US Power Regulator Sees Data Centers as Critical Opportunity

(Bloomberg) -- Supporting the development of data centers – including providing the enormous amounts of electricity they require – is a matter of national security, a top federal energy regulator said.

Willie Phillips, chairman of the Federal Energy Regulatory Commission, said artificial intelligence and related technologies hold “generational significance” and belong in the US. 

“We have that opportunity today with regard to data centers, and we should not surrender it,” Phillips said Friday at a highly anticipated FERC technical conference about building data centers next to power plants.

“Data centers moving overseas due to a lack of power supply and infrastructure or regulatory barriers could cause lost opportunities for economic growth and raise national security concerns for our nation.”

Friday’s meeting launches the first big discussion at FERC about how to serve data centers, which are poised to drive unprecedented growth in electricity demand. AI is evolving quickly, and the data centers being planned to support it use as much power as entire towns.

But building new power plants and transmission lines takes years, and US grids are already under increasing stress from aging infrastructure, the rise of renewable resources and extreme storms. 

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The conference focused on the merits and pitfalls of building data centers next to power plants, often described as “co-location.” In March, Amazon Web Services paid Talen Energy Corp. $650 million for a data center campus adjacent to the Susquehanna nuclear plant in Pennsylvania. FERC is currently reviewing a complaint from utilities that the deal could lead to higher rates for their customers. 

Critics fear co-location will strain electricity supplies on the power grid and allow deep-pocketed tech giants to avoid paying for infrastructure upgrades, shunting those costs onto consumers. FERC Commissioner Mark Christie pointed to the threat of shortages by 2030 on the largest US grid — operated by PJM Interconnection — which covers such data center hot spots as Virginia and Ohio.

“We want to serve data centers, absolutely, but we want to be fair to all the other consumers,” Christie said.

But co-location would allow companies such as Amazon, Alphabet Inc. and Microsoft Corp. to open data centers at a faster pace. Executives from power generators Talen, Vistra Corp. and Constellation Energy Corp. told the conference that data centers can support existing plants and bring on new electricity supplies, noting Microsoft’s recent deal to revive the shuttered Three Mile Island nuclear plant in Pennsylvania. Dominion Energy, said its Millstone nuclear plant in Connecticut could conceivably be an option for co-location in the future, according to a statement filed to FERC.

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“We don’t have until 2030 to figure this out,” Cole Muller, executive vice president of strategic ventures at Talen, said during the meeting. The rise in electricity demand is coming, and long-term contracts “ensure the longevity of our power plants,” he said.