industrial customers previously had contracts but with much shorter minimums and lower payment thresholds.
The agreement creates a program where the companies can voluntarily invest in clean energy. The companies also agreed to pay half a million dollars each annually for five years into a fund that helps low-income residents access energy programs like weatherization.
Inskeep said that while the Citizens Action Coalition is frustrated at lawmakers’ enthusiasm for data centers and small nuclear reactors, the advocates do support a state bill introduced in January that would demand more transparency about data centers’ energy use. The bill would require that local governments review projected energy and water usage and other impacts before approving permits for a data center. Once a data center is operating, it would need to publicly report its energy use each quarter.
Inskeep said this bill would be a good start, and the coalition thinks even more study should be done during a moratorium.
“We think such a study should analyze trends and impacts, include opportunities for stakeholder involvement and public comment, and identify potential policy solutions,” he said.
U.S. utilities are spending more than ever on their transmission grids. So why has the construction of new long-range, high-voltage power lines — the kind that experts say the country desperately needs — slowed over the past decade?
Claire Wayner, a senior associate at think tank RMI, says one big reason is that utilities are opting to build smaller-scale transmission projects that earn them guaranteed profits instead of large ones that are more difficult to plan but deliver greater benefits for ratepayers.
In a November report, Wayner and her co-authors examine the blind spot in utility regulation that they say is at the root of the problem — a “regulatory gap” that prevents both federal and state regulators from exercising meaningful oversight of the smaller transmission projects utilities build within their own territories.
Many of these projects are clearly needed to bolster parts of the grid that were built more than half a century ago. But with less oversight, they tend to cost utility customers more than bigger, regionally planned grid projects, which require utilities, state regulators, and regional grid operators to assess costs and benefits and agree on how to share construction expenses.
That’s a complex and time-consuming process. But the longer-range, higher-voltage power lines that typically result can deliver far greater benefits per dollar of investment than piecemeal, utility-by-utility buildouts, according to analysis of previous regional expansions by the grid operators responsible for managing them.
Wayner thinks reforms are needed to push utilities and grid operators to take what RMI’s report calls a “regional-first” approach. “You could be addressing local and regional needs simultaneously and meeting both needs in a more efficient manner,” she said.
Today, however, transmission planning is like “two different cars being driven on two different roads in parallel. The regional road is like a toll road with all these checkpoints: identify regional needs, open competitive bidding windows, identify the costs and benefits,” she said. “The local road has no speed limits. [Utilities] can build as much as they want.”
The U.S. needs more regional transmission than ever to allow clean energy to replace retiring fossil-fuel power plants, to transmit energy further and clear grid congestion spots, and to make the grid more resilient against extreme weather. But the more local projects eat up money, the less there is for projects that could deliver bigger benefits.
The result, Wayner said, has been “rapidly increasing transmission rates, while the buildout of mileage of high-voltage transmission lines is at an all-time low.”
The regulatory gap identified in the RMI report stems from the Federal Energy Regulatory Commission’s Order 1000, which, somewhat ironically, intended to push utilities, state regulators, and regional grid operators to do more cost-effective regional grid planning.
The order, passed in 2011 and put into effect in 2014 after overcoming court challenges, created regional grid planning entities across almost all of the country. States and utilities within them must undertake coordinated planning of grid projects and agree on methods to share the costs of building them.
But Order 1000 also included exemptions. “Local” projects under certain voltage thresholds within individual utilities’ service territories don’t have to be part of regional planning. Neither do “asset management” projects that rebuild or refurbish existing transmission lines. Perhaps not coincidentally, since the order went into effect, these exempted projects have grown to make up most transmission investment.
FERC Order 1000 also requires that regional transmission projects be opened to competition from independent transmission developers, with the goal of driving down costs. But grid experts, including former FERC commissioners involved in crafting the rule, have conceded that this provision has driven utilities to seek out local and asset-management projects that evade competitive bidding.
These various policies and exemptions — and their implications for federal, regional, and state authorities — are at the heart of the regulatory gap, Wayner explained in a December webinar discussing RMI’s report.
At the federal level, FERC allows utilities to earn guaranteed profits on exempted projects under a so-called “formula rate” structure, which “does not require project-level scrutiny,” Wayner said. Thus, “most local projects receive virtually automatic rate approval.”
At the state level, utility regulators can require local projects to secure state permits. But many exempted projects are bundled into infrastructure spending requests within sprawling and complex utility rate cases, which makes it much harder for regulators to demand more information about them.
What’s more, FERC sets the rates of return that utilities can earn from these small-scale transmission investments, so states have few openings to demand that utilities prove they’re the most cost-effective option, Wayner said.
As for the planning entities and grid operators that manage regional planning, they’re not actually regulators, said Ari Peskoe, director of the Electricity Law Initiative at Harvard University. Instead, they’re organizations made up of the same utilities that are incentivized to push projects that maximize profits.
“There are lots of reasons why these projects are more attractive financially for the utilities than more ambitious regional projects that we might need for clean energy and reliability,” said Peskoe, who is a longtime critic of monopoly-utility transmission policies. “They’re easier to execute. You don’t have to publicly disclose details that could bring more scrutiny. You may need no state or local permits, particularly if you’re rebuilding existing infrastructure.”
These are all well-known problems, and FERC held a technical conference in 2022 that allowed critics to lay out proposals for fixing them, he said. But it’s not clear if or how FERC might initiate a proceeding to take further steps to reform the status quo.
“The real problem with this local spending is that we have no idea what value the public might be getting,” Peskoe said. “It’s hard to even tally up the bills.”
There’s no doubt that costs are growing. Consultancy The Brattle Group has tracked data from FERC and utility trade group Edison Electric Institute showing a steady rise in U.S. transmission spending over the past two decades. Since FERC Order 1000 went into effect, more than 90% of transmission spending has gone to projects that don’t undergo cost-benefit analysis, and about half of those investments are in local and asset-management projects that fall into the regulatory gap.
There’s also been a steady decline in new high-voltage transmission projects over the past decade. According to RMI’s November report, spending on projects of 230 kilovolts and above — the kind typically built in regional grid projects — has fallen from 72% of total transmission spending in 2014 to 34% of spending in 2021.
And a July report from consultancy Grid Strategies found projects of 345 kilovolts and above have fallen from an average of 1,700 miles per year from 2010 to 2014 to 350 miles per year from 2020 to 2023, including an all-time low of 55 new miles in 2023.
That’s not to say that regional grid expansions aren’t happening. In some parts of the country, including much of the Midwest, utilities and state regulators have agreed to tens of billions of dollars of grid projects expected to yield cost, climate, and reliability improvements. FERC Order 1920, passed last year, orders grid operators and utilities across the country to undertake similarly ambitious efforts.
But elsewhere, the chasm between regional and local projects has become extreme. In the territory of PJM, the grid operator that serves Washington, D.C., and 13 states from Illinois to Virginia, RMI calculated that the five-year averages for spending on “supplemental” projects — PJM’s term for local projects — ballooned from less than $1 billion per year in 2010 to more than $8 billion per year since 2020. Meanwhile, the same averages for spending on “baseline” projects not subject to Order 1000’s exemptions declined.
Just because a transmission project falls into the regulatory gap doesn’t mean it shouldn’t be built, said Rob Gramlich, president of Grid Strategies. For one thing, much of the money spent on local projects over the past decade has gone to “replacing assets that are 50 or 60 or more years old,” he said.
But Tyson Slocum, director of the energy program at nonprofit watchdog group Public Citizen, said the inability to review or challenge these projects is a problem.
“Transmission owners, and [regional transmission organizations] to a certain extent, have lots of incentives to prioritize the projects that maximize returns for them but not necessarily for the consumers,” he said. It’s particularly troubling when utilities may be using that lack of transparency to squeeze their customers for more money than they really need.
Slocum suspects that’s what happened with a transmission project at the heart of a December settlement agreement between FERC and New Jersey utility Public Service Electric and Gas Co. (PSE&G). The utility agreed to pay a $6.6 million fine to settle allegations that it failed to provide “accurate and factual information” regarding a $546 million project to rebuild a transmission line with towers built nearly a century ago.
Among the disclosure failures cited in FERC’s enforcement action was PSE&G’s presentation to PJM stating that a consultant had found that 67 of those towers needed extensive foundation retrofits. In fact, the consultant had found only eight towers needed such work — presumably a much less costly scope of work than what PSE&G ended up doing.
PSE&G neither admitted nor denied the allegations, and the settlement with FERC does not require it to forgo revenues it will receive for the project under FERC’s formula rates. Public Citizen filed a protest with FERC this month challenging PJM’s plan to assign those costs to ratepayers, citing PSE&G’s December settlement agreement as evidence of “harrowing fraud” from the utility and a failure by PJM to “perform a modicum of independent oversight.” PSE&G told Utility Dive that it will “vigorously defend” against Public Citizen’s allegations of imprudence.
Slocum called the PSE&G case “an easy-to-understand example of how bad things can get when you don’t have independence in assessing these transmission projects, when you don’t have someone in the room asking hard questions.”
PJM spokesperson Jeff Shields told Canary Media that PJM has “enhanced the transparency of its supplemental projects processes” in recent years. But he added that “authority and expertise for certain asset management decisions remain with transmission owners under settled FERC precedent.”
Nor can New Jersey utility regulators challenge the utility’s rate recovery on their own. Harvard’s Peskoe highlighted this as a problem that FERC will need to step in to solve since the agency regulates these rates. “If you find that utilities went way over budget on a project, there’s nothing the state can do but go to FERC and complain about it,” he said
State regulators sometimes take actions that undermine what little oversight they do have over utility investments. Utility Florida Power & Light has faced criticism over a 176-mile transmission line that it designed at an unusually low voltage, allowing the endeavor to skirt the rigorous review required for higher-voltage regional projects. Critics say that earlier decisions by the Florida Public Service Commission paved the way for that project to escape more scrutiny.
Other states have taken more aggressive steps to demand better transparency. RMI’s report highlights Kansas, which passed a law in 2023 giving regulators authority to demand that utilities provide detailed information, hold public workshops, and accept a state-set rate of return if they want to pursue a streamlined process to earn revenues on money spent on local transmission projects.
But watchdogging individual local transmission projects doesn’t fix the underlying problem described in RMI’s report: Regional planning has been relegated to second-run status behind local projects.
Instead of executing local projects on a separate track from regional projects, utilities and regional planning organizations should be required to “first look at how regional projects could holistically meet local and regional needs, and then build any local projects necessary to meet remaining local needs,” Wayner said during the December webinar.
FERC Order 1920 does require utilities, planning entities, and grid operators to undertake some major long-term grid planning reforms. But Wayner and Peskoe agreed that its adjustments don’t close the local-project regulatory gap.
Most notably, when grid operators hold meetings to share local transmission project data with state regulators and other stakeholders, utilities and the grid operator don’t have to respond to any questions or data requests from stakeholders.
FERC’s order modeled this approach on PJM’s method for managing those meetings, which have been a longtime frustration for Greg Poulos, the executive director of the nonprofit Consumer Advocates of the PJM States. “We are given a sticker price of projects,” he said during the December webinar. “We can’t get any other information. We can ask questions. They do not have to be answered.”
That lack of transparency is a big problem, said Kent Chandler, a former chairman for the Kentucky Public Service Commission and resident senior fellow at free market-oriented think tank R Street Institute. Utilities are monopolies that get to charge captive customers for reliable and affordable power, he said during the December webinar. “It shouldn’t be on us to have to prove the negative on why we’re not getting the best value for our money.”
These concerns have spurred a new effort to get FERC to intervene. In December, R Street Institute, consumer advocates including Public Citizen, and groups representing industrial energy consumers filed a complaint asking FERC to require that lower-voltage lines typically built under the “local” designation be brought into the same regional planning structures that govern higher-voltage lines.
It also calls for “independent transmission system planners,” a new kind of regional planner watchdog that would counterbalance “the self-interest and undue influence of existing transmission providers.”
Maryland’s Office of People’s Counsel, which advocates for residential utility consumers in the state, joined that complaint. David Lapp, who leads the office, said the goal is to “stop being nickel and dimed in massive amounts” for local transmission projects.
Under today’s regulatory gap, “we have situations where two adjacent utilities might be spending hundreds of millions each,” he said. “You might be able to have a project that cuts those costs in half if they were part of a regional plan.”
Lapp noted that in PJM’s territory, “investments made at a higher cost are lost opportunities for better spending on what’s really going to help customers going forward as well as advance climate policy.”
PJM is facing a massive backlog in processing hundreds of gigawatts of clean energy projects seeking to interconnect to its grid, a lag that some analysts say has been exacerbated by its refusal to engage in large-scale regional grid planning and expansions. “We may be looking at that lost-opportunity cost with the stalled interconnection queue and the inability to get more clean energy on the grid,” Lapp said.
AI faces a big question that even ChatGPT hasn’t been able to answer: How to provide the massive amount of power it needs to work and expand. But a new, efficient and inexpensive open-source AI model may sidestep the question altogether.
Just last week, the U.S.’s path forward on AI seemed clear. OpenAI — the company behind ChatGPT — and two partners got a White House welcome to announce a $500 billion investment into building out the virtual and physical infrastructure behind AI. That includes funding for solar arrays and battery storage to power new, energy-hungry data centers, Bloomberg reports.
A slew of other news made it clear energy was still at the heart of AI’s challenges: Tech companies joined a utility regulators’ conference to curry favor as they look to build their own power plants, and Chevron cemented a partnership to build gas plants dedicated to powering data centers.
President Trump meanwhile took his own crack at a plan for powering data centers, saying he’d use his new emergency powers to fast-track power plants that would connect directly to AI data centers. Companies can use “anything they want” to power their data enter operations, Trump said, “and they may have coal as a backup.”
But a Chinese company’s apparent AI breakthrough may render all of those plans moot. The company DeepSeek last week released a chatbot that it says uses far less computing power and energy than rivals like ChatGPT, but still churns out comparable results. The news sent AI and energy company stocks tumbling, as investors quickly noticed that the efficient DeepSeek could drastically reduce AI’s energy usage.
Still, DeepSeek’s long-term impact is still up in the air. It could end up creating loads of new energy demand, as its cheapness and efficiency earns it new customers, Heatmap notes. It could lead the U.S. government to fund domestic AI research to catch up to China’s lead.
Or, if DeepSeek fails to take off over security concerns or its apparent pro-China censorship, it could mean nothing at all.
💵 Deep freeze: The Trump administration pauses approvals for clean energy projects on public land and waters, and freezes conditional loans for clean energy and other projects that had not yet been finalized by the Department of Energy. (The Hill; E&E News, subscription)
🌊 What Trump’s wind order means: President Trump’s order curtailing wind power is likely to affect at least seven offshore projects still in the permitting process and jeopardize new manufacturing and supply chain investments, but questions remain about how forcefully the Interior Department will execute the policy. (Canary Media)
👀 All eyes on the states: Advocates share their fears about how the Trump administration will upend renewable energy development and climate action, but say state-level progress will be key to keeping things moving over the next four years. (Inside Climate News)
☀️ Floating a new idea: Federally owned or managed reservoirs could hold enough floating solar panels to power 100 million homes each year, a National Renewable Energy Laboratory study finds. (Canary Media)
🔌 Charging EVs: Congressional Republicans look to impose a national fee on electric vehicles, which advocates fear will be punitively high and discourage EV adoption. (New York Times)
📉 Solar growth sunsets: A new report predicts U.S. solar industry growth will come “to a halt” this year, as President Trump’s orders blocking Inflation Reduction spending and instituting tariffs threaten the industry. (E&E News)
🔋 Storage safety: Experts say recent safety improvements for grid-scale battery storage systems make another fire like the one at the Moss Landing site in California unlikely. (Canary Media)
🏠 Heat pumps heat up: U.S. residents bought 37% more heat pumps than gas furnaces in the first 11 months of last year, marking the electric appliances’ biggest lead over fossil fuel heating yet. (Canary Media)
NATURAL GAS: A lack of spare pipeline capacity into the region could threaten the reliability of New England and New York’s natural gas system in extreme cold weather, the North American Electric Reliability Corp. says. (Utility Dive)
ALSO: A Connecticut company signs a $160 million deal to build a 7.4-MW power plant in the state capital using natural gas fuel cells, which officials say will produce no emissions and contribute to state renewable energy goals. (CTpost)
OFFSHORE WIND: A Maine Congressman introduces legislation to prohibit offshore wind development in certain key fishing areas with the aim of protecting his state’s lobstering industry. (Maine Morning Star)
TRANSPORTATION: Ongoing projects to improve New York’s infrastructure, including adding solar generation to public transportation facilities, electrifying bus fleets, and improving transit infrastructure, will not be deterred by the Trump administration, officials say. (City & State New York)
GRID:
ELECTRIC VEHICLES: A Maine education official asks the EPA for relief as school districts that received problem-plagued electric buses grapple with financial loss, but officials still stand behind the importance of electrifying the state’s school bus fleets. (Kennebec Journal, subscription)
SOLAR:
CLIMATE: New Jersey environmental advocates lay out a wish list of goals they’d like to see gubernatorial candidates embrace, including reaching 100% clean energy by 2035 and advancing the electrification of public transportation. (New Jersey Monitor)
HYDROGEN: New York awards $1.2 million to four clean hydrogen research and development projects that show promise in making the production process cleaner and more efficient. (news release)
Correction: Illinois environmental and consumer advocates launched a $1 million ad buy opposing rate increases for a Peoples Gas pipeline replacement program. An item in Wednesday’s newsletter misstated the size of the ad buy.
GRID: Minnesota regulators approve permits for a 180-mile, $1 billion transmission line that two utilities say is needed to improve grid reliability as they transition from fossil fuels. (MPR News)
ALSO:
OHIO: Republican lawmakers introduce a bill that backers say would cut regulations on power produced in the state from nuclear, coal and gas plants to meet growing demand from manufacturing and data centers. (Toledo Blade)
CARBON CAPTURE: The owner of a large Illinois ethanol plant pursuing an onsite carbon capture project, along with the state’s corn lobby, has contributed millions of dollars to state lawmakers to support carbon capture policies as opponents worry the project could harm a local aquifer. (Investigate Midwest)
ELECTRIC VEHICLES:
OIL & GAS:
SOLAR:
UTILITIES: Xcel Energy spent the most on lobbying among companies and organizations in Minnesota in 2023, with most of the $1.4 million involving cases before the state Public Utilities Commission. (MinnPost)
CLIMATE: Dozens of Iowa residents speak out against proposed state science standards that would water down references to climate change in school curriculum. (KCCI)
NUCLEAR: North Dakota lawmakers consider legislation that would begin to study the potential of small nuclear plants making up a greater share of the state’s power generation. (KXNET)
WIND: National laboratory researchers find floating offshore wind facilities along the West Coast could add as much as 33 GW of generating capacity by 2050, but transmission constraints and the technology’s newness could hamper development. (Utility Dive)
CLEAN ENERGY:
SOLAR: A developer nears completion of a 13 MW solar installation in California to provide power to a glass manufacturing facility. (Glass International)
OIL & GAS:
POLITICS: Wyoming Gov. Mark Gordon calls Trump’s energy-related executive orders a “win” for the state even though they lack specifics and could jeopardize funding for efficiency and grid resiliency projects. (WyoFile)
UTILITIES:
GRID: Videos show Southern California Edison distribution lines catching on fire in an area burned by a Los Angeles blaze days after the fire was extinguished. (Los Angeles Times)
TRANSPORTATION: California awards the Port of Los Angeles $31 million to test harbor craft emission-reduction technologies and develop zero-emission capable boats. (Biofuels Digest)
BATTERIES:
BIOFUELS: California advocates push back against proposed wood pellet plants and an export terminal, citing adverse community, climate and ecological impacts. (news release)
POLLUTION: The U.S. EPA launches an investigation into claims that a New Mexico city’s health department discriminated against residents when issuing air pollution regulations. (news release)
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