AI boom spurs Big Tech to build clean power on site
Summary
Tech groups and clean power builders are partnering to co-locate data centers and power generation to reduce permitting and grid connection risks.
February 5 - As AI accelerates demand for computing capacity, tech groups and other data center operators are increasingly looking to co-locate new facilities with new solar, wind and battery storage to secure power supplies and meet net zero targets.
Tech giant Google recently signed a $20 billion partnership with developer Intersect Power and investor TPG Rise Climate to develop gigawatts of U.S. data center capacity powered by co-located energy plants.
Grid connection requests for huge data center facilities that require over 300 MW of power capacity are stretching a power network already under strain, opens new tab from soaring clean power deployment, the U.S. Department of Energy (DOE) said in a report released in July 2024. Lead times for these data centers are typically one to three years, the DOE noted, and new grid connections for clean power often take far longer due to queues in many networks.
Demand from data centers is forecast to double within five years, rising from 176 TWh in 2023 to between 325 and 580 TWh in 2028, government data shows. Last month, President Donald Trump threw his support behind a $500 billion pledge by tech groups and investors to develop infrastructure for AI facilities.
CHART: Forecast US data center electricity demand
Data center operators, clean power builders and investors hope that coordinated efforts in development, permitting and grid connection will ensure clean power and data centers are deployed more efficiently.
"All too often, developers bringing data centers online or other industrial loads are having a conversation with one portion of the utility while the generator is having another conversation," Leeward Renewable Energy (LRE) chief commercial officer Eran Mahrer told Reuters Events.
"We can create efficiency when those [projects] are co-located, and those conversations are happening in tandem," he said.
Green machines
The AI boom has prompted development of data centers beyond the traditional clusters of computing campuses as operators seek to secure clean power, grid capacity and competitive costs.
Northern Virginia is currently the largest regional data center hub and other established areas of activity include Dallas, Phoenix and Atlanta, but there are also fast-growing 'hyperscaler' markets in Oregon, Columbus, Salt Lake City and Kansas City, according to the 2024 Global Data Center Market Comparison study by Cushman & Wakefield.
Soaring demand for data capacity is set to significantly impact wholesale power prices, opens new tab.
CHART: Forecast wholesale power price at Texas ERCOT North
Data centers need power 24/7 for energy and cooling purposes, which means that even with batteries, they often need some dispatchable gas-fired or nuclear power to cover intermittency. A number of gas-fired power developers are looking to build plants for data center customers and some tech groups are even looking to nuclear, opens new tab power capacity.
"Currently, the grid, which also includes non-renewable sources, fills the gaps created by renewable generation," Stijn de Kruijf, Data Center Facility Expert at Royal HaskoningDHV, said.
Join hundreds of senior executives across energy, industry and finance at Reuters Events Global Energy Transition 2025, opens new tab.
Soaring demand from data centers could boost the case for creating cost-effective 100% clean power configurations that, for example, include long duration energy storage (LDES).
"There is still a technology gap to be bridged because of the level of redundancy that is required for data centers right now," Chris Post, senior managing director at FTI Consulting's Power and Renewables, told Reuters Events.
"The technology does not exist that you can have a fully behind-the-meter, fully green power generation set."
Tech partners
Google and partners Intersect Power and TPG Rise Climate plan to co-locate data centers with high capacity factor clean electricity alongside battery storage.
"When Intersect Power builds new clean energy assets in regions and projects of interest, Google will be able to provide power offtake as an anchor tenant in the co-located industrial park that would support data center development," Google said in a blog post in December 2024.
Surging demand from Tech groups is accelerating clean power activity - download our exclusive report, opens new tab.
In another significant move, investment firm KKR and power generation developer Energy Capital Partners (ECP) announced a $50 billion partnership that would engage with industry stakeholders to accelerate the delivery of data center campuses and power generation.
'Building out AI and power infrastructure will require collaboration across industries," Waldemar Szlezak, Partner and Global Head of Digital Infrastructure at KKR, said in a statement. "KKR and ECP's strategic partnership offers a new approach, with immediately available capital and the capabilities needed to deploy that capital to accelerate this effort."
Meanwhile, tech groups and data center operators continue to sign long-term power purchase agreements, opens new tab (PPAs) with new clean power facilities connected to the regional grid.
TABLE: Largest buyers of US solar power by Q1 2024
LRE has 700 MW of solar projects in Oklahoma supported by PPAs with Google to supply one of the tech group's largest data centers, near Pryor in Mayes County.
"The projects are not the classic definition of co-located, but they are electrically adjacent, within the same electrical bus," Mahrer said.
To that end, these projects "meet the characterization of being generation at load," he said.
Almost all of the power from the projects will serve Google's load, delivered under firm transmission service agreements with local utility Grande River Dam Authority (GRDA).
New clean power projects dedicated to data center growth can support regional economic growth and benefit other power users on the network, Mahrer added.
LRE's partnership with Google "ultimately allows the economic engine in Oklahoma to meet both existing customer demand and all the opportunities that come with growth," he said.
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