Data Center

BY SCOTT FLOOD

The demand for electric power continues to increase, and America’s peak demand is forecast to grow by 38 gigawatts through 2029 – the equivalent of adding another California-sized state to the nation’s power grid. At the same time, power producers plan to retire more than 110 gigawatts of baseload, or always-available, generation by 2033.

When demand outpaces supply of any commodity – corn, gasoline or electricity for example – prices tend to increase. In addition, there’s increasing concern about the potential for rolling outages as power providers struggle to meet peak demands.

Local co-op members may not notice the impact of the supply and demand imbalance for some time, but it’s captured the attention of electric co-op directors and their staffs.

“The leadership at many electric co-ops is seeing unprecedented growth in demand,” explains Stephanie Crawford, regulatory affairs director for the National Rural Electric Cooperative Association.

A decade ago, a huge commercial project might boost a co-op’s total load by 20 or 30 megawatts. “Now they’re getting multiple requests for projects in the hundreds of megawatts,” she adds.

AI and cloud computing are driving demand

Artificial intelligence (AI) and cloud computing are key drivers of this added demand. As use of AI skyrockets and a greater share of computer applications and storage migrate to the cloud, all that data needs to be stored somewhere. Data centers, which are massive groups of high-capacity computer servers, provide the most efficient way to handle it.

According to the U.S. Department of Energy, data centers can consume as much as 50 times the energy per floor space of other types of commercial buildings. A single large data center may use over 100 megawatts of power, the equivalent of powering 80,000 homes. Data centers already account for nearly 2% of the nation’s electricity use, and the Electric Power Research Institute predicts that will grow to 9% by 2030.

“It’s not only a question of needing to build or obtain more capacity, but in many cases, also creates questions about the availability of transmission and distribution,” Crawford notes.

Co-ops focus on knowledge and relationships

For electric co-ops, the efforts fall into two categories: increasing knowledge and building relationships. A generation ago, power supply discussions were fairly straightforward for co-op directors, given the widespread availability of baseload generation. Today’s directors increasingly find themselves learning about sophisticated and challenging issues as they weigh decisions affecting their co-op’s operations and financial viability for years to come.

Co-ops have long emphasized relationship-building, and Crawford stresses that will continue with companies developing large projects such as data centers.

“Early and frequent conversations between the co-op and the entities seeking additional energy are critical,” she explains. “That includes honest conversations about the costs and timelines involved.”

For example, while a data center project might ultimately need a significant supply of megawatts, if its operations are phased in gradually over several years, the co-op may have additional time to prepare for the maximum load. They might consider creating a partnership with the project owner to develop new generation assets on the project’s site, reducing transmission concerns.

Reliability is a cornerstone

The large tech companies involved in deploying data centers and similar projects are highly sophisticated and well-resourced. They tend to be less interested in obtaining the lowest cost and are more focused on reliability.

“What we’re hearing from co-ops is that the companies building data centers typically have done their homework before they start talking to co-ops,” Crawford says.

While the developers may be ready to pay for the substantial infrastructure upgrades needed to serve their data centers, she notes that the conversations may end up focusing more on project timelines and data center obligations to remain as co-op member-consumers. In addition to supply chain issues related to transformers and other components that are in increasingly short supply, projects may face regulatory delays at all levels.

While co-ops prepare for projects from organizations new to the co-op, Crawford notes the importance co-op leaders also place on keeping a finger on the pulse of their existing commercial accounts.

“Being proactive and reaching out to understand how a commercial account’s energy needs may be changing in the coming years informs conversations and decisions about timing, rate design and other factors, even if they’re not making specific requests yet,” she says. “That helps the co-op serve emerging needs while protecting the reliability for all of its members.”

Scott Flood writes on a variety of energy-related topics for the National Rural Electric Cooperative Association.

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