Tackling The Data Center Clean Energy Dilemma

Companies betting on a future driven by AI are hungry to build the data centers necessary to power their quickly scaling operations. This is leading to unprecedented power demands.

This is happening at the same time as the U.S. aims to transition to clean energy sources that produce affordable, clean power.

But there’s a catch.

The intermittent power solar and wind farms produce is dependent upon the sun shining and the wind blowing. This becomes a significant challenge for the utilities that are trying to supply data centers, which consume as much power as a small- to medium-sized city with around-the-clock power.

The tremendous rise in power demand—not just from data centers but also from the “electrification of everything”—underscores the need to reimagine the very architecture of the grid.

What many don’t realize is the level of interdependence between the 3,000+ public power utilities in the U.S. It is one of the great balancing acts of modern times. Utilities hundreds or even thousands of miles apart support one another as demand for power ebbs and flows.

This is because, to function, the grid needs to be balanced. There can’t be too many or too few electrons flowing at any given time without a place for them to be used. Data centers requiring significant “firm power,” or a guaranteed, reliable and continuous flow of electricity, present a unique challenge.

If a data center goes offline for some reason, the power it usually consumes must be redistributed otherwise it can lead to problems like widespread blackouts. This risk is why some states delay closing coal plants and authorize new fossil-fuel-based plants, as these energy sources more reliably deliver the firm power data centers need.

Over the past two decades, the clean energy market has grown tremendously, ushering in hopes of reducing reliance on fossil fuels.

In most cases, though, clean energy is not being sold as physical power. For every megawatt hour of physical power produced by a wind or solar farm, something called a renewable energy credit is generated. Companies can purchase that credit as an investment in clean energy, which often has the added benefit of ensuring the projects produce enough revenue to make them bankable. The largest purchasers of clean energy will take their credit purchasing one step further and lock the price of the clean energy the project produces into a power purchase agreement (PPA). These can last a decade or more and since these aren’t actually taking the physical delivery of the clean energy, it’s essentially a hedge on the future price of power.

The spike in demand driven by data centers disrupts this process because data centers need firm power, and a lot of it exposes a chasm between the well-established renewable energy market and the century-plus-old physical power market.

Electricity is the only commodity in the world that must be consumed the moment it is produced. This is why the U.S. grid is not built to the specifications of how much power is generally needed to meet demand but rather how much will be needed during absolute peak periods (like during an extreme cold snap when every household in an area has their heaters blasting at the same time).

This balancing act has been the bane of utilities' existence since Thomas Edison built the first power plants. Today, nearly every utility is facing a huge influx of requests for intermittent clean energy projects to join the grid at a time when data centers are requiring around-the-clock firm power on a similar scale. At best, clean energy projects take years to get added to the grid, and that speed can not keep pace with a ballooning demand for data centers, leaving local utilities in a very tough position.

This is why grid architecture must evolve.

The current architecture was built around controllable, mostly fossil-fuel generation, and the simple solution, if some utilities had their way, would be to turn back to fossil fuels.

We need to bring the supply network and demand together on the same site (they need to be designed together to work together) if we want a future powered by clean energy. This solution can support the demands of a data center with clean power and won’t need to wait for years to join the grid. Eventually, these sites can interconnect with the grid, serving as another node that helps to balance the grid and makes data centers better grid partners. This enhances grid reliability and reduces the risk of more widespread energy imbalances.

For businesses to stay ahead, they can’t wait years for power, and meeting this demand with clean energy is crucial for our collective future. Regulators, utilities and companies must work together to build this new architecture now.