US regulators raise questions about siting data centers at power plants

NEW YORK : Cost and reliability concerns about the growing trend of building energy-intensive data centers next to U.S. power plants were the focus of a technical conference held by the Federal Energy Regulatory Commission on Friday.

As the tech industry races to build data centers for technologies such as generative artificial intelligence, rapid access to large amounts of electricity for the centers has become a critical issue.

Connecting data centers directly to power plants, in an arrangement known as colocation, offered a quick way to access large amounts of electricity rather than waiting in queues for years to connect to the broader grid.

“I believe the federal government, including this agency, should do its best to nurture and encourage their development,” said FERC Chairman Willie Phillips, adding that he considers AI centers vital to national security and the U.S. economy.

This year, Amazon purchased a data center powered directly by Talen Energy’s Pennsylvania nuclear power plant. Shares of other major independent nuclear operators, including Constellation and Vistra, have risen this year in part due to the prospect of similar deals.

The prospect of increasing the number of co-located data centers has raised questions about potentially higher electricity bills for ordinary customers as the centers will use grid infrastructure and publicly paid services.

Connecting data centers directly to power plants that provide electricity to the public has also raised reliability concerns, in part because they can divert constant power from the grid.

FERC questioned whether co-located centers could use the grid as backup power and what would happen if a neighboring power plant unexpectedly went offline.

“Can the customer still get power from the grid? Because if so, that’s going to have a huge impact,” Commissioner Mark Christie said.

The technical conference could lead to new co-located data center guidelines, including ones that specify who is responsible for transmission and distribution upgrade costs and how agreements for centers are managed.

FERC is also currently gathering details about the utilities’ regulatory fight over the co-located Amazon data center deal with Talen Energy. Talen’s interconnection deal for the center is opposed by companies Exelon and American Electric Power, and FERC’s decision in the case could set a precedent for similar deals.

The data center will receive as much as 960 megawatts of nuclear power from the largest U.S. power grid, or enough to power about 1 million American homes.

At Friday’s conference, PJM Interconnection market activity observer Joseph Bowring said the increasing number of data centers co-located at nuclear power plants would further worsen the supply-demand imbalance in the region.

“This is not a way to solve the problem, it’s actually a way to make it worse,” Bowring said, suggesting instead that data center developers help bring more power online.

Brian George, Google’s head of global energy market development and policy, said Google’s interest in co-located developments is driven by the need for access to electricity and not to avoid the associated costs.

“We will pay our share of those costs,” George said.