Power and Energy in Data Centers

Barlow Keener: We have the pleasure of presenting insights from Belton Zeigler, co-leader of the Womble energy sector, and Steve Snyder, an expert in federal regulatory issues involving power.  
Steve, could you start by providing a national perspective on the power supply issues for data centers?

Steve Snyder: Data centers have always had specific demands on the availability and quality of power. In the early days, development was more haphazard, but now there is a more established path. The explosive growth in energy needs for data centers is reshaping goals and planning processes. For example, there are plans to restart Three Mile Island to provide power for Microsoft data centers, highlighting the increasing electricity and transmission needs. This underscores the critical nature of reliable power supply for data centers, which are integral to the digital infrastructure of modern economies. The planning and development processes for data centers have evolved significantly, with a greater emphasis on sustainability and efficiency. This includes the integration of renewable energy sources and advanced technologies to ensure uninterrupted power supply. The complexity of these projects necessitates meticulous planning and coordination among various stakeholders, including utility companies, regulatory bodies, and technology providers.

Barlow Keener: Belton, can you explain the role of small nuclear reactors, also known as “SNRs”, in this context?

Belton Zeigler: Small nuclear reactors are an interesting development. While they are not yet widely deployed, the discussions suggest they are moving closer to reality. The key factor will be cost. If the technology becomes deployable at a reasonable cost, it will likely be built. Onsite generation at a larger scale, either owned or through joint ventures, is also being considered. The potential of small nuclear reactors lies in their ability to provide a consistent and reliable power supply, which is crucial for data centers. These reactors can be integrated into the existing power grid or operated independently, offering flexibility in power management. The deployment of small nuclear reactors could significantly reduce the reliance on traditional power sources and enhance the sustainability of data centers. However, the economic feasibility and regulatory approval processes will play a pivotal role in determining the adoption of this technology.

Barlow Keener: How are utilities adapting to the increasing demand from data centers?

Steve Snyder: Utilities are creating new tariff provisions to require credit support from data center customers. This ensures that the costs of transmission upgrades are covered. The process of getting power delivered to a site involves a power flow model to determine necessary transmission system changes. The developer is responsible for these costs. Utilities are also investing in infrastructure upgrades to accommodate the growing demand from data centers. This includes the expansion of transmission lines, substations, and other critical components of the power grid. The collaboration between utilities and data center developers is essential to ensure the timely and efficient delivery of power. Additionally, utilities are exploring innovative solutions such as demand response programs and energy storage systems to enhance grid stability and reliability.

Barlow Keener: What are the challenges in the transmission upgrade process?

Belton Zeigler: Transmission service for new data centers typically takes four to eight years to install, longer if new greenfield right-of-way is required. Utilities are now requiring security to ensure that developers are serious about their requests. The costs include engineering, construction, and preorders of equipment. The lengthy timeline for transmission upgrades poses a significant challenge for data center developers, who often operate on tight schedules. The complexity of the process, which involves multiple regulatory approvals and coordination with various stakeholders, adds to the challenge. Additionally, the increasing demand for transmission capacity can lead to congestion and delays. To mitigate these challenges, developers need to engage with utilities early in the planning process and explore alternative solutions such as onsite generation and microgrids.

Barlow Keener: Steve, what is the federal perspective on co-location of data centers with generation?

Steve Snyder: Co-location of data centers with generation is a hot-button issue at FERC. The challenge is balancing the need for new generation and transmission with reliability and cost allocation. FERC is grappling with how to allow more co-located load while ensuring grid reliability. The co-location of data centers with generation facilities offers several advantages, including reduced transmission losses and enhanced reliability. However, it also presents challenges related to regulatory compliance and cost allocation. FERC's role in this context is to ensure that the integration of co-located generation does not compromise grid stability and that the costs are equitably distributed among stakeholders. The ongoing discussions and regulatory proceedings at FERC will shape the future of co-location strategies for data centers.

Barlow Keener: Have there been any regulatory pushbacks on utilities requiring credit support?

Belton Zeigler: Utilities have created new tariff provisions that require credit support, and regulators have generally supported these measures. This ensures that the costs of transmission upgrades are covered and that developers are committed to their projects. The requirement for credit support is a critical measure to mitigate financial risks associated with large-scale transmission upgrades. It ensures that developers have the financial capacity to fulfill their commitments and that the costs are not unfairly passed on to other customers. Regulatory support for these measures reflects the recognition of the importance of financial stability and accountability in the development of data center infrastructure.

Barlow Keener: How does the change in administration impact regulatory decisions?

Steve Snyder: FERC traditionally focuses on reliability and cost to customers, which cuts through partisan disputes. The current administration is likely to continue developing policies that support data center growth while protecting customers from cost impacts. A change in administration can influence regulatory priorities and policies, but the fundamental principles of reliability and cost-effectiveness remain constant. FERC's commitment to ensuring a stable and reliable power supply for data centers is likely to persist, regardless of political changes. The administration's support for data center growth is also expected to drive investments in infrastructure and innovation, further enhancing the resilience and efficiency of the power grid.

Barlow Keener: What practical advice would you give to developers planning new data centers?

Belton Zeigler: Get involved early in the process and understand the specific utility structures, regulations, and statutes in each location. Establish a queue position for major loads to avoid higher costs from subsequent requests. Ensure that developers have the necessary security in place to cover transmission upgrade costs. Early engagement with utilities and regulatory bodies is crucial for the successful development of data centers. Developers should conduct thorough due diligence to understand the regulatory landscape and identify potential challenges. Establishing a queue position helps secure priority access to transmission capacity and minimizes the risk of delays. Additionally, having the necessary financial security in place ensures that the project can proceed smoothly and that the costs are managed effectively.