By Laila Kearney
NEW YORK, March 26 (Reuters) – The U.S. technology industry is being pushed to shrink its power use in times of high demand, amid growing public concern that Big Tech’s massive electricity needs for its expansion of data centers are maxing out the country’s grid.
The power industry and its regulators are increasingly urging tech companies to make what was once an unthinkable concession – scaling back energy consumption at the giant server farms known as data centers when called upon by utilities and grid operators.
Attempts to make data centers more flexible are largely in pilot mode. The process is complex and the financial incentives for data centers to stay on around the clock are immense. IT consultant Heunets estimates when data centers are down, it costs technology companies about $9,000 a minute.
But the point is to avoid blackouts and surging power bills on the days and hours of the year when demand on the grid is peaking. For Silicon Valley, increased flexibility that could help avert potential crises may help tech companies win agreements to connect their new data centers faster.
Electricity use from data centers could more than quadruple by the end of the decade to consume as much as 17% of U.S. power supplies, according to a recent study by the Electric Power Research Institute, EPRI.
“It’s not electrons on the grid – it’s being able to deliver when demand is at a peak,” U.S. Energy Secretary Chris Wright said at the CERAWeek conference in Houston this week. “When electricity demand rises high, supply must meet demand, or people die.”
During a storm this winter, the Department of Energy told data centers in the country’s largest regional electric grid – PJM Interconnection – to run on their backup generators to free up power on the grid.
PJM, which covers the biggest data center market in the world, is projecting supply shortages as early as next year if demand continues to outstrip new supply.
“Finding a way to manage this in a flexible way is how we are going to get through this as an industry,” said Stu Bresler, chief operating officer of PJM Interconnection.
Taking action when local grids are maxed out could save $40 billion to $150 billion in capital investments over the next decade, ultimately saving households and small businesses from taking on more costs of the grid build-out for data centers, according to research released last week by Duke University’s Nicholas Institute for Energy, Environment & Sustainability.
To ease concerns about rising costs and power outages, data center investors and energy suppliers say the massive server warehouses will need to show that they can pull back on their energy use when utilities or grid operators ask them to, an electric industry practice known as “demand response.”
“Demand response has to be part of the solution,” said Matt O’Connor, Chief Investment Officer of International Energy at Carlyle, which develops and invests in data centers.
“I think we will see, and what we’re starting to see now, is that real heavy end-users are going to start to be able to figure that out and model that into how the data centers operate,” he said.
TRANSITION PERIOD
Data centers, historically, have not taken part in demand response. Traditional cloud data centers that store data at a single site must have a constant and consistent energy source or data could be compromised, according to industry sources. Data centers being built today to develop artificial intelligence may be more flexible, allowing energy-intensive large language model training work at some sites to be shifted across locations.
Technology companies are beginning to commit to shifting data center workloads – pushing energy-intensive processing to other facilities – or switching to backup power rather than drawing from the grid during peak periods.
Google recently announced contracts with several utilities to lower consumption at certain data centers when called upon. Nvidia announced an initiative this week with Emerald AI to control and relocate power consumption from server warehouses when grid demand spikes.
Also this week, EPRI released a framework with the input of dozens of power and technology companies, including Meta, laying out how data centers can become more flexible. The hope, it said, is that the effort will speed up the time it takes to connect data centers.
Owners are increasingly asking how they can make their data centers more flexible, said Jennifer Cahill, an associate vice president at engineering and building firm Black & Veatch, whose customers include utilities and technology companies.
“You’re seeing a transition period where everybody would like to do it, and we’re working through how it can be done,” Cahill said.
(Reporting by Laila Kearney in Houston; Editing by Liz Hampton and Nia Williams)
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