By Kennedy Maize
The Federal Energy Regulatory Commission last week (Apr. 19) refused to reverse a November decision killing a plan for an Amazon data center to snuggle up next to Talen Energy’s 2500-MW Susquehanna nuclear plant. The Pennsylvania data center would have gobbled up 480-MW of the plant’s capacity. The original proposal came in the form of a request by the PJM Interconnection to alter its interconnection policy to accommodate the co-location of the data center and the generating plant.
In its original decision deep sixing the deal, a depleted commission overturned the co-location proposal by a 2-1 vote, with Republican commissioners Mark Christie and Lindsay See rejecting the plan and then-chairman Willie Phillips, a Democrat, in favor. In the notational vote last week, the same lineup prevailed, with the newest commissioners, Democrats Judy Chang and David Rosner, not participating.
In rejecting the original plan and the rehearing request, Christie said he was concerned about the impacts of the data center on the operations of the PJM grid. He expressing some skepticism of claims by Talen and PJM that because the data center would not be directly grid-connected, it would not have grid impacts.
Phillips affirmed his dissent in the commission’s denial of rehearing request. He said in November that the co-location denial was a “step backward for both electric reliability and national security…. There is a clear, bipartisan consensus that maintaining U.S. leadership in Artificial Intelligence (AI) is necessary to maintaining our national security. Maintaining our nation’s leadership in this ‘era-defining’ technology will require a massive and unprecedented investment in the data centers necessary to develop and operate those AI models.”
He added in last week’s dissent that subsequent FERC decisions to dive more deeply into data center co-location issues “will soon result in solutions to address what I regard as unnecessary roadblocks to the continued maturing of an industry that is vital to our economic prosperity and national security.”
A Talen Energy spokesperson told Reuters after the FERC action, “The ruling now allows us to pursue our appeal rights on the merits in the Fifth Circuit.” Independent power producer Talen is based in Houston. The Fifth Circuit Court of Appeals, located in New Orleans, covers Louisiana, Mississippi, and Texas. It is generally considered the most conservative and most skeptical of federal authority of the U.S. federal appeals courts.
In another data center development, the New Hampshire House of Representatives has passed a bill (HB 672) that would encourage “off grid” data centers, sending the measure to the state Senate. LegiScan’s analysis describes it: “This bill defines ‘off-grid electricity providers’ and establishes a specific category for off-grid electricity providers, exempting them from certain regulations as long as they remain independent from the regulated electric grid.”
The state’s House Republican Caucus praised the bill, calling it “a groundbreaking piece of legislation that removes regulatory barriers and allows for innovative, independent energy generation at no cost to taxpayers or ratepayers.”
Glen Lyons, a founder of the Washington-based Advocates for Consumer Regulated Electricity, testified for the legislation before the New Hampshire Senate. Observing that the current electrical system is highly regulated and can’t be changed without creating winners and losers, he said, “There is no reason not to allow suppliers and buyers tomove outside of the regulated sector provided they can’t impact it.”
Further thinking outside the data center box comes from economist Severin Borenstein at the University of California, Berkeley’s Energy Institute at Hass. He asks, “Can data centers flex their power demand?” The answer is yes, “if they have the right incentives.”
Borenstein writes, “Electricity world these days is filled with concern about supersized (‘hyperscale’) data centers, those computing facilities that use more electricity than even large industrial plants. These operations are showing up throughout the country, and announcing plans for even more locations every week. Utilities, grid planners, consumer advocates, and the media are worried about the costs they might impose on other customers and about the strain they could create for the grid during peak periods.”
Borenstein notes that data centers don’t need to run flat out all the time: “Recent research suggests that a bit of flexibility at peak times – ratcheting down demand during less than 1% of annual hours – could drastically reduce the grid constraints that are causing planners to slow interconnections for new data centers.”
The common economic narrative of data centers, Borenstein observes, is that they must run at “100% of capacity once they are built in order to make them pencil out.” But do they need to run at 100% every hour?
Probably not. Data centers do two things: “real-time response to data queries and information retrieval requests, and background tasks such as training AI models and processing tasks that are not time sensitive.”
Given that electricity is a major cost for data centers – 40% to 70% by some estimates – Borenstein says that “during the small number of constrained hours that portion of costs can easily rise by 10x to more than 20x, causing overall operating costs to increase from 5 to more than 10 times. It seems quite likely that a data center facing that additional cost would look for ways to ramp down or shut off completely for a few hours.”
Why aren’t the data center managers doing it? “After speaking with people who see this problem from many different angles, it seems to be less of a technical problem and more of an incentive problem.”
Generally, he says, “customers do not have the full financial incentive to reduce consumption during the small number of hours when wholesale costs spike. There are good arguments for protecting small unsophisticated customers from price spikes to some extent. But when electricity is half of an industrial customer’s operating cost, and changes in their load have direct impacts on system reliability, it’s hard to see why they wouldn’t be on real-time prices that change at least hourly for their marginal consumption decisions.”
Borenstein concludes, “These are early days for the data center business. It’s clear that pricing and service requirements have not caught up with the imperatives of large loads that are rapidly growing. Developing service contracts between utilities and the data centers, and between the data centers and their business customers, will be central to serving this exploding new demand in a cost-effective way without undermining system reliability.”
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