How to build data centers without raising grid costs — and emissions
This is the third article in our four-part series “Boon or bane: What will data centers do to the grid?” The world’s wealthiest tech companies want to build giant data centers across the United States to feed their AI ambitions, and they want to do it fast. Each data center can use as much electricity as a small city and cost more than $1 billion to construct. If built, these data centers would unleash a torrent of demand for electricity on the country’s power grids. Utilities, regulators, and policymakers are scrambling to keep pace. If they mismanage their response, it could lead to higher utility bills for customers and far more carbon emissions. But this mad dash for power could also push the U.S. toward a cleaner and cheaper grid — if tech giants and other data center developers decide to treat the looming power crunch as a clean-power opportunity. Utilities from Virginia to Texas are planning to build large numbers of new fossil-gas-fired power plants and to extend the life of coal plants. To justify this, they point to staggering — but dubious — forecasts of how much electricity data centers will gobble up in the coming years, mostly to power the AI efforts of the world’s largest tech companies. Most of the tech giants in question have set ambitious clean energy goals. They’ve also built and procured more clean power than any other corporations in the country, and they’re active investors in or partners of startups working on next-generation carbon-free energy sources like advanced geothermal. But some climate activists and energy analysts believe that given the current frenzy to build AI data centers, these firms have been too passive — too willing to accept the carbon-intensive plans that utilities have laid out on their behalf. It’s time, these critics say, for everyone involved — tech giants, utilities, regulators, and policymakers — to “demand better.” That’s how the Sierra Club put it in a recent report urging action from Amazon, Google, Meta, Microsoft, and other tech firms driving data center growth across the country. “I’m concerned the gold rush — to the extent there’s a true gold rush around AI — is trumping climate commitments,” said Laurie Williams, director of the Sierra Club’s Beyond Coal campaign and one of the report’s authors. Williams isn’t alone. Climate activists, energy analysts, and policymakers in states with fast-growing data center markets fear that data center developers are prioritizing expediency over solving cost and climate challenges. “I think what we’re seeing is a culture clash,” she said. “You have the tech industry, which is used to moving fast and making deals, and a highly regulated utility space.” Some tech firms intend to rely on unproven technologies like small modular nuclear reactors to build emissions-free data centers, an approach that analysts say is needlessly unreliable. Others want to divert electricity from existing nuclear plants — as Amazon hopes to do in Pennsylvania — which simply shifts clean power from utility grids to tech companies. Yet others are simply embracing new gas construction as the best path forward for now, albeit with promises to use cleaner energy down the road, as Meta is doing in Louisiana. Meanwhile, several fossil fuel companies are hoping to convince tech firms and data center developers to largely avoid the power grid by building fossil-gas-fired plants that solely serve data centers — an idea that’s both antithetical to climate goals and, according to industry analysts, impractical. But a number of tech firms and independent data center developers are pursuing more realistic strategies that are both affordable and clean in order to meet their climate goals. These projects should be the model, clean power advocates say, if we want to ensure the predicted AI-fueled boom in energy demand doesn’t hurt utility customers or climate goals. And ideally, the companies involved would go even further, Williams said, by engaging in utility proceedings to demand a clean energy transition, by bringing their own grid-friendly “demand management” and clean power and batteries to the table, and by looking beyond the country’s crowded data center hubs to places with space to build more solar and wind farms. Getting utilities and data centers on the same page The basic mandate of utilities is to provide reliable and affordable energy to all customers. Many utilities also have mandates — issued by either their own executives or state policymakers — to build clean energy and cut carbon emissions. But the scale and urgency of the data center boom has put these priorities on a collision course. As the primary drivers of that conflict, data centers have a responsibility to help out. That’s Brian Janous’ philosophy. He’s the cofounder of Cloverleaf Infrastructure, a developer of sites for large power users, including data centers. Cloverleaf is planning a flagship data center project in Port Washington, a city about 25 miles north of Milwaukee. Cloverleaf aims to build a data center campus that will draw up to 3.5 gigawatts of power from the grid when it reaches full capacity by the end of 2030, “which we think could be one of the biggest data center projects in the country,” Janous said. That’s equivalent to the power used by more than 2.5 million homes and a major increase in load for the region’s utility, We Energies, to try to serve. Together with We Energies and its parent company, WEC Energy, Cloverleaf is working on a plan that, the companies hope, will avoid exposing utility customers to increased cost and climate risks. “The utility has done a great job of building a very sustainable path,” Janous said. WEC Energy and Cloverleaf are in discussions to build enough solar, wind, and battery storage to meet more than half the site’s estimated energy needs. The campus may also be able to tap into zero-carbon electricity from the Point Beach nuclear power plant, which is now undergoing a federal relicensing process, he said. The key mechanism of the deal is what Janous called a “ring-fenced, bespoke tariff.” That structure is meant to shield other utility customers from paying more than their fair share for infrastructure built to meet data centers’ demand. “This tariff puts it completely in the hands of the buyer what energy mix they’re going to rely on,” he said. That allows Cloverleaf — and whatever customer or customers end up at the site it’s developing — to tap into the wind, solar, and battery storage capacity WEC Energy plans to build to meet its clean energy goals. To be clear, this tariff structure is still being finalized and hasn’t yet been submitted to state utility regulators, said Dan Krueger, WEC Energy’s executive vice president of infrastructure and generation planning. But its fundamental structure is based on what he called a “simple, just not easy,” premise: “If you come here and you say you’ll pay your own way”— covering the cost of the energy and the transmission grid you’ll use — “we invest in power plants” to provide firm and reliable power. “We make sure we can get power to the site, we make sure we have enough capacity to give you firm power, and then we start lining up the resources that can help make you green,” he said. WEC Energy’s broader plans to serve its customers’ growing demand for power haven’t won the backing of environmental advocates. The Sierra Club is protesting the utility’s proposal to build or repower 3 GW of gas-fired power plants in the next several years, and has pressed Microsoft, which is planning its own $3.3 billion data center in We Energies territory, to engage in the state-regulated planning process to demand cleaner options. Krueger said that the gas buildout is part of a larger $28 billion five-year capital plan that includes about $9.1 billion to add 4.3 GW of wind, solar, and battery capacity through 2029. That plan encompasses meeting new demand from a host of large customers including Microsoft, but it doesn’t include the resources being developed for Cloverleaf. Janous said he agreed with the Sierra Club’s proposition that “the biggest customers should be using their influence to affect policy.” At the same time, Cloverleaf is building its data center for an eventual customer, and “our customers are looking for speed, scale, and sustainability,” in that order. Cementing a tariff with a host utility is a more direct path to achieving this objective, he said. A “clean tariff” model for sustainable data center development? Similar developer partnerships between utilities and data centers are popping up nationwide. In Georgia, the Clean Energy Buyers Association and utility Georgia Power are negotiating to give tech companies more freedom to contract for clean energy supplies. In North Carolina, Duke Energy is working with Amazon, Google, Microsoft, and steelmaker Nucor to create tariffs for long-duration energy storage, modular nuclear reactors, and other “clean firm” resources. In Nevada, utility NV Energy and Google have proposed a “clean transition tariff,” which would commit both companies to securing power from an advanced geothermal plant that Fervo Energy is planning.
This is the third article in our four-part series “ Boon or bane: What will data centers do to the grid? ” The world’s wealthiest tech companies want to build giant data centers across the United States to feed their AI ambitions, and they want to do it fast. Each data center can use as much electricity as a small…
This is the third article in our four-part series “Boon or bane: What will data centers do to the grid?”
The world’s wealthiest tech companies want to build giant data centers across the United States to feed their AI ambitions, and they want to do it fast. Each data center can use as much electricity as a small city and cost more than $1 billion to construct.
If built, these data centers would unleash a torrent of demand for electricity on the country’s power grids. Utilities, regulators, and policymakers are scrambling to keep pace. If they mismanage their response, it could lead to higher utility bills for customers and far more carbon emissions. But this mad dash for power could also push the U.S. toward a cleaner and cheaper grid — if tech giants and other data center developers decide to treat the looming power crunch as a clean-power opportunity.
Utilities from Virginia to Texas are planning to build large numbers of new fossil-gas-fired power plants and to extend the life of coal plants. To justify this, they point to staggering — but dubious — forecasts of how much electricity data centers will gobble up in the coming years, mostly to power the AI efforts of the world’s largest tech companies.
Most of the tech giants in question have set ambitious clean energy goals. They’ve also built and procured more clean power than any other corporations in the country, and they’re active investors in or partners of startups working on next-generation carbon-free energy sources like advanced geothermal.
But some climate activists and energy analysts believe that given the current frenzy to build AI data centers, these firms have been too passive — too willing to accept the carbon-intensive plans that utilities have laid out on their behalf.
It’s time, these critics say, for everyone involved — tech giants, utilities, regulators, and policymakers — to “demand better.” That’s how the Sierra Club put it in a recent report urging action from Amazon, Google, Meta, Microsoft, and other tech firms driving data center growth across the country.
“I’m concerned the gold rush — to the extent there’s a true gold rush around AI — is trumping climate commitments,” said Laurie Williams, director of the Sierra Club’s Beyond Coal campaign and one of the report’s authors.
Williams isn’t alone. Climate activists, energy analysts, and policymakers in states with fast-growing data center markets fear that data center developers are prioritizing expediency over solving cost and climate challenges.
“I think what we’re seeing is a culture clash,” she said. “You have the tech industry, which is used to moving fast and making deals, and a highly regulated utility space.”
Some tech firms intend to rely on unproven technologies like small modular nuclear reactors to build emissions-free data centers, an approach that analysts say is needlessly unreliable. Others want to divert electricity from existing nuclear plants — as Amazon hopes to do in Pennsylvania — which simply shifts clean power from utility grids to tech companies. Yet others are simply embracing new gas construction as the best path forward for now, albeit with promises to use cleaner energy down the road, as Meta is doing in Louisiana.
Meanwhile, several fossil fuel companies are hoping to convince tech firms and data center developers to largely avoid the power grid by building fossil-gas-fired plants that solely serve data centers — an idea that’s both antithetical to climate goals and, according to industry analysts, impractical.
But a number of tech firms and independent data center developers are pursuing more realistic strategies that are both affordable and clean in order to meet their climate goals.
These projects should be the model, clean power advocates say, if we want to ensure the predicted AI-fueled boom in energy demand doesn’t hurt utility customers or climate goals.
And ideally, the companies involved would go even further, Williams said, by engaging in utility proceedings to demand a clean energy transition, by bringing their own grid-friendly “demand management” and clean power and batteries to the table, and by looking beyond the country’s crowded data center hubs to places with space to build more solar and wind farms.
Getting utilities and data centers on the same page
The basic mandate of utilities is to provide reliable and affordable energy to all customers. Many utilities also have mandates — issued by either their own executives or state policymakers — to build clean energy and cut carbon emissions.
But the scale and urgency of the data center boom has put these priorities on a collision course.
As the primary drivers of that conflict, data centers have a responsibility to help out. That’s Brian Janous’ philosophy. He’s the cofounder of Cloverleaf Infrastructure, a developer of sites for large power users, including data centers. Cloverleaf is planning a flagship data center project in Port Washington, a city about 25 miles north of Milwaukee.
Cloverleaf aims to build a data center campus that will draw up to 3.5 gigawatts of power from the grid when it reaches full capacity by the end of 2030, “which we think could be one of the biggest data center projects in the country,” Janous said. That’s equivalent to the power used by more than 2.5 million homes and a major increase in load for the region’s utility, We Energies, to try to serve.
Together with We Energies and its parent company, WEC Energy, Cloverleaf is working on a plan that, the companies hope, will avoid exposing utility customers to increased cost and climate risks.
“The utility has done a great job of building a very sustainable path,” Janous said. WEC Energy and Cloverleaf are in discussions to build enough solar, wind, and battery storage to meet more than half the site’s estimated energy needs. The campus may also be able to tap into zero-carbon electricity from the Point Beach nuclear power plant, which is now undergoing a federal relicensing process, he said.
The key mechanism of the deal is what Janous called a “ring-fenced, bespoke tariff.” That structure is meant to shield other utility customers from paying more than their fair share for infrastructure built to meet data centers’ demand.
“This tariff puts it completely in the hands of the buyer what energy mix they’re going to rely on,” he said. That allows Cloverleaf — and whatever customer or customers end up at the site it’s developing — to tap into the wind, solar, and battery storage capacity WEC Energy plans to build to meet its clean energy goals.
To be clear, this tariff structure is still being finalized and hasn’t yet been submitted to state utility regulators, said Dan Krueger, WEC Energy’s executive vice president of infrastructure and generation planning. But its fundamental structure is based on what he called a “simple, just not easy,” premise: “If you come here and you say you’ll pay your own way”— covering the cost of the energy and the transmission grid you’ll use — “we invest in power plants” to provide firm and reliable power.
“We make sure we can get power to the site, we make sure we have enough capacity to give you firm power, and then we start lining up the resources that can help make you green,” he said.
WEC Energy’s broader plans to serve its customers’ growing demand for power haven’t won the backing of environmental advocates. The Sierra Club is protesting the utility’s proposal to build or repower 3 GW of gas-fired power plants in the next several years, and has pressed Microsoft, which is planning its own $3.3 billion data center in We Energies territory, to engage in the state-regulated planning process to demand cleaner options.
Krueger said that the gas buildout is part of a larger $28 billion five-year capital plan that includes about $9.1 billion to add 4.3 GW of wind, solar, and battery capacity through 2029. That plan encompasses meeting new demand from a host of large customers including Microsoft, but it doesn’t include the resources being developed for Cloverleaf.
Janous said he agreed with the Sierra Club’s proposition that “the biggest customers should be using their influence to affect policy.” At the same time, Cloverleaf is building its data center for an eventual customer, and “our customers are looking for speed, scale, and sustainability,” in that order. Cementing a tariff with a host utility is a more direct path to achieving this objective, he said.
A “clean tariff” model for sustainable data center development?
Similar developer partnerships between utilities and data centers are popping up nationwide.
In Georgia, the Clean Energy Buyers Association and utility Georgia Power are negotiating to give tech companies more freedom to contract for clean energy supplies. In North Carolina, Duke Energy is working with Amazon, Google, Microsoft, and steelmaker Nucor to create tariffs for long-duration energy storage, modular nuclear reactors, and other “clean firm” resources. In Nevada, utility NV Energy and Google have proposed a “clean transition tariff,” which would commit both companies to securing power from an advanced geothermal plant that Fervo Energy is planning.