What Keeps Data Centers and Their Utility Partners Up at Night: The Power Problem
In the dynamic landscape of energy infrastructure, utility providers are navigating a paradigm shift as they strive to modernize and adapt to exponentially increasing demands. It is projected there will be 50% more devices behind the meter than in front of it by 2030. If you believe all the news headlines, reshaping the trajectory of the modern power grid will propel us into a new era of resilience, efficiency, and sustainability. That sounds wonderful, we think, and does it come with a cherry on top? Alas, there’s no shortage of concern about how we accomplish this transformation before the power runs out. In considering what keeps data centers' utility partners up at night, it’s just the tip of the iceberg regarding how we make the grid green enough and powerful enough to meet increasing demands.
Amid this transformation, utilities find themselves grappling with the looming specter of insufficient power supply. The exponential growth of clean-tech manufacturing and power-hungry data centers is pushing the grid to its limits, leaving utilities and regulators scrambling for viable strategies to expand and fortify the nation's aging infrastructure. Additionally, the increasing prevalence of distributed energy resources (DERs) and the mounting pressure of extreme weather events further compound the challenge, underscoring the imperative for utilities to ensure the safety, reliability, and affordability of energy services in the face of mounting uncertainty.
As utility providers navigate these complexities, they must confront risk-averse agencies, outdated planning models that do not have the granularity needed to prepare for what is coming, and the inadequacy of historical data to accurately anticipate future grid needs. Nothing we’ve done in our past is translatable to the future, and human capacity to build models off a shortage of projectable data is certainly lacking.
Power Availability Concerns
Power availability is easily the chief concern for utility providers as they struggle to keep pace with escalating demands. The current infrastructure is insufficient to meet the burgeoning need for electricity, and grid expansion seems an easy answer, but the process to build the necessary transmission lines is fraught with challenges, including extensive land acquisitions, environmental reviews, and contentious discussions over cost allegations. Utilities and the regulatory powers that oversee them simply will not be able to move quickly enough to provide the needed capacity and get power to where it is most needed. We will have to think creatively.
State regulatory agencies play a pivotal role in this process, often resulting in protracted disputes between states over financial responsibilities and route placements, leading to significant delays in project implementation. The rate of new transmission line installations has sharply declined in recent years, exacerbating concerns about meeting future energy needs and climate objectives. Without urgent action to accelerate transmission construction, the United States risks forfeiting a substantial portion of potential emission reductions mandated by critical climate legislation.
The proliferation of data center sites and growing use of AI further complicates the situation, increasing pressure on states to approve new transmission infrastructure while generating contentious debates over fairness and financial burdens. As power supply becomes increasingly scarce, tensions over allocation and distribution are expected to escalate, potentially hindering the transition to cleaner energy sources.
Furthermore, the current regulatory framework lacks mechanisms to prioritize projects based on urgency or necessity, resulting in a backlog of unfulfilled demands. This backlog, coupled with growing concerns about cost burdens on residential ratepayers and potential delays in transitioning to cleaner energy, underscores the urgent need for comprehensive and proactive solutions to address the looming power crunch. Failure to do so risks impeding progress towards state and federal climate goals and jeopardizing the ability to support the growing demand for electricity from electric vehicles and household appliances.
AI is Revolutionizing Grid Management
Even outside of data center events, AI is all the rage. The growth of ChatGPT has quite literally shaken all areas of connected infrastructure and charted new processes for both churning through our workload as well as supporting the unprecedented digital growth. Per a recent poll, currently only one-third of utilities are working with generative AI to find productivity gains.
AI has the potential to revolutionize how we manage the grid, marking a transformative shift in how utilities optimize operations, enhance reliability, and meet evolving consumer demands. Through the deployment of AI-driven algorithms and predictive analytics, utilities can anticipate grid dynamics, optimize energy flows, and proactively address challenges in real time. The integration of AI with cloud infrastructure further enhances efficiency and performance, enabling utilities to leverage vast amounts of data from diverse sources, including weather data, edge data, and advanced metering systems (AMS).
By leveraging machine learning and analytics to merge and assess data streams and sensored information, utilities can unlock new levels of efficiency and performance. The challenges of our power needs are so complex that a system will be best utilized to process the various permutations and uncertainties; this will need to be a highly sophisticated predictive tool, but if properly developed it can enhance grid equipment lifespans, apply data-driven decision making, identify issues quickly, and reduce unplanned downtime.
Utilities are increasingly recognizing the importance of leveraging AI to gain intimate insights into their customers' energy needs and behaviors, allowing them to prepare for future power demands effectively. From improving customer experiences through innovative applications to reimagining day-to-day operations with self-healing grid technology, utilities are embracing AI to drive digital transformation and move beyond their traditional roles. This data-driven approach not only optimizes grid performance but also enhances customer experiences and drives digital transformation within the industry.
Strategic Grid Planning for Looming Demand
Part of the planning that worries them most is not just how to supply power to more data centers. At least data centers clue our local utilities in on our upcoming needs. Electric vehicles are altogether unpredictable, except for areas that have seen regulatory timelines enforced. They also tend to flock together, with charging stations handling many at a time. More than just consumer use, they have potential fleets being converted in bulk.
The proliferation of electric vehicles as well as data centers presents both challenges and opportunities for grid planners. Word on the street is that electrification of the transportation market will double energy usage in 10 years and lead to an 800% increase over the next 20 years. That’s the load that has them most worried, and calculating how many electric vehicles they can handle. They need to get uncomfortably close to what consumers and businesses are going to want in the future to predict and plan for this demand.
Strategic grid planning is essential to accommodate the surge in electricity demand while ensuring reliability and stability. Utilities are exploring innovative solutions such as smart charging infrastructure, vehicle-to-grid integration, and energy storage to manage peak demand and optimize resource utilization. With the exponential growth of EVs and data centers, grid planning has never been more critical. We must invest in scalable and resilient infrastructure to support this electrified future.
Embracing the Grid Edge and Prosumer Movement
The emergence of the prosumer movement and the evolution of the grid edge are reshaping the traditional utility-consumer relationship, transforming consumers from passive recipients to active participants in the energy transition. This shift is driven by the proliferation of rooftop solar, home energy storage, and distributed energy resources (DERs), highlighting the importance of grid-edge innovations and community energy initiatives.
Consumers are no longer merely consumers; they are prosumers actively shaping the energy landscape. Utilities must adapt to this transformation and empower consumers to become active stakeholders in the energy transition. At the grid edge, where consumers interact directly with energy systems, better data quality, validity, and granularity are achieved, leading to low latency, high reliability, and scalability. This proximity to data sources enables predictive infrastructure and empowers citizens to be part of the solution.
The path to edge intelligence involves various components, including metrology for energy, demand, and power quality, as well as anomaly detection for outage, temperature, loose neutral, and tampering. Despite existing limitations in edge technology, such as firmware-driven systems and communication bottlenecks, rapid advancements in hardware, communication protocols, and software are driving progress. Software deployed at the edge is customizable, agile, and driven by an application mindset, leveraging more advanced algorithms, especially in machine learning.
Overcoming challenges at the edge requires leveraging technologies that enable robust networks capable of making informed decisions and identifying various devices, such as EVs, solar panels, batteries, and pump controls. This necessitates funneling and utilizing data effectively to empower consumers to make informed energy decisions and optimize energy usage. Despite the complexities introduced by IP addresses and evolving technologies, the focus remains on enabling consumers to actively participate in the energy transition while ensuring the reliability and scalability of grid-edge solutions.
Renewable Energy Integration
Renewable energy integration is driving a significant transformation in the energy landscape, with solar and wind power playing increasingly prominent roles in the generation mix. Utilities are investing in renewable energy infrastructure, grid-scale energy storage, and innovative grid-edge technologies to maximize the potential of renewables and reduce carbon emissions.
With sustainability at the forefront of efforts, integrating renewable energy sources into the grid and leveraging advanced technologies are seen as crucial steps toward achieving environmental goals while ensuring reliability and affordability for customers. Last year, 84% of new installed capacity was renewables and storage, marking a substantial shift in the generation mix. Demand response, accounting for 60% of capacity, is becoming increasingly significant.
Orchestrating the energy transition requires flexible resources and demand-side capabilities, with virtual power plants (VPPs) emerging as cost-effective solutions. However, managing the transition poses challenges, particularly in forecasting net load, VPP capabilities, and battery capacity at scale. Artificial intelligence and machine learning are key applications that can help the industry navigate these transitions and keep moving forward.
Some companies are exploring off-grid solutions due to frustrations with traditional electricity networks. Off-grid technology, once frowned upon, is now considered a necessity for certain operations. Companies like Microsoft and Google are exploring options such as small nuclear plants and zero-emissions fusion power to power energy-intensive operations, although regulatory and land acquisition challenges remain significant hurdles in this endeavor.
Fostering Innovation and Scalability
In the midst of rapid change, utilities are recognizing the critical importance of innovation and scalability in navigating the evolving energy landscape. By fostering a culture of innovation, establishing strategic partnerships, and prioritizing scalability, utilities can unlock new opportunities for success and drive significant progress towards a smarter, more resilient grid.
To meet the challenges of tomorrow, it is essential to invest in cutting-edge technologies and scalable solutions. This proactive approach enables utilities to pioneer the power grid of the future while delivering tangible value to customers and communities alike.
As electrification continues to grow rapidly and new technologies emerge, such as nuclear energy, utilities are embracing innovative projects to enhance reliability and resiliency. For instance, there are some pretty cool utility-driven projects in my local area I’ve been following: Duke Energy's floating solar project in South Florida and residential battery installations in neighborhoods like Hunter’s Creek exemplify the shift towards cleaner, more resilient energy solutions. Additionally, initiatives like the 100% green hydrogen project in DeBary, FL highlight the ongoing efforts to integrate renewable energy sources and drive sustainability forward.
Not Your Grandparents’ Power Grid
The pulse of energy shapes our present and affords our future. The job to be done itself has not changed over time: people need light and power. What has changed is the complexities that utility providers must navigate in the modern energy landscape: the convergence of AI, EV integration, grid-edge innovations, renewables, and scalable solutions are reshaping the trajectory of the power grid. By embracing these key themes and driving meaningful progress in each area, utilities can unlock new opportunities for growth, sustainability, and resilience, propelling the power grid into a new era of innovation and prosperity.
It's about more than just meeting demand in ways that are better, faster, cheaper, but about how to do things altogether differently. It's essential to adopt a beginner's mindset, allowing for the exploration of new possibilities rather than adhering to traditional methods. The future of energy lies in our ability to think differently and embrace technology as a critical tool for progress. By scaling faster and remaining curious about innovation, utilities can adapt to the evolving landscape and create a power grid that meets the needs of the present while paving the way for a brighter future.
Technology will be critical to make all the changes needed to turn the power grid into a dynamic and ever-evolving system ready to meet the challenges and opportunities of tomorrow. One thing is clear: it’s not your grandparents’ power grid anymore. In line with that thought, I stumbled across this chart recently depicting electric consumption and GDP, per capita. In our modern era, the intricate relationship between a nation's energy consumption and its economic prosperity cannot be overstated. This symbiotic relationship also has implications for data centers.
Several decades into the 21st century, the rise of digital transactions and the pivotal role of data centers highlight a critical challenge: the need for robust and sustainable energy infrastructure. Understanding how energy use and national wealth are intertwined is essential in addressing the growing demands of data centers, which serve as the backbone of our digital economy.
How the Power Problem Will Impact Economic Growth and the Correlation Between Energy Consumption and Wealth
Historically, economic growth and energy consumption have shared a direct and positive correlation. Industrialization in the 19th and 20th centuries vividly showcased this link. Countries that harnessed energy effectively — through coal, oil, hydroelectricity, and eventually natural gas and nuclear power — experienced significant economic growth. This trend persists in today's digital age, where energy powers not just traditional industries but also the data-driven sectors of our economy.
A data scientist would say that this is correlated, not necessarily causational, but we should always ask whether one is the driver--economic growth or energy demand? Wealthier nations tend to consume more energy per capita. This is due to the extensive industrial activities, widespread use of technology, and higher living standards that characterize these economies. For instance, the United States and China, the two largest economies, are also among the top energy consumers globally. The International Energy Agency (IEA) consistently reports that energy consumption is a key driver of economic activity.
Energy is naturally an economic enabler. Energy availability and reliability are crucial for economic development; just think what an outage costs us. Countries with abundant energy resources support a wide range of industries, from manufacturing to services, thereby boosting employment and GDP. Conversely, energy shortages can cripple economies, leading to reduced industrial output and lower quality of life. And yet, we're capped in many markets when it comes to power. This would suggest we're capped in economic opportunity as well.
Data Centers: The Digital Heartbeat of Modern Economies
In the digital age, data centers underpin everything from financial transactions to entertainment to social media. The rapid expansion of cloud computing, artificial intelligence, smart sensored information, and big data analytics has led to an exponential increase in the demand for data storage and processing capabilities. Data centers are the physical embodiment of the digital economy, ensuring that data flows seamlessly across the globe.
Yet data centers are notoriously energy-intensive, with needs only rising. According to a report by the U.S. Department of Energy, data centers account for about 2% of the total electricity use in the United States, a figure that is expected to grow as digitalization continues. Requiring substantial power not only to run servers, but also to cool them, this ensures they operate efficiently. They are seen as the enemy, and the mass populace isn't clear that data center support of the virtually-enabled world is critical to the way our society functions. Lose the data centers (not just the power availability) and a nation will be less prosperous.
We need to message broadly that our industry is acutely aware of its energy demands and is continuously searching for ways to enhance efficiency. Advances in server technology, cooling methods, and renewable energy integration are making data centers more sustainable. Companies from hyperscalers to colocation operators are investing in renewable energy projects to offset their data centers' carbon footprints. But we have to start telling those outside our immediate industry friends what we are doing to solve this problem, as well as all the ways we are adding value to their daily lives.
Meanwhile, We Still Have to Address the Power Issues
To ensure that the growth of data centers does not exacerbate energy challenges, a multifaceted approach is necessary:
• Investing in Renewable Energy: Expanding the use of renewable energy sources such as wind, solar, and hydroelectric power is crucial. These sources can provide the necessary power without the environmental impact associated with fossil fuels. Many tech giants are leading the way, pledging to run their data centers entirely on renewable energy in the near future. Many utilities that provide power to the data centers are similarly transitioning their power mix to incorporate more renewable generation as well.
• Enhancing Energy Efficiency: Technological advancements continue to focus on making data centers more energy-efficient. This includes developing low-power server technologies, optimizing cooling systems, and implementing energy management software to monitor and reduce energy consumption. But we have to share what we are doing: we're seen as large consumers who seemly show no restraint; nothing is further from the truth.
• Policy and Incentives: Governments play a critical role in this transition. By providing incentives for renewable energy projects and setting stringent energy efficiency standards, they can drive the adoption of sustainable practices across the industry. Governments also must seek to understand these forces and work alongside data centers, seeing our operations as a way to stimulate economic growth.
The link between energy use and a nation's wealth underscores the importance of developing a sustainable energy strategy, particularly as the demand for digital services continues to rise. Data centers, as the linchpins of the digital economy, must be at the forefront of this transformation. By investing in renewable energy, enhancing efficiency, fostering innovation, and communicating our public-serving value we can ensure that the growth of our digital infrastructure supports both economic and environmental goals. But the future of our digital economy depends on our ability to power it.
Melissa Farney
Melissa Farney is an award-winning data center industry leader who has spent 20 years marketing digital technologies and is a self-professed data center nerd. As Editor at Large for Data Center Frontier, Melissa will be contributing monthly articles to DCF. She holds degrees in Marketing, Economics, and Psychology from the University of Central Florida, and currently serves as Marketing Director for TECfusions, a global data center operator serving AI and HPC tenants with innovative and sustainable solutions. Prior to this, Melissa held senior industry marketing roles with DC BLOX, Kohler, and ABB, and has written about data centers for Mission Critical Magazine and other industry publications.
