Data center growth at power plants faces regulatory hurdles

Growing interest in co-locating data centers next to US power plants has sparked a regulatory review, as officials weigh the impact on energy costs and grid reliability.
Tech leaders are turning to nuclear energy to meet rising power demands.

The Federal Energy Regulatory Commission (FERC) is examining the rapid growth of energy-intensive data centers being built next to US power plants. Known as co-location, this trend is driven by the tech sector’s need for large amounts of power for AI and other data-heavy operations. Co-locating data centers near power plants offers companies quicker access to electricity, bypassing the longer process of connecting to the broader grid.

However, regulators and industry experts are concerned about the impact on costs and reliability for other electricity consumers. If data centers use power plants that typically supply the public grid, there are questions about how such facilities will handle power disruptions and whether they will lean on the grid as backup. This could mean higher electricity bills for consumers who fund grid infrastructure, a point raised by FERC Commissioner Mark Christie.

The regulatory scrutiny comes as companies like Amazon and Google look to establish co-located data centers to meet growing energy needs. A recent arrangement in Pennsylvania, where Amazon bought a data center linked to a nuclear plant, has stirred debate among electric utilities over infrastructure costs and reliability. FERC’s review could lead to new guidelines clarifying financial responsibilities and operational rules for these partnerships.