HARRISBURG, PA. (AP)-Looking for a quick fix for their fast-growing electricity diet, tech giants are increasingly looking to make deals with power plant owners to connect directly, avoiding the potentially longer and more expensive process of plugging into the storied power grid that serves everyone else.
Questions are being raised as to whether diverting power to higher-paying customers will leave enough for others and whether it will fairly justify large energy users paying the grid. Federal regulators are trying to figure out what to do about it, and fast.
Front and center is a data center that Amazon’s cloud computing subsidiary, Amazon Web Services, is building next to the Susquehanna Nuclear Plant in eastern Pennsylvania.
The arrangement between the plant owner and AWS — dubbed the “behind the meter” connection — is the first of its kind to come before the Federal Energy Regulatory Commission. So far, FERC has rejected a deal that could eventually send 960 megawatts — about 40% of the plant’s capacity — to the data center. That’s enough to power more than half a million homes.
That leaves the agreement and others likely to follow in a hole. It’s unclear when FERC, which blocked the deal on procedural grounds, will take up the matter again or how a change in presidential administrations might affect things.
“Companies, they’re very frustrated because now they have a business opportunity that’s really big,” said Bill Green, director of the MIT Energy Initiative. “And if they’re five years late, for example—I don’t know if it would be five years, but years anyway—they might miss a business opportunity entirely.”
Which is driving demand for power-hungry data centers
The rapid growth of cloud computing i artificial intelligence It has fueled demand for data centers that need power to run servers, storage systems, networking equipment and cooling systems.
This has prompted proposals to retire nuclear power plants, develop small modular nuclear reactors and build renewable installations or new natural gas plants. In December, California-based OKLO announced a deal to provide 12 gigawatts to a data center developer with small nuclear reactors that run on nuclear waste.
Federal officials say the rapid development of data centers is vital to the economy and national security, including keeping up with China in the artificial intelligence race.
For AWS, the agreement with Susquehanna meets its need for reliable power that meets its domestic requirements for sources that do not emit planet-warming greenhouse gases, such as coal, oil or gas plants.
Big Tech also wants to get its centers up and running quickly. But the vociferous appetite for energy comes at a time when electricity supplies are already strained by efforts to move away from planet-warming fossil fuels.
They can build data centers in a few years, said Aaron Tinjum of the Data Center Coalition. But in some areas, connecting to a congested power grid can take four years, sometimes much longer, he said.
Plugging it directly into the power plant would take years off its development timeline.
What’s in it for power providers
In theory, the AWS deal would allow Susquehanna to sell power for more than it got by selling it to the grid. Talen Energy, Susquehanna’s majority owner, projected the deal would generate as much as $140 million in electricity sales in 2028, though it did not disclose how much AWS would pay for the power.
The profit potential is one that other nuclear plant operators, in particular, are embracing after years of financial distress and frustration as they get paid in the broader electricity markets. Many say they have been forced to compete in some markets against a flood of cheap natural gas, as well as government-subsidized solar and wind power.
The plant’s owners also say the arrangement benefits the wider public, bypassing the expensive construction of long transmission lines and leaving more transmission capacity on the grid for everyone else.
FERC’s big decision
A favorable FERC ruling could open the door to many larger giant data centers and other massive energy users like hydrogen plants and bitcoin miners, analysts say.
FERC’s 2-1 rejection in November was procedural. Recent comments from commissioners suggest they weren’t ready to decide how to regulate such a thing without more study.
Meanwhile, the agency is hearing arguments for and against the Susquehanna-AWS contract.
Overseeing Analytics, a market watchdog in the mid-Atlantic grid, wrote in a FERC filing that the impact would be “extreme” if the Susquehanna-AWS model were to expand to all nuclear power plants in the territory.
Energy prices would increase significantly and there is no explanation as to how growing energy demand will be met even before large power plants drop out of the supply mix, it said.
Separately, two electric utility owners—who make money in deregulated states from building the grid and delivering power—protested that the Susquehanna-Aws arrangement amounts to freezing the grid that ordinary customers pay to build and maintain. Chicago-based Exelon and Columbus, Ohio-based U.S. Electric Power say the Susquehanna-AWS arrangement would allow AWS to avoid the $140 million a year it would otherwise owe.
Susquehanna’s owners say the data center won’t be online and question why it should pay to keep it going. But critics argue that the plant itself benefits from taxpayer subsidies and subsidized services, and should not be able to enter into contracts with private customers that could raise costs for others.
FERC’s decision will have “huge ramifications for the entire country” because it will set a precedent for how FERC and Grid operators will handle the avalanche of pending similar requests from companies and nuclear data facilities, said Jackson Morris of the Natural Defense Council. resources.
Stacey Burbure, vice president of American Electric Power, told FERC at a November hearing that it must move quickly.
“The time of this issue is upon us,” she said, “and if we take our typical five years to get this perfect, it will be too late.”
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