Back
Data centers are creating problems for the congested, overburdened U.S. power grid. One company thinks it can crowdsource the solution.
California-based Voltus operates “virtual power plants” across North America, controlling the amount of electricity that participating homes and businesses consume or send to the grid via resources like rooftop solar and batteries.
Last month, the firm unveiled its “bring your own capacity” plan. Put simply, the idea is for data center operators to pay other utility customers to reduce their power use when electricity demand peaks, a move that would diminish strain on the system without disrupting computing processes at data centers.
The proposal comes as the nationwide boom in data center construction pushes electricity demand — and prices — to new heights. These conditions are putting pressure on data center developers, utilities, regulators, and regional grid operators to find ways to enable rapid construction that don’t break the grid, or customers’ wallets.
That’s where the bring-your-own-capacity concept could fill the gaps, said Dana Guernsey, Voltus’ CEO and cofounder.
The approach benefits utilities and their customers because it’s a lot cheaper to reduce energy use than it is to build new power plants and infrastructure. And it benefits data centers by offering a much faster route to getting a grid interconnection, as developers wouldn’t have to wait years for utilities to bring new power generation online.
“The hyperscalers and data center developers are eager to fund this,” Guernsey told Canary Media. “It’s more affordable, it’s faster, and it’s an investment back into the communities.”
Voltus is in a good position to spearhead this work, she said. As a virtual power plant operator, it already aggregates backup batteries, electric vehicles, smart appliances, and other fast-responding technologies to provide on-demand relief to the grid. Voltus was recently dubbed the top company in this sector by analytics firm Wood Mackenzie, and after several years of rapid growth, it now has more than 7.5 gigawatts of scattered “demand response” capacity under management.
In general, virtual power plants, or VPPs, could meet 10% to 20% of U.S. peak grid needs in the coming years and save utility customers roughly $10 billion in annual costs, according to a U.S. Department of Energy analysis released in January. Voltus’ new plan is to harness the power of VPPs to help specifically with the data-center-driven electricity crunch — a creative idea with big potential, if the company can convince utilities to play ball.
Voltus already has one developer on board to participate in its bring-your-own-capacity plan: Cloverleaf Infrastructure, which builds gigawatt-scale data centers.
“The right way to serve data center load quickly, at scale, and less expensively and more sustainably, is to leverage the existing resources on the grid as efficiently as possible,” said Brian Janous, Cloverleaf’s chief commercial officer.
Data centers, which are facing yearslong wait times to connect to the grid, are considering every available option. In Wisconsin, Cloverleaf is planning a flagship data center project that could draw up to 3.5 gigawatts of power from the grid when it’s fully built at the end of 2030. Cloverleaf has worked with utility We Energies and its parent company, WEC Energy Group, to develop a tariff that will put the onus on Cloverleaf to pay for the new resources the utility is building to meet its facility’s energy needs.
While specifics on that deal remain confidential, Janous noted that it could include demand response and VPP resources.
“The conversation we’ve been having with utilities is, we want to connect fast. If you tell us, ‘You have to come back in seven years, after the completion of my latest gas-fired power plant,’ I’ll go somewhere else,” he said. But if Cloverleaf can work with a company like Voltus to supply the necessary energy capacity within months, a utility may be able to connect a data center faster.
Guernsey highlighted other examples of data centers bringing their own capacity to utilities. In August, Google announced agreements with Indiana Michigan Power and the Tennessee Valley Authority to reduce the peak loads of data centers in their territories.
Most of the attention on those deals focused on Google’s commitment to shift its computing workloads to reduce peak grid demand — a novel approach to data center power flexibility that tackles the electricity consumption of the massive racks of servers within the facilities’ walls.
But part of Google’s deal with Indiana Michigan Power includes transferring credits for a portion of carbon-free energy Google has contracted to serve its data centers in the region to help the utility meet its capacity requirements. In this case, the tech giant offered up its renewable-energy resources to cover its data centers’ power use, but Google could have leveraged VPPs for that purpose just as easily, Guernsey said.
Ben Hertz-Shargel, global head of grid-edge research for Wood Mackenzie, agreed that VPPs are theoretically a faster and cheaper means of achieving data center flexibility compared to the alternatives.
Most tech companies haven’t done the hard work that Google has done over the past decade or so to enable flexible computing, he said. Data center developers will face cost and air-quality challenges in using their ubiquitous diesel-fueled backup generators for on-site power. And they may be loath to invest in more expensive options like on-site solar, batteries, and gas-fired generators and microturbines — the “build-your-own-power plants” model some developers are pursuing.
“We don’t think that’s going to be faster or cheaper or more sustainable,” Janous said of the latter model. “We think the better approach is to work with companies like Voltus on how to bring more available resources into the mix.”
Demand-response programs and VPPs can also counteract utility customers’ rising power bills, since these initiatives financially compensate the individuals who allow their energy use to be managed.
“You’re paying homeowners and business owners to be part of the solution to accommodate data centers,” Hertz-Shargel said. “They’re already facing large and growing bill increases, not just because of large loads but because of utility investments, costs of climate change. This is a way to offset that.”
It won’t be easy to turn these ideas into reality.
Utilities and regional grid operators consider demand response and VPPs primarily as a tool for managing existing grid stresses, but are far less eager to allow VPPs to substitute for building more traditional power plants and upgrading the grid. It’s always a tall order to get utilities to do something for the first time, but especially so when dealing with data centers, which can require a small city’s worth of electricity for their operations.
Guernsey conceded these challenges to Voltus’ plan. “Most of the deals we’re discussing start in 2027 or 2028 time frame,” she said. “We’re just running as fast as we can to keep up. We’re growing at a clip of about a gigawatt a year across North America. … In particular regions where data centers are getting built, we usually respond with, ‘We can get a couple hundred megawatts in a given territory within that time.’”
One of Voltus’ key early targets is PJM Interconnection, a grid operator responsible for the transmission system and energy markets serving Washington, D.C., and 13 states from Virginia to Illinois. Electricity bills are spiking for the region’s more than 65 million residents — primarily due to data centers. Similar pressures are pushing up costs across the Midwest, and in data center hotspots like Georgia and Texas.
Johannes Pfeifenberger, a grid-planning expert and principal with The Brattle Group, has argued for years that grid operators need to embrace VPPs and other innovations to deal with rising demand. Among those options, “a VPP is very attractive, whether it’s storage, or controlled EV charging, or heating and air conditioning controls,” he said.
But putting this solution into practice will require grid operators to restructure the rules by which VPPs can directly reduce a data center’s impact on the system, he said. PJM and the Southwest Power Pool, which serves 14 Midwest and Great Plains states, are starting to take on these challenges, but their efforts remain a work in progress.
Data centers may also be limited by the capacity of the power lines and substations at the points they’re seeking to connect to the grid, he said. VPPs that consist of customers scattered across a grid operator’s territory can’t relieve those specific stresses, although other options could, such as data centers colocating at spots with ample grid capacity and building their own generation to fill those gaps, he said.
Guernsey agreed that Voltus’ bring-your-own-capacity construct “can only be a solution when capacity is the problem. If the data center is creating an acute distribution level constraint or requires a substation upgrade, that’s a different type of problem.”
Janous thinks data center developers are willing to pay even more than the currently inflated prices for energy if it means they can move faster. Grid operators just have to be willing to allow them to cut deals with companies like Voltus to go do it.
“Our view from our side is that the market is still undervaluing capacity relative to the willingness to pay for a data center to go faster,” he said.
In the face of those pressures, allowing data centers and VPP providers to bring their own capacity is the kind of fast-track effort that could actually succeed at the speed needed, Guernsey said. And it’s a way to make sure that big developers — rather than ordinary consumers — are the ones paying for the energy capacity that data centers require.
.svg)
