The Federal Energy Regulatory Commission (FERC) on Thursday directed power grid operators to expedite interconnection requests from data centers and other large electricity users.
Under the order, six major power grid operators will have to prove that their data centers “can be connected to the power grid in a timely and orderly manner.” Data centers are responsible for paying interconnect costs. Commissioners unanimously approved the order.
FERC also provided an avenue for grid technology startups and directed grid operators to consider “alternative transmission technologies.” Although the commission did not mention specific technologies, the directive could include solid-state transformers and superconducting transmission lines.
Grid operators are currently required to submit a report within 30 days detailing any available generation capacity. Additionally, you have 60 days to “defend or revise” electricity rates in your area. FERC also directed grid operators to further address behind-the-meter power in data centers.
FERC’s directive gave data centers fast lanes for connectivity but did not address the lack of power generation capacity.
New power plants also have connection problems, which has delayed their ability to connect to the grid. By the end of 2023, grid connection requests for power plants exceeded the total capacity of the existing power plant fleet. This meant that the lines to connect to the power grid were longer than the grid itself could theoretically accommodate.
Against this backdrop, electricity demand from data centers is expected to nearly triple by 2035. Grid operators, accustomed to near-zero demand growth for the past two decades, can no longer sustain the load. Some countries, such as PJM, the country’s largest power transmission operator, are in a state of turmoil, with major power companies on the verge of withdrawal.
Technology companies and developers are turning to on-site or behind-the-meter power (which is typically more expensive and complex) in desperation because many locations cannot connect to the grid in a timely manner.
Still, enough projects have resulted in higher electricity prices in many areas. According to Bloomberg, wholesale power prices are up 267% compared to five years ago.
FERC was urged to address the issue by Energy Secretary Chris Wright, who said in October that delays in connecting data centers to the grid could hurt America’s competitiveness in AI. Since then, public sentiment towards AI and data centers has deteriorated significantly.
Meanwhile, the Trump administration announced Wednesday that it will pay wind power developer Invenergy $765 million to cancel offshore wind leases near California, Maine and New York. The company said it would use the money to build natural gas plants in the Midwest and geothermal projects in the West. One of Invenergy’s wind projects is expected to generate up to 2.4 gigawatts of electricity, enough to power approximately 1.8 million homes at peak output.
The Trump administration is currently spending a total of about $2.6 billion to halt offshore wind development.
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