Harrisburg, Pa. An electric grid that serves everyone.
It’s raising questions about whether shifting power to high-paying customers will be enough for others, and whether it’s worth keeping large power users from paying for the grid. Federal regulators are trying to figure out what to do about this and quickly.
Front and center is the data center Amazon Web Services, Amazon’s cloud computing subsidiary, is building near the Susquehanna Nuclear Plant in eastern Pennsylvania.
The arrangement between the plant owners and AWS — the so-called “behind the meter” relationship — is the first to come before the Federal Energy Regulatory Commission. For now, FERC has ultimately rejected a deal that would have sent 960 megawatts — about 40% of the plant’s capacity — to the data center. This is enough to power over half a million homes.
That leaves the deal and others that may follow in limbo. It’s unclear when FERC, which blocked the deal on procedural grounds, will reopen the case, or how a change in presidential administrations will affect things.
“Companies are very upset because they now have a huge business opportunity,” said Bill Green, director of MIT’s Energy Initiative. “And if you’re five years late in the queue, for example — I don’t know if it’s going to be five years, but any number of years — you could miss the business opportunity entirely.”
What is driving the demand for energy-hungry data centers?
The rapid development of cloud computing and Artificial intelligence This has led to increased demand for data centers that require power to run servers, storage systems, network equipment and cooling systems.
That’s a spurred idea to retire nuclear power plants, develop smaller modular nuclear power plants and build utility-scale renewable installations or new natural gas plants. In December, California-based Okello announced a deal to provide 12 gigawatts to a data center developer.
Federal officials say the rapid development of data centers is important for the economy and national security, including to compete with China in artificial intelligence.
For AWS, the deal with Susquehanna fulfills its need for reliable power that meets its domestic needs without emitting planet-warming greenhouse gases like coal, oil or gas-fired plants.
Big Tech also wants to get their centers up and running quickly. But the technology’s high energy demand comes at a time when energy supplies are strained in an effort to shift away from fossil fuels as the planet warms.
They can build data centers in two years, says Aaron Tinjum of the Data Center Alliance. But in some areas, it could take four years, sometimes longer, to connect to the congested electricity grid, he said.
Plugging directly into a power plant takes years off their development time.
What’s in it for energy providers
In theory, the AWS deal would allow Susquehanna to sell more power to the grid than it would get. Susquehanna’s majority owner, Talen Energy, predicted the deal would generate up to $140 million in electricity sales by 2028, though it did not specify exactly how much AWS would pay for the power.
The profit is one that other nuclear plant operators welcome, especially after years of financial trouble and frustration over how they are paid in the broader electricity markets. Many say they have been forced to compete in some markets with a flood of cheap natural gas and government-sponsored solar and wind power.
Power plant owners also say the arrangement benefits the wider community, avoiding the cost of long power lines and leaving more transmission capacity on the grid for everyone.
FERC’s big decision
A favorable decision from FERC could open the door to many more giant data centers and massive energy users like hydrogen plants and bitcoin miners, analysts say.
The process was rejected by FERC 2-1 in November. Recent comments by commissioners suggest they are not ready to decide how to regulate such a novel issue without further study.
In the meantime, the agency is hearing arguments for and against the Susquehanna-AWS agreement.
Monitoring Analytics, a market watchdog in the mid-Atlantic grid, wrote in a FERC filing that the effect would be “tremendous” if the Susquehanna-AWS model were extended to all nuclear power plants in the state.
Energy prices will increase significantly and there is no explanation as to how the increase in energy demand will be met even before large power plants are removed from the supply mix.
Separately, two electric utility owners — who make money from building grids and delivering power in restricted states — objected to the Susquehanna-AWS arrangement, saying it would freeload the grid that ordinary customers pay to build and maintain. Chicago-based Exelon and Columbus, Ohio-based American Electric Power say the Susquehanna-AWS arrangement will allow AWS to avoid $140 million a year in debt.
Susquehanna owners have questioned why the data center won’t be on the grid and should pay to maintain it. But critics say the power plant itself benefits from taxpayer subsidies and ratepayer-subsidized services, and shouldn’t be able to strike deals with private customers that could raise costs for others.
Jackson Morris of the Natural Resources Defense Council said FERC’s decision “will have huge ramifications across the country” because it will set an example of how FERC and grid operators can expect similar requests from data center companies and nuclear plants.
American Electric Power Vice President Stacey Burbury told FERC at a hearing in November that it needs to move quickly.
“The time for this is upon us, and if we take five years to get this perfect, it’s too late,” she said.
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