US Power Regulator Sees Data Centers as Critical Opportunity

The Federal Energy Regulatory Commission (FERC) recently held a technical conference to discuss the growing trend of building energy-intensive data centers on the sites of U.S. power plants. The meeting highlighted the critical opportunity data centers present for national security and economic growth, while also emphasizing the need to address grid reliability and consumer cost concerns.

Data centers, which house the servers and infrastructure needed to support technologies like generative artificial intelligence, require massive amounts of electricity. Co-location, the direct connection of data centers to power plants, is a quick way to access large amounts of energy. However, this arrangement raises concerns about increased power bills for everyday customers and potential reliability issues due to power diversion or system drainage if a neighboring plant goes down.

FERC Chairman Willie Phillips emphasized the importance of data centers for national security and economic growth. He stated, "I believe that the federal government, including this agency, should be doing the very best it can to nurture and foster their development." However, he also acknowledged the need to address grid reliability and consumer cost concerns.

To ensure the reliability of power supply to both co-located data centers and the broader grid, FERC should establish guidelines on who pays for certain costs associated with co-located data centers and how they are managed. Additionally, FERC should gather information on the battle between electric utilities and Amazon over the co-location of a data center in a Talen Energy Nuclear Power Plant in Pennsylvania, setting a precedent for similar deals.

The environmental impact of co-located data centers should also be considered. Utilities can play an active role in promoting energy efficiency and renewable energy adoption, helping data centers reduce their carbon footprint and ease grid strain.

To incentivize utilities to invest in co-located data centers while protecting customer interests, regulators could consider cost recovery, revenue sharing, regulatory incentives, risk mitigation, and public-private partnerships. These measures can help offset the initial costs and encourage utilities to participate in the development of these facilities, while ensuring customer rates remain fair.

In conclusion, the growth of data centers presents a critical opportunity for national security and economic growth. However, addressing grid reliability and consumer cost concerns is crucial for a sustainable and beneficial environment for data center infrastructure growth. By establishing clear guidelines on cost allocation and management, FERC can foster the development of data centers while protecting consumers and ensuring grid stability.