- As AI data centers place huge demands on the electric grid, cloud providers say they are able to return power to the grid when needed
- Hyperscalers are exploring “behind the meter” solutions — purchase agreements with power generators rather than utility companies
- Makers of electrical transformers are marketing their products to data center builders, who could increasingly explore their own mini-grids
For U.S. utilities, hyperscale cloud providers have become industrial customers on par with giant manufacturers and petrochemical companies. Industrial customers have the capability to impact the overall grid of energy infrastructure by drawing large amounts of power — and contributing power back to the grid. By sending power to the grid when demand is high, hyperscalers help ensure their own supplies remain stable.
At this year’s Datacloud Energy USA and Metro Connect Fall show in Austin, Texas, Brian Marrs, senior director of energy markets at Microsoft, said the company is collaborating with Constellation Energy to bring power to the grid.
Constellation owns nuclear plants in Illinois, Pennsylvania, Texas, New York and New Jersey, as well as numerous hydro, wind, solar and oil and gas plants. It sells power directly to consumers and businesses, using existing utility distribution infrastructure. Constellation is restarting the Three Mile Island Unit 1 nuclear plant in Pennsylvania under the name Crane Clean Energy Center, and Microsoft is helping finance the plant through a 20-year power purchase agreement with Constellation.
About 25 miles from Three Mile Island is Talen Energy’s Susquehanna Nuclear Plant. Until last year, Talen owned the Cumulus data center campus near its nuclear plant. It announced the sale of the campus to AWS in March 2024.
AWS global head of energy Vibhu Kaushik spoke at Datacloud Energy USA and said his company is benefitting from the colocation of the nuclear plant and data center. “You don’t need a lot of grid competence and that leads to efficiency,” he said.
Originally, AWS planned to buy power directly from Talen Energy, but utilities in the area protested, and in November 2024 the Federal Energy Regulatory Commission (FERC) rejected the interconnection agreement. Talen is challenging the decision in the Fifth Circuit Court of Appeals.
Pushback from utilities could be one reason hyperscalers are touting their ability to add power to the grid. AWS’s Kaushik said his company is partnering with utilities to bring nuclear power resources onto the grid. He added that while AI is using lots of energy, it is also helping power generators with asset monitoring and predictive maintenance, which increases grid efficiency.
Nelson Abramson, CEO of data center developer Verrus, said during a panel discussion that electrical grids are rarely anywhere near capacity, and that when they are, data centers can help. “If we can run our data center in partnership with the utility and give the utility services when needed, we can fit the data center infrastructure on the grid we have,” he said.
Not everyone is convinced the existing grid can handle the demand AI data centers are bringing. “There is not a shortage of power; there is a shortage of distribution and transmission that utilities have not responded to,” said Alex Hernandez during a panel at the show. Hernandez was previously the CEO of both Talen Energy and Cumulus Data.
After Talen sold the Cumulus data center campus to AWS, Hernandez partnered with Five Point Infrastructure to start a new company, PowerBridge. PowerBridge is leveraging Five Point's affiliation with LandBridge, which is giving PowerBridge access to land for data center development. Some of the land is near natural gas resources in West Texas.
“Our idea is to connect power directly to data and to use fiber as the connective tissue,” Hernandez explained. “Historically, data centers emerged because of fiber availability. We believe strongly one can build fiber much more quickly and cheaply than energy. Site to where the power is.”
If hyperscalers site data centers near natural gas exchanges, solar/wind farms or nuclear power plants, they will almost certainly end up working with nearby utilities. But they may also try to copy the AWS-Talen playbook and buy power directly from the source, especially if FERC’s interjection doesn’t stand up in court. This model is known as “behind the meter” or “bring your own power,” because the energy is not delivered by a utility company.
“Bring your own power is the term of the day,” said Bob Kinscherf, VP of national accounts at Constellation Energy. “A lot of developers say I am going to build to an island behind the meter.” He added that supply chain issues are starting to negatively impact some of these plans.
Companies that make energy transmission equipment seem to expect data center developers to become their customers. This was clear at a separate data center show in Austin, staged a few blocks from the Datacloud Energy USA event at the same time. The Data Center Anti-Conference (DCAC) was sold out well before it started, and the sponsor list included at least two makers of electrical transformers: Maddox Transformer and Central Moloney.