The Solution for Rising Data Center Power Demand Begins With Collaboration
November 27, 2024

By Enchanted Rock

Enchanted Rock’s VP of Policy, Joel Yu, recently joined an expert panel on artificial intelligence (AI) and the energy transition at the Business Council for Sustainable Energy (BCSE)’s Annual Membership Meeting in Washington, DC. Among the many perspectives shared during the discussion, one thing was abundantly clear – the challenge calls for a paradigm shift: collaboration over competition.

Above: Joel Yu, VP of Policy, Enchanted Rock, discusses AI and the energy transition at BCSE’s Annual Membership Meeting.

Utilities, data center operators, and distributed energy resource (DER) providers have traditionally operated in well-defined siloes, but the pressing issues of gridlock and capacity shortages require all parties to work toward collaborative solutions. A collective approach will not only foster innovation but also align with the flexible strategies that are crucial for securing 24/7 power for data centers and many other power-intensive industries.

 

The AI-Energy Nexus

The rapid growth of AI and cloud computing has triggered a dramatic increase in the size and power demands of data centers, leading to substantial challenges in securing reliable electricity. On top of that, utilities expect power needs to double by 2028, with many areas projected to face shortages in generation, transmission, and distribution capacity. Commonly referred to as “power gridlock,” it poses a critical issue for all consumers of power – big and small. The dilemma has become a serious focal point for data centers, which are now being built on an unprecedented scale with power requirements reaching 10x what they were for a new data center just a few years ago.

Previously, efficiency gains from the transition to cloud environments masked the rising data center power demand and fostered the idea that minimal new investment in transmission and generation was needed. However, as AI accelerates along with the development of massive training models and intensive inferencing, the power requirements of data centers are skyrocketing. Additionally, the industry is shifting from designs focused on lower-density chips to multi-hundred-megawatt data centers that accommodate more powerful GPUs, significantly increasing power per square foot. Across the country, this drive toward rapid development of energy-intensive facilities is outpacing the infrastructure needed to support them. This transformation in the industry presents a critical opportunity for utilities, data centers, and DER providers to innovate to meet these escalating demands through scalable approaches.

 

Flexibility Is Key

Flexibility is emerging as a foundational solution, through which data centers can adjust their energy imports based on grid conditions and help maintain stability. Under this new collaborative approach, data centers can operate as assets to the grid and the utilities that operate them rather than liabilities. For example, by using onsite generation to displace 500 MW of load and potentially exporting 250 MW to the grid, these facilities can contribute to overall grid stability while maintaining reliable power and increasing their speed to market.

To enable flexibility, all parties need to come together to deploy non-traditional solutions. For example, diesel generators, which have been the standard for backup power at data centers, cannot facilitate flexibility due to air permitting restrictions. Natural gas microgrids present a compelling, near-term alternative.

Offering faster deployment – typically within one to two years compared to the four to five years required for transmission and central generation infrastructure – microgrids allow utilities to help customers bridge their power requirements until necessary grid upgrades are ready by leveraging customer-sited distributed generation. When compared to diesel, this clean solution also benefits the surrounding community thanks to major emissions reductions.

Additionally, the cost-effectiveness of natural gas, combined with its ability to support critical loads without compromising air quality, makes it a superior choice for data centers seeking both reliability and environmental responsibility. With flexible operations, data centers will reduce the potential for costly transmission upgrades and mitigate concerns about cost shifting to captive utility ratepayers. Further, modernizing tariffs to include flexibility may be the right approach to provide the speed to market that AI is looking for without jeopardizing grid reliability. By prioritizing interconnections based on beneficial attributes, such as the ability to support the grid with dispatchable generation, new loads can be incentivized to deploy needed solutions.

DER providers must also evolve to continue meeting customer needs and providing utility support. While natural gas generation is actionable for today’s problem, the industry is looking forward to the next wave of technologies that can unlock new solutions, whether it be long-duration energy storage solutions, advanced nuclear reactors, or other “moonshot” technologies.

 

Collaboration Is a Win-Win Outcome for All Stakeholders

It is rare to find a solution that generates wins for a party, but data center flexibility backed by clean generation technologies is just that. Everyone wins when the grid can continue to support the economic boom that will come with AI adoption and growth, new data center loads providing flexibility to preserve grid stability, and communities experiencing improved environmental outcomes and lower costs.

 

About the author: Enchanted Rock is an industry leader in electrical resiliency-as-a-service. Its advanced dual-purpose microgrids protect companies, critical infrastructure, and communities from unexpected power outages – ensuring business continuity and civic durability.

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