“I don’t know if we’ve ever had more people on a panel before,” joked FERC Commissioner David Rosner to a chorus of laughs as he looked at the row of individuals in front of him.
The lighthearted moment drew contrast to the gravity of the topic being discussed inside the Commission Meeting Room on Friday. The Federal Energy Regulatory Commission (FERC) led a technical conference to discuss the co-location of large loads at generating facilities and all the issues that come with it: Load growth, resource adequacy, grid reliability impacts and the fair distribution of costs.
With respect to other large loads that are driving U.S. electricity demand growth, AI data centers are what is top of mind. According to a study published by EPRI in May, the facilities could consume up to 9% of U.S. electricity generation by 2030 — more than double the amount currently used.
Data centers are seeking creative ways to procure electricity. Under a specific proposal, Amazon Web Services (AWS) would purchase power in 120 MW increments from Talen Energy’s Susquehanna Nuclear Plant in Pennsylvania. Amazon would use the electricity to power its data center, which would be co-located with the Susquehanna plant.
Because this arrangement could set a precedent for other data center developers to seek reliable power by co-locating with nuclear plants, FERC called for the technical conference, which included utilities and other power producers, grid operators, regulators and other stakeholders.
The conference was not intended to discuss specific situations like the Talen case, but rather to explore the general cause-and-effect of large load co-location and to brainstorm potential solutions.
“This is a down payment on a very significant and I think positive national initiative,” said FERC Chairman Willie Phillips. “FERC can and should play a leadership role.”
Proponents of co-locating large loads with generation believe it allows significant new load to be served without requiring expensive system upgrades, especially when grid operators are struggling to integrate new resources faster.
Opponents, like some in the utility industry challenging the Talen-AWS proposal, say co-location could result in unfair cost burdens on ratepayers and negatively impact market operations and reliability.
During the technical conference, FERC commissioners and a panel of ISOs and RTOs discussed the impact of a grid-serving generator going behind-the-meter, removing capacity from the general supply and potentially worsening supply-demand balance.
Stu Bresler, who is Executive Vice President of Market Services and Strategy for PJM Interconnection, raised concerns about planning challenges, especially when a generator is reclassified to serve a data center directly and taken out of the grid’s general supply.
“Is it going to be an acceptable answer for a transmission system operator like PJM, if that generator is unavailable, to say, ‘I don’t have to serve that load because it contractually committed to not be on the system if that generator is unavailable?’” he raised.
Bresler highlighted ongoing concerns regarding equitable cost allocation for loads co-located with generators that must remain connected to the grid, such as nuclear plants.
“There are grid services that are necessary to maintain a reliable transmission system, and I think it’s a valid question as to whether a load that is added behind a generator’s meter should be responsible for a portion of those costs,” he said.
Questions then arose about whether grid operators can rely on contractual arrangements with co-located data centers to not draw from the grid if the generator fails. The panelists highlighted that relying solely on contractual commitments might be problematic, particularly when loads are critical, such as in defense applications. Ultimately, it might depend on the use case.
“What are the societal interests? It sounds like we almost have to decide, what are those data centers running? Maybe they’re running DraftKings. And society says we want our DraftKings,” quipped FERC Commissioner Mark Christie.
Mike Kormos, formerly Executive Vice President and COO of PJM, noted data centers have their own backup generation, regardless of being in front of or behind-the-meter. Thus, the co-location approach may not drastically alter costs.
He suggested that customers should ultimately decide whether to co-locate and accept the associated risks, as long as regulations clearly outline any grid-support expectations.
“To me, it’s not the load getting the services,” said Kornos. “The load is putting itself at risk, is going to basically half the shed if the generator trips.”
Later in the technical conference, commissioners heard from a group which largely consisted of independent power producers.
J. Arnold Quinn, Senior Vice President Regulatory Policy at Vistra, argued that co-locating large loads with generators offers market opportunities rather than challenges. He said these types of arrangements strengthen the capacity market, creating a stable, ongoing demand signal for new generation projects.
Quinn urged FERC not to take any actions to slow data center growth, as doing so may weaken market signals for resource investment.
“We need [data centers] in our states that desperately need this investment and this growth, and the state should control the destiny for that,” he said. “[States] should not be dictated to and told that they can’t figure out innovative ways to help their constituents, their stakeholders, their ratepayers.”
Right now, the co-location play is simply a response to a market inadequacy, said Brian George, who handles global energy market development and policy for Google, which owns and operates a vast network of hyperscale data centers across the globe.
“It is not driven by the need to avoid transmission and distribution infrastructure upgrade costs,” he said. “We have been very clear for a long time that we will pay the fair share of those costs.”
George stressed the importance of integrated grid planning that considers the needs of large co-located loads in collaboration with utilities and regional transmission organizations (RTOs). He emphasized the importance of accurate load forecasting.
In Ohio, George said Google has proposed a “capacity commitment framework,” which ties the pace of load growth to financial commitments. He said this framework could serve as a model for RTOs, providing a clearer basis for infrastructure planning.
“At the end of the day, better load forecasts inform infrastructure planning, and it gives RTOs and grid operators more certainty to trigger the infrastructure that they need to meet our growth,” he said.
At the technical conference, commissioners and panelists also discussed the potential for new market designs that allow for load flexibility programs.
But at the end of the day, there was no silver bullet for solving the challenges brought on by load growth and grid constraints. The conference marked the beginning of discussions, certainly not the end.
“We just need to fix interconnection, transmission and resource adequacy, and we’ll be all set,” joked Commissioner Rosner.
