

Data center priorities have shifted in recent years. Where the power was once one of the most direct elements of a data center project, it could become the most critical problem of consideration before a project could take off. A career to obtain the ability of a boom AI, combined with the net-zero objectives that are approaching, is to see that the data centers must look seriously not only when and where they can get energy, but to consider close to the source of those electrons . In the short term, most operators will likely use all the energy they can get, but in the context of an ongoing grid transition to renewables, any company serious about achieving net zero emissions will need to think long and hard about energy in the near future.
Changing the grid mix, increasing data center capacity
Energy demand has increased. Data center electricity consumption (excluding cryptocurrencies) is estimated to have accounted for 1 to 1.3 percent of global electricity demand in 2022 and could increase to 1.5 to 1.3 percent in 2026, according to recent projections from the International Energy Agency (IEA).
In the United States, the IEA says data center energy consumption will be between 1.3 and 4.5 percent of the country’s total consumption in 2022, although the agency notes that data is difficult to obtain in aggregate. Since then, data center capacity has only increased as more AI-focused facilities have come online. Data center advances in the U.S. have led to a 1% increase in commercial electricity consumption nationwide over the past four years, the U.S. Energy Information Administration (EIA) said in a recent report, with electricity demand expected to increase by 14 billion kilowatt-hours (BkWh) in the U.S. between 2019 and 2023. In areas where large data centers have not been developed, energy demand has dropped significantly.
Utilities are seeing huge increases in energy demand from data center customers. Xcel Energy revealed during its Q2 2024 earnings call that it has a pipeline of 6.7 GW of new data center projects underway; another provider, Oncor, said it has received 59 GW of data center connection requests. AEP said it has 15 GW of data center loads coming online by 2040, while NextEra has 4 GW of data center loads in the pipeline. PG&E said it expects more than 3.5 GW of data center capacity to come online in California over the next five years.
Along with this increased demand, the grid is changing. Renewable energy is increasingly being used and old fossil fuel power plants are being decommissioned. According to the IEA’s 2024 mid-year report, solar power alone is expected to account for about half of the growth in global electricity demand through 2025. Together with wind power generation, it will account for nearly 75% of the increase, but the transition is not happening uniformly, smoothly, or at the same pace as data center development. In December, NERC released its annual long-term reliability assessment. In it, the nonprofit warned of potential capacity shortages amid rising peak demand that the planned retirement of 83 GW of nuclear and fossil generation over the next 10 years could have on the grid. NERC has warned that the Midcontinent Independent System Operator (MISO) region, which includes data center markets such as Illinois, Indiana, Iowa, and parts of Texas, is expected to have a deficit of 4.7 GW if planned generators are retired, despite the addition of new assets totaling more than 12 GW.
DigitalBridge CEO Marc Ganzi recently warned that data centers will be without power for the next two years. On his company’s first-quarter earnings call, he said, “We’re going to run out of power in the next 18 to 24 months. If you think about the amount of power left on the U.S. grid, we’re running out of power. We’re running out of less than 7GW.”
“What’s limited is the transmission and distribution of power. Transmission networks have capacity issues. And if you think it’s hard to get a permit for a new cell tower, think about building new towers or transmission substations.”
Despite warnings about deficits, times are good for the renewable energy sector. “It’s booming,” Oliver Kerr, managing director of North America at Aurora Energy Research, tells DCD. “Things were going well before, but the Inflation Reduction Act (IRA) really kick-started the industry. The number of projects that are trying to connect to the grill in the coming years is astronomical. “
Silicon Ranch is one of the companies they use. It manages more than 150 solar projects in 15 states, with 5GW in operation and development. Data center customers include Meta, Microsoft, and Tract.
“We’re seeing significant and continued interest because there are sustainability commitments from data center companies; the ability to meet those goals is extremely important,” Matt Kisber, co-founder and chairman of the board of Silicon Ranch, tells DCD.
John Wieland, director of development at Leeward Renewable Energy, adds that his company has seen “explosive” growth in demand. It has 3 GW of renewable energy operating across more than 30 projects, with another 2 GW in development, and supplies companies such as Microsoft and Digital Realty.
“We see no sign of a slowdown from these hyperscalers and colocation providers,” Wieland says. too much of a good thing
But the renewable energy industry is becoming a victim of its own success. Wait times for new solar and wind projects to get connected to the grid have increased dramatically. “Historically, developers have had to make very little financial commitment to get a project into the interconnection queue,” says Aurora’s Kerr. “They have the option to build rather than the obligation to build. And that became a vicious cycle.
“The more people queue up projects, the more incentive it gives other people to start trying to queue up their own projects to secure a spot. That dynamic feeds itself and you get a lot of speculative projects.”
Lap times vary from about two years in some places to eight in others, largely driven by a combination of the complicated studies that grid operators have to do to assess the impact developments will have locally and the time it takes to physically connect so many new infrastructure projects to the grid. According to a report from the Department of Energy’s (DOE) Lawrence Berkeley National Laboratory (LBNL), power projects seeking to connect to the U.S. electric grid increased by 27% in 2023. The report suggests that about 2.6 TW of projects have joined the interconnection queue, roughly double the existing U.S. generating capacity. Most of that energy was solar or battery-based, about 1 TW each. The number of new projects added to the list continued to increase, from 561 GW in 2021 to 908 GW in 2023. But the average time to complete projects is also increasing: it is estimated that it will take about five years to go from interconnection study to commercial operations, compared to two years in 2008.
In California, total power generation capacity is about 200 GW, half of which comes from renewables or low-carbon sources such as nuclear. As of last year, the California Independent System Operator (CAISO) grid had an interconnection queue of more than 500 GW of projects waiting to come online.
In Texas, grid operator ERCOT has seen its interconnection queue of grid-scale solar and battery storage projects grow to 355.4 GW. “If you wanted to build a project, starting today in California, it could be eight years or more before that project actually supplies power to the grid,” Kerr says.
In April 2024, the U.S. government set a goal of modernizing 100,000 miles of transmission lines over the next five years to ensure the country’s infrastructure is ready to meet the demands of a grid that relies heavily on renewables and faces increased demand from data centers and electric vehicles. According to Grid Strategies, only 88.5 kilometers of high-voltage transmission were built in 2023, despite spending reaching an all-time high of $25 billion. About 90% of the investment went to reliability improvements and equipment replacement. In the first five months of 2024, only 200 kilometers of new transmission lines were built, all between Arizona and California. An additional $92 billion is expected to be invested in transmission over the next three years. “Transmission is a challenge not just for solar, but for all forms of new energy generation,” says Silicon Ranch’s Kisber. “Our transmission system is completely inadequate to accommodate the growth that’s going to happen. “If we want to meet the energy needs of data centers and others, we’re going to need more transmission.”
Kisber, a former Tennessee representative, likens transmission to the interstate highway system: “It used to be easy to find a space on the ramp or real estate near an interstate on-ramp or off-ramp. Today, it’s a much more difficult challenge because there’s construction, there’s congestion in a lot of places, and it takes time to fix that. “We have the same problems with our transmission system.”
Amid grid congestion, renewable energy operators say analyzing transmission maps and project queues is key to finding an advantage. These companies have entire teams looking for opportunities where queues are shorter and projects are at risk of being abandoned.
Leeward’s Wieland is hopeful that change is coming. “It’s going to take a little bit of time to get implemented, but I think the number of projects in the pipeline two years from now will be dramatically lower,” he says. “And it’s because of the procedures that have been implemented; the readiness milestones and the withdrawal penalties are reaching a point where customers will no longer be able to speculate on positions as they used to.”
“There’s a lot of demand-side economic development and I think that’s going to be a big catalyst for change.”
Many problems in the power grid are beyond the control of data center developers and operators. But one of the key ways to ensure that the electrons that power your data centers are green and flowing is to continue investing in renewable energy projects.
Cloud, data center, and telecom companies remain the largest buyers of renewable energy. Amazon is the world’s largest corporate buyer of renewable energy, while Microsoft has said it has more than 20 GW of renewable energy under contract.
Google and Meta have invested in gigawatts worth of renewable projects around the world, and companies such as Equinix and Digital Realty have also acquired a significant number of renewable power purchase agreements. Despite these efforts, Google has seen its emissions increase 48 percent in five years due to the company’s data center buildout and focus on artificial intelligence. Similarly, Amazon’s 2023 ESG report saw its annual Scope 1 emissions rise from 13.32 million metric tons of carbon dioxide equivalent (MT CO2e) to 14.27 million last year. The story is similar for utilities: U.S. coal and natural gas power generation are forecast to grow by about 2% and 1.5%, respectively, leading to higher emissions, before declining next year. After falling 8% in 2023, the U.S. is expected to be one of the few advanced economies where electricity sector emissions will increase year over year in 2024, rising slightly below 2%. Ensuring that new data centers’ energy demand matches renewables is key to meeting net-zero emissions goals, but DCD was surprised to hear of a general lack of coordination with data center operators about where they’re moving projects forward.
At a time when the tech industry is trying to squeeze out all the capacity it can get, renewable energy operators appear to be playing whack-a-mole and making educated guesses about where cloud and colocation companies are building projects. “Access to clean energy is just one component of the site selection criteria,” says Leeward’s Wieland. “They don’t tell us specifically where they’re going to go before we do the site selection work. “It’s more about understanding where they’re going and being smart about how we quote our assets to meet their needs.”
Jesse Tippett, vice president of source energy marketing at Adapture Renewables, said data center companies “aren’t always up front about where they’re going to develop.”
He said, “If we do our homework and it turns out we have projects in areas they’re considering, then we’re well-matched and can reach a deal.” We grew our business and found the right location a couple of years ago.
Adapture is building 36 solar projects totaling 262 MW in the U.S., with another 4 GW in development, and counts Meta among its customers. Tippett says that greater trust is needed between the data center and renewable developers to coordinate projects and ensure that the demand and ability are well coinciding.
Both parties must be “very transparent on where they have projects,” he says. “If we work together from the beginning and commit to each other’s best interests, we can start to identify early on what might be an opportunity to work together.”
While Tippett acknowledges that this one-size-fits-all mentality can cause companies to forgo the opportunity to seek the lowest bidder for projects, the customer guarantee means developers can focus on completing development and moving on to the next project in parallel. Data center companies, for their part, get the security of renewable energy, perhaps even before a facility is built. The growing demand for renewable energy means data center companies are working with multiple suppliers in different markets to secure green electrons.
“I think there is a preference for doing repeat deals with companies they have already established relationships with,” says Wieland. “But given the demands, I also see a lot of opportunity in the market.”
When asked what data center operators are looking for in their renewable energy partners, DCD is repeatedly told that certainty is a key factor amid so many speculative projects.
Kerr notes that the industry measures many of these speculative projects in what are known as “braggawatts”; projects that promise big numbers but don’t deliver. “They’re looking for companies with a track record and a reputation for delivering what we say we’re going to do,” adds Silicon Ranch’s Kisber. “Silicon Ranch has done every project we’ve contracted for. This element of certainty is extremely important.”
The IEA report finds that some data center providers are considering on-site generation to circumvent the challenges of connecting to the grid. At the Aurora Renewables Summit in London in July, Alexa Capital CEO Bruce Huber said that while the industry awaits interconnection reform, behind-the-meter (BtM) projects, where many customers are on the same site as renewable projects, can be a good option to reduce investment risk and avoid connection issues.
Huber called BtM projects a “big part” of his firm’s financing: “It’s real and it’s growing,” he said. He cited as an example a project in the MISO connection area around Ohio that is developing megawatt farms for industrial customers. “They’re building these megawatt industrial farms and then they’re just adding and inviting more and more industrial customers into what are essentially microgrids behind the meter,” he said. However, large-scale renewable energy projects involving data centers are few and far between. Tencent installed a 10 MW utility-scale solar array at one of its data centers in Tianjin; Amazon recently acquired a behind-the-meter data center at a nuclear power plant in Pennsylvania; and several projects in Dublin, Ireland, have filed applications to install gas-fired generators on site to circumvent a moratorium on new data center grid connections. “BtM projects are something we’re very focused on,” says Adapture’s Tippett. “If there’s a real win-win situation, the data center and the renewables can come online sooner; co-location can reduce the interconnection period.”
He points out that data center companies could consider building their own on-site renewable projects. “There will be some BtM facilities, and maybe some of them will be built by the data center companies themselves,” he says. “It’s a great model, but it’s a very challenging business.”
It’s not yet clear what BtM (non-nuclear) colocation projects for data centers will look like. Given the need for uptime and redundancy, it is unlikely that many operators would be willing to abandon the grid entirely and rely on wind or solar power, even if longer battery deployments were available.
But some operators may be brave enough to attempt such an implementation if demand continues to outstrip supply. In 2024, startup Aston partnered with JLL to commercialize autonomous, off-grid “clean energy campuses” for data center customers. The first campuses will reportedly be located in Colorado, New Mexico, and Texas, and its current development pipeline represents 2 GW of energy. Projects started in 2024 will launch in 2026.
“[BtM] projects will have to become more common,” says Aurora’s Kerr. “For example, in the case of a data center, the biggest cost is energy. “If you’re thinking about installing generation on-site rather than buying it from the grid, building your own generation can be a fairly small part of your overall costs.”
“It makes sense to think about building generation on-site, and it just takes away one of those worries people have about not having enough energy.”