Where should you get the power for your next data center project?
Let's review your power generation options
AI data centers are a 24/7 load and need reliable, dispatchable energy sources that can be turned on with the flip of a switch. When your local utility can’t provide enough power to meet the load of your data center project, you need to creatively engineer the best solution for your location. This week’s newsletter goes into depth on how to engage your local utility, and your options for on-site power generation if they say no.
First, check with your local provider
The easiest option will always be to get the power from your local electric utility. They own the transmission lines, the substations, and usually the power plants too.
After you decide on the location of your project, go find out who the power provider is for that area. Electric utilities in the U.S. are separated into service territories, meaning you usually only have one option.
Once you figure out who the utility is for your area, you’ll need to do some digging on their website to find the industrial/commercial interconnection request form (it can go by a few different names). If there isn’t a section of the website, you’ll need to submit the generic “contact us” form or pick up the phone and give their customer service team a call.
If they can’t meet your needs, you’ll need to generate it yourself
Building your own power plant may sound like quite the daunting task, but it is very doable if you work with the right financing and construction partners. Your best bet is to find an EPC (Engineering, Procurement, and Construction) firm that specializes in power plant construction, and a financial firm that specializes in power plant financing.
EPCs do “turnkey” projects, meaning they can handle everything from technology selection to engineering design to permitting, to equipment procurement and installation. Some can even handle the day-to-day operations of the plant to keep it up and running.
There are a few different financing options for power plants, including PPAs (Power Purchase Agreements) that can involve as little as $0 up front. It is essentially a long-term agreement (usually 15-30 years) to purchase a set amount of electricity at a set rate.
How do I decide what kind of power to use?
Your main options are:
Natural gas (if within close vicinity of a pipeline)
Diesel (but it’s an extremely expensive fuel)
Solar (battery, natural gas, or diesel backup would be required, and it would be very expensive)
Wind (battery, natural gas, or diesel backup would be required, and it would be very expensive)
Nuclear (slowly rolling out - it will be at least 4-5 years before you could get a plant built and permitted)
Hydrogen (Hydrogen production is currently nowhere near where it needs to be to support large-scale power generation deployments)
It is best to rely on your EPC firm to do a feasibility study to review your location and recommend the best options for your power plant. They have software that can look at potential solar production, distance from pipelines, and other factors to estimate costs to build various types of power plants and recommend the most economical and environmentally friendly solutions. Most firms will charge a few thousand dollars for this service, but some may be willing to do some “back of the napkin” budgetary calculations for free if they see potential in the project or if you have a good relationship with them.
What does this mean for you?
Data center developers: Build relationships with EPCs and financing partners early. You want to have partners like this on speed dial for when your project progresses.
Utilities and grid operators: Data center customers move fast and have ways to generate their own power if you can’t keep up with their load
EPCs and contactors: Building relationships with AI companies should be a top priority for you. It is a well-funded and fast-moving industry that prioritizes speed and reliability over cost.