Energy regulators scrutinizing data center use reject Amazon bid
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Energy regulators are trying to determine how to respond to the recent wave of deals between nuclear plants and data centers that some worry could threaten grid reliability and raise utility bills.
Why it matters: Tech companies are seeking direct tie-ups and power purchase agreements with nuclear plants as they clamor for zero-carbon, round-the-clock power supplies to feed their facilities.
- Microsoft and Constellation plan to restart Three Mile Island in Pennsylvania; Amazon took a stake in advanced reactor company X-energy; Google linked up with Kairos Power.
Driving the news: The Federal Energy Regulatory Commission late Friday rejected a proposal that would have allowed an Amazon data center to co-locate with an existing nuclear power plant in Pennsylvania.
- The 2-1 decision was published at the end of a FERC conference with utilities, consumers, grid operators, and state regulators about how to smooth the process for new grid connections without straining the grid.
- The commission should be encouraging development of data centers and semiconductor manufacturing as national security and economic development priorities, said FERC Chairman Willie Phillips, a Democrat who dissented on the order.
- Commissioners Mark Christie and Lindsay See, both Republicans, voted to reject the proposal. Two Democrats, David Rosner and Judy Chang, didn't vote.
Zoom in: Amazon wants to build a data center next to Talen Energy's Susquehanna nuclear plant and draw power directly from it.
- Neighboring utilities AEP and Exelon challenged the novel arrangement, arguing it would unfairly shift costs of running the broader grid to other consumers.
- FERC's order Friday found the region's grid operator, PJM Interconnection, failed to show why the proposal was necessary and prove such a deal would be limited to the Susquehanna plant given the widespread interest in placing data centers next to power plants.
- Talen said the ruling would have a chilling effect on the region's economic development and that it's weighing its options. Amazon didn't immediately respond to a request for comment.
Big picture: The grid operator simply needs more power plants to maintain reliability, said Joseph Bowring, PJM's independent market monitor, said during the conference.
- Diverting large amounts of existing power generation to data centers "is not a way to solve the problem — it's a way to actually make it worse," Bowring said.
- Fast-tracking new plants to connect to the grid could improve the situation, he added. (A House GOP bill introduced in September would require FERC to prioritize new coal, gas, and nuclear plants.)
Threat level: The ambiguity of data center growth makes it difficult to even know exactly how much power demand is coming and when, grid operators said.
- Zachary Smith, an executive with the New York Independent System Operator, said he worries about "my ability, and lack thereof, to foresee what large loads are coming at us and are we going to have sufficient resources on the system to serve them."
What we're watching: Whether PJM files another proposal for FERC's consideration.
- The commission also has eight other pending proceedings that similarly involve a large customer co-locating with a power plant.
