- President Trump this week encouraged data centers to build their own power generation on campus
- The concept of microgrids has been around for a while
- Data centers have hesitated to act, but they now may have no choice
Sitting high on a dais at Carnegie Mellon University in Pennsylvania on Tuesday, President Donald Trump unveiled his big idea to keep the country at the forefront of the AI revolution. Why don’t power constrained data center operators like Amazon and Meta just … build their own power plants onsite?
“You’re going to own your own electric plants, and they’ll be powered by maybe nuclear, maybe gas, maybe coal,” he said, adding excess energy generated by data center operators can be sold into the grid to generate revenue.
What Trump was describing is known as a microgrid – that is, a tiny, isolated version of the larger power grid most of us are familiar with. And though he attempted to take credit for the idea, it has actually been around for nearly 150 years.
What's a microgrid?
First credited to Thomas Edison thanks to his construction of the Manhattan Pearl Street Station in 1882, the microgrid concept has been employed by a range of entities over the years, including towns, schools and even the military. Interest in microgrids has emerged in the tech and telecom consciousness in recent years in response to a need for increased reliability (hello, wireless networks) and rising demand for more power (go ahead and blame AI).
What IS true is that until now, data center operators have been hesitant to go all in on the idea. Sure, they’ve created short-term redundancy systems for themselves using generators and battery power, but they’ve thus far been willing to leave the creation – and cost – of new long-term power generation facilities to utility companies and their rate payers.
The difference now is that demand for AI compute is well in excess of the available power supply and what utilities will be able to build themselves in the coming years. Where perhaps data center operators previously didn’t want to afford to build their own microgrids, now they can’t afford NOT to.
That’s essentially the argument Trump and companies like microgrid design company Xendee are making. Xendee, which was founded in 2018, is working with a client who is part of the massive Stargate AI data center project.
Michael Stadler, CTO and co-founder of Xendee, acknowledged that microgrids aren’t cheap. Think upfront costs in the hundreds of millions of dollars depending on the size of grid required. But the alternative is to sit around and wait for utilities to build new generation facilities and upgrade their transmission lines. In that case, data centers are waiting longer and still likely absorbing some of the cost via the rates they’ll end up paying.
The pitch for microgrids
All three of the major hyperscalers are eagerly exploring nuclear energy as a long-term solution to the power problem. But despite interest in small modular reactors (SMRs) and plans by the likes of Westinghouse to build 10 new nuclear reactors in the U.S., these solutions likely won’t be a reality until 2030 or beyond.
With microgrids, data centers can move faster – starting with fuel sources like natural gas and renewables – and position themselves for long-term viability with the ability to hook up new generation sources (like SMRs) as they become commercially available, Stadler argued.
“We have technologies now,” he said, referring to natural gas and renewables. “Why not build a microgrid now so that you can build your business case and serve the demand you’re seeing – to some extent at least – and help the utility by not burdening them with the full demand of the growth you’re seeing.”
That way, Stadler said, data center operators will be prepared with internal knowledge of microgrids work by the time new nuclear power arrives and can simply swap in the new technology.
According to Stadler, data center operators are “really gung ho” on the idea of microgrids. But while they’ve expressed “huge interest,” they’ve not yet acted on it.
That could soon change. Trump's nudge aside, states are starting to wake up to the burden data centers are placing on the electric grid and are taking action to protect residents. The emerging data center hub of Texas, for instance, recently passed a law that will allow utilities to curtail the loads of customers drawing over 75MW (coughdatacenterscough) in the event of load shed events or emergencies.
Michael Hafner, Engineering Solutions Manager for Data Centers at Rehlko (formerly Kohler Energy), told Fierce the law could signal the start of a new trend in areas facing power constraints and said data centers will likely start to "design around this bill, either by supplying their own energy ... and/or designing facilities under the 75MW threshold."
Asked if microgrids might be one way data centers who want to stay in Texas might cope, he said yes, adding that broadly speaking, microgrids and bridge power sources such as natural gas and even hydrogen systems are "gaining traction" in the industry.
“The longer you wait the bigger the problem becomes,” Stadler concluded. “There’s no way that the utilities can handle the demand, assuming it’s real.”