When it comes to providing the enormous power demands of artificial intelligence-related data centers, is smaller better?
So far, most approaches to meeting the AI loads have involved conventional big iron, such as co-locating data centers at existing nuclear and natural gas plants. A contrary view comes from San Diego-based consultant Xendee Corp., which says a better solution is microgrids combined with distributed energy resources (DERs), eventually including small modular nuclear reactors.
Xendee, which focuses on microgrids, DERs, and electric vehicle charging infrastructures, in a new report says microgrids powered by DERs “offer a promising solution by reducing dependency on centralized grids, integrating generation from multiple fuels and storage, and providing load flexibility. Further, a microgrid solution improves power quality, reliability and energy security.”
A standard definition of “microgrids” is “‘a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to enable it to operate in both grid-connected or island-mode.” Also, “A stand-alone microgrid has its own sources of electricity, supplemented with an energy storage system. They are used where power transmission and distribution from a major centralized energy source is too far and costly to operate.”
Those definitions fit well with the problems that new, large data centers pose. Xendee notes that “existing grid infrastructure is increasingly constrained, particularly in regions with concentrated data center activity, such as Northern Virginia’s ‘Data Center Alley.’ Transmission bottlenecks, aging infrastructure, and long timelines for grid upgrades present significant challenges for meeting this explosive demand.”
The impending data center power drain has so far befuddled regulators. The Federal Energy Regulatory Commission has scratched its collective head over the issue. Last November, a divided FERC rejected a plan by Amazon to develop a data center on the site of Talen Energy’s 2,500-MW Susquehanna nuclear plant near Wilkes-Barre, Pa., in the PJM grid.
Amazon would have taken 480-MW of power directly from the plant, without directly connecting to the PJM grid. FERC rejected the plan 2-1, with the majority led by Commissioner Mark Christie, now FERC’s chairman. Christie explained that the Talen plan raised gnarly, unanswered questions about the implications of co-location.
At its February open meeting, FERC issued two orders aimed at bringing order out of the co-location quagmire in the PJM Interconnection, the nation’s largest regional transmission operator. FERC ordered PJM and its transmission owners to show cause that PJM’s planned open access transmission tariff is “just and reasonable” and what changes might be needed if it is found to be unjust.
Separately, FERC rejected proposed PJM tariff revisions by Exelon to deal with co-located loads and their impacts on the grid. In a news release, FERC said, “The Commission ruled that Exelon Companies’ proposal exceeds their filing rights. Generic issues regarding co-location raised in Exelon Companies’ filings, however, may be considered in the PJM proceeding initiated by the Commission.”
Xendee’s paper also fits with a free-market proposal from newly-formed “Consumer Regulated Electricity” or CRE, pushing this somewhat revolutionary idea: “What if we simply allow large, sophisticated buyers like data center companies to enter unregulated electricity utility arrangements with the suppliers of their choice? Why do we need a regulator to protect large businesses from their decisions, provided their decisions don’t impact the existing regulated grid?”
Xendee is offering a two-stage plan for connecting data centers to DER-powered microgrids. In the first “short term” stage, microgrids could combine renewables such as wind and solar along with combined heat and power from natural gas and battery energy storage. The report says, “This reduces costs, minimizes emissions, and provides flexibility as energy needs evolve.”
Phase 2, several years down the road when the technology is available, could combine the DERs with SMRs. The small reactors “mitigate the risks of rising natural gas and electricity costs while ensuring scalability and energy security.” The firm cautions that “with such a multi-year approach it is important to design the DERs in an effective way to avoid sunk costs later on. In other words, the DERs installed now need to augment the SMRs of the future to create a very cost-effective solution for data centers.”
Xendee’s analysis assumes that SMRs will actually come to market in the next few years. That’s not a sure thing. While there is plenty of hype and significant investments in the technology, the small, scalable reactor projects remain paper reactors. No current designs have Nuclear Regulatory Commission approval. A recent Seeking Alpha analysis of SMRs says that “this industry is still extremely unproven, as not even a single SMR plant is currently operating.”
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