Utilities struggling to deal with data center power demand, report says

The explosive growth of artificial intelligence has also prompted an explosive growth in demand for data centers, but a recent report warned that utilities are under strain dealing with that demand.

Construction engineering company Black & Veatch found in its 19th annual Electric Report that more than half of utility leaders said that available power is the biggest challenge in getting data centers operational, followed closely by transmission capacity and the need to upgrade substations.

The report also found a disconnect between data center development timelines and the time it takes to upgrade the electrical grid and power infrastructure. Building a data center takes around 18 months, while it can take utilities between three to six years to install or upgrade the infrastructure necessary to power them. That creates a “mismatch,” the report said, as utilities are forced to “try to deliver city-scale power on exponentially squeezed timelines.”

It means data centers’ importance in providing the compute power for artificial intelligence, and the desire for states to embrace the economic benefits is competing with the hard realities of infrastructure development and the capabilities of the electric grid. But planning for it all should have started earlier, experts said.

“When you talk about utility planning and grid planning, for the last 20 years, it's been pretty low growth, and nobody was really talking about it,” said Jenn Cahill, Black & Veatch’s campus infrastructure integration lead. “A few people said, ‘Hey, there's going to be growth coming.’ It's not just data centers, and I think we focus just on data centers, and they're kind of getting a bad rap right now, in my opinion, because there's also electrification, increase in manufacturing and industrial, commercial and residential growth.”

Cahill said another factor is the growth in size of data centers, which at one stage required 25 megawatts of power but now need many times that to keep up with computing demand. Numerous states want to get in on the action, but the impacts on power and energy are slowly coming into view. In Virginia and New Jersey, climbing energy prices were among the top campaign issues in recent elections, especially as residents reckon with the impacts on their electricity bills and the power grid.

Some states are looking to new energy sources to power their new data centers, and the technology companies and providers behind them have emphasized their efforts to lean on renewable energy. But that disconnect between data center development and utility infrastructure planning weighs heavily.

“We've always all been very siloed,” Cahill said. “We don't talk well; we don't plan well. Especially a regulated utility, where they have to go through a pretty detailed process to get new generation approved.”

Black & Veatch’s report indicated that relationships between data center developers and utility companies have also struggled over the years. Forty-one percent of respondents from the utility sector said they are unsure when to factor data center demand into their planning, which the report said “reflects growing pains” in the industry.

Those growing pains are especially acute in the initial planning phases, as developers typically submit several requests to different utilities in different areas to hook up to their grid and see where they get the best agreement before choosing to develop there.

But the report said that seems to be changing, as both utilities and data center developers are becoming more proactive in how they work together and look to identify sites and power supplies much earlier in the development process. By being more proactive, they are also better able to identify more innovative cost-sharing models.

“By prioritizing transparency, proactive communication and data-driven planning, utilities continue to evolve from passive energy providers to strategic partners in supporting large-scale data infrastructure, ultimately strengthening grid resilience while enabling economic growth and a lower-carbon world,” Heather Donaldson, Black & Veatch’s managing director for infrastructure advisory, wrote in the report.

Beyond those better relationships between data center providers and utilities, other groups have suggested consequences if data centers place an undue strain on the electric grid. In a proposal recently submitted to regional grid operator PJM Interconnection, the Maryland Office of People’s Counsel said data centers and other large customers should face “enforceable consequences” if they connect to the grid but are unable to meet their own power demands and reliability requirements.

Those consequences, which could include service interruptions if they fail to bring in their own power capacity, would look to protect ratepayers from higher costs or unreliable service to their homes as data centers come online.

“Data centers are already causing electric bills to increase for Maryland customers, and they will cause billions of dollars in future costs for customers in the region unless state and federal utility regulation is updated and enhanced to address the unprecedented pace and scale of actual and projected data center growth,” Maryland People’s Counsel David Lapp said in a statement.