The Federal Energy Regulatory Commission (FERC) has directed six major grid operators to accelerate interconnection requests for data centers and other large electricity users. The orders require operators to demonstrate that data centers can connect to the transmission system in a timely and orderly manner, with data centers bearing the interconnection costs. The commissioners approved the orders unanimously.
Key Directives
- Grid operators must submit a report within 30 days detailing available generating capacity.
- Within 60 days, operators must defend or revise electricity rates in their regions.
- FERC also instructed operators to consider "alternative transmission technologies," such as solid-state transformers or superconducting lines.
- Operators are to be more accommodating to behind-the-meter power for data centers.
Background
Grid connection delays have been exacerbated by a backlog of power plant interconnection requests. As of end of 2023, such requests exceeded the total capacity of the existing power plant fleet.
Meanwhile, electricity demand from data centers is projected to nearly triple by 2035. Grid operators, accustomed to near-zero demand growth over the past two decades, are struggling; PJM, the largest U.S. grid operator, has faced major utilities threatening to withdraw.
Tech companies and developers, unable to connect promptly, have turned to on-site (behind-the-meter) power, which is typically more expensive and complex. Despite these challenges, enough projects have connected to drive wholesale electricity rate increases of up to 267% compared to five years ago, according to Bloomberg.
Context
FERC's action follows a request from Secretary of Energy Chris Wright, who in October expressed concern that delays in data center grid connections could undermine U.S. competitiveness in artificial intelligence. The FERC orders do not address the broader shortage of generating capacity.