HARRISBURG, Pa. — In response to their skyrocketing energy needs, technology companies are increasingly seeking direct agreements with power plant operators. This strategy enables them to bypass the more complex and potentially time-consuming method of connecting to an aging electricity grid that serves the general public.
This trend has sparked discussions about the implications of redirecting energy to higher-paying clients and concerns about the fairness of releasing large power consumers from their obligations to support the grid. Federal regulatory bodies are actively assessing the situation and are under pressure to respond rapidly.
A prominent example is the data center being established by Amazon Web Services (AWS) adjacent to the Susquehanna nuclear facility in eastern Pennsylvania. This unique arrangement has introduced a new concept known as a “behind the meter” connection, which has drawn the attention of the Federal Energy Regulatory Commission (FERC). At present, FERC has halted a proposal that would enable the data center to access 960 megawatts of power—equivalent to nearly 40% of the plant’s output—which could serve over half a million residences.
The FERC’s rejection on procedural grounds leaves the future of this deal and potential similar agreements hanging in the balance. There remains uncertainty regarding when FERC will revisit the issue, especially with the possibility of shifts in presidential administrations playing a role.
“The companies are understandably frustrated as they see a significant business opportunity,” stated Bill Green, the director of the MIT Energy Initiative. “If they face substantial delays in the waiting process—potentially years—they may lose out on a lucrative venture.”
The demand for energy-intensive data centers is being driven primarily by the rapid expansion of cloud computing and artificial intelligence, which require significant power for operating servers, storage systems, networking gear, and cooling technologies.
This burgeoning need has ignited proposals to reactivate dormant nuclear facilities, implement small modular reactors, and establish large-scale renewable energy projects or new natural gas plants. For instance, in December, Oklo, a California-based company, revealed plans to supply 12 gigawatts to data center developer Switch from small nuclear reactors utilizing nuclear waste.
Federal officials emphasize that expediting the development of data centers is crucial for both economic growth and national security, particularly in the context of competing against China in the AI domain. For AWS, their partnership with Susquehanna fulfills their requirement for stable, emissions-free power, steering clear of traditional fossil fuel sources.
While major tech firms are eager to set up data centers promptly, their substantial energy needs are coinciding with an already constrained power supply as the country transitions away from fossil fuels that contribute to climate change. Aaron Tinjum of the Data Center Coalition noted that while data centers can be constructed within a few years, connecting to a congested electricity grid may take significantly longer—sometimes up to four years or beyond.
By establishing direct connections to power plants, tech companies can significantly reduce their project timelines.
From the perspective of power providers, the AWS agreement holds the promise of increased revenues from electricity sales compared to the standard grid rates. Talen Energy, which holds the majority stake in Susquehanna, projected that the arrangement could generate up to $140 million in power sales by 2028, although specific payment details from AWS remain undisclosed.
This profit potential has garnered attention from other nuclear operators, particularly given the financial challenges they have faced in recent years due to market volatility and competition from low-cost natural gas and renewables supported by state incentives.
Supporters of the direct energy service claim it will also benefit the general public by removing expensive infrastructure expansion and freeing up additional transmission capacity for broader use.
FERC’s eventual ruling on this matter could pave the way for numerous substantial data centers and other large electricity users, such as hydrogen facilities and cryptocurrency mining operations, to secure similar arrangements. However, FERC’s recent 2-1 decision to deny AWS’s proposal was primarily procedural, with the agency indicating it needs further evaluation before establishing regulatory guidelines.
As the commission considers the implications of the Susquehanna-AWS arrangement, stakeholders are weighing the potential impact on market dynamics. Monitoring Analytics, a market oversight entity in the mid-Atlantic, warned that if similar models were widely adopted across nuclear plants, energy prices could increase markedly without clear strategies to meet this heightened demand, especially as some major generators exit the marketplace.
Electric utility companies that profit from constructing and maintaining the grid have raised objections to the AWS arrangement, arguing it represents an unfair exploitation of the grid, which regular customers fund. Both Exelon, based in Chicago, and American Electric Power, located in Columbus, Ohio, contended that this deal would enable AWS to sidestep around $140 million in costs annually.
The managers of Susquehanna, however, argue that the data center will not be integrated into the grid, questioning the necessity of contributing to its upkeep. Critics counter that the power plant benefits from tax subsidies and services supported through customers’ payments; thus, it should consider the broader implications of private agreements that may increase costs for the wider populace.
FERC’s ruling on this matter is expected to have significant repercussions, potentially setting a national precedent for how the agency and grid operators address the influx of similar proposals from tech companies and nuclear plant owners. Jackson Morris of the Natural Resources Defense Council highlighted the widespread effects of this decision, emphasizing its potential to influence industry standards moving forward.
Stacey Burbure, a vice president at American Electric Power, urged FERC to act decisively, asserting that timely intervention is crucial. “The time is of the essence on this issue,” she remarked. “If we take the usual five years for deliberation, we risk missing the opportunity altogether.”