Big technology companies are confronting significant challenges in securing power supply for their expanding data centers across the United States. The demand for hundreds of gigawatts of power from these facilities is rising sharply, while the aging infrastructure of regional power grids struggles to keep pace. As a result, grid operators are proposing alternative solutions, including a trend known as “bring your own generation,” which is expected to become increasingly common in the coming years.
Grid Infrastructure Struggles to Meet Demand
Regional grid operators are urging major tech firms to integrate their data centers with dedicated power sources to meet their energy needs. The situation is particularly pressing for companies seeking to connect their facilities to the grid. While some operators offer priority access during peak times, this option often comes with the stipulation that data centers must be prepared to disconnect from the grid and rely on generators when local demand threatens to overwhelm the system.
The Data Center Coalition, a trade group representing the interests of major tech firms, has voiced strong concerns about these proposals. The coalition argues that relying on diesel-powered generators to maintain continuous power could violate air-quality regulations in several regions. Additionally, data centers provide essential services for critical sectors, such as finance and healthcare, which cannot afford any interruptions in power supply.
“A reliable power grid is essential for data centers, which depend on consistent, uninterrupted power to support critical operations,” the coalition stated.
The Growing Demand for Power Connections
The push for alternatives comes as PJM Interconnection, which coordinates electricity movement across multiple states including Virginia, Pennsylvania, and Maryland, has suggested that data centers either invest in their own power generation capabilities or accept being disconnected during periods of high demand. This struggle highlights a critical bottleneck: the overwhelming demand from proposed data centers far exceeds the current capacity of the power grid.
According to Michael Webber, an engineering professor at the University of Texas at Austin, the stakes are exceptionally high, with “hundreds of billions of dollars or trillions of dollars of capital” on the line. The growing number of requests for large power interconnections underlines this urgency. For instance, the Electric Reliability Council of Texas (ERCOT) reported that it received requests exceeding 205 gigawatts, a dramatic increase from just 56 gigawatts the previous year. Notably, over 70% of these requests come from data centers, with an additional 10% from cryptocurrency mining operations.
As grid operators like Southwest Power Pool explore conditional connections that prioritize data centers, the demand for reliable and immediate access to power has never been more pressing. “Some may want to do that. Others may not,” said Antoine Lucas, chief operating officer at SPP, about the potential for data centers to agree to conditional disconnections.
The trend towards “bring your own generation” is gaining traction as developers seek faster and more dependable grid connections. John Ketchum, chairman and CEO of NextEra Energy, noted during an earnings call that securing a load interconnect is paramount for data center operators. “A lot of parts of the country, in securing a load interconnect, you’ve got to bring your own generation,” he explained.
Research from Goldman Sachs indicates that if current trends continue, the United States could face a significant power shortfall by 2030. According to Samantha Dart, co-head of global commodities research at Goldman Sachs, the growth in power demand from data centers alone could elevate overall U.S. electricity demand growth by 1.2 percentage points to a total of 2.6%, marking the highest growth rate since the 1990s.
“If the issue remains unaddressed, the U.S. could lose the AI race with China,” Dart warned, emphasizing the urgency to expand power capacity in line with rising demand from technological advancements and data center expansions.
The evolving landscape of power supply and data center development reflects a critical intersection of technology and infrastructure, necessitating urgent attention from policymakers and industry leaders alike.
