Customer-Facing Resources Could Mitigate Data Center Grid Impacts: Kansas Shows Us How
The state is proving that collaboration and innovation can create solutions that protect affordability, reliability, and our climate.
The rapid expansion of data centers in the United States is dramatically transforming our electricity system. These facilities consume enormous amounts of electricity to sustain our digital ecosystems and emerging artificial intelligence technologies. Electric utilities across the nation are forecasting unprecedented demand growth, driven in part by onshoring of manufacturing and electrification of vehicles but primarily from data centers. Skyrocketing energy demand is creating serious challenges to electricity affordability, grid reliability, and fossil fuel emissions. At the same time, the data center boom is backed by enormous capital and some of the largest companies in the world.
In the face of these looming challenges, there is a clear question: Can we harness this capital to avoid the worst outcomes and accelerate a clean, affordable, and reliable grid?
As a result of NRDC advocacy, a promising answer has emerged in Kansas.
A landmark settlement in Kansas
In November, the Kansas Corporation Commission approved a groundbreaking settlement agreement that establishes a new rate structure for large-load customers like data centers. The agreement brought together a diverse group of perspectives, including NRDC, the Data Center Coalition, Google, staff from the Kansas Corporation Commission and Kansas’s largest electric utility, Evergy.
The settlement agreement includes robust financial requirements, including up-front deposits, a minimum 12-year contract term, 80 percent minimum demand charges, and exit fees. Evergy’s approved rate also allows large-load customers to voluntarily invest in their own clean energy generating resources, similar to the terms that Nevada approved in NV Energy’s Clean Transition Tariff in May 2025.
What makes this settlement especially innovative is that in addition to bringing their own clean energy supply, large customers can also invest in distributed resources, including energy efficiency (EE), battery storage, and other demand-side management (DSM) programs.
Demand-side solutions can mitigate negative impacts
Electrical grids are designed to meet electricity demand at its peak, which only occurs a few hours a year. These peaks determine how much generation, transmission, and distribution must be built, and how much customers must ultimately pay. The system often relies on the most expensive and often polluting resources to meet peak needs.
Massive data centers, most of which operate near full capacity 24/7, significantly raise these peaks, straining the grid and driving up costs. Programs that reduce demand during peak hours could defer or avoid the need for new generation and infrastructure investments, lowering bills for all customers.
To that end, the Kansas settlement incentivizes data centers to participate in demand response programs. However, only a small subset of data centers can currently reduce or shift their load, making it critical to look at other peak-reduction strategies.
Distributed resources are proven, cost-effective, and fast to deploy. EE, DSM, and battery storage bring with them grid benefits—they can help mitigate peak demand, enhance grid reliability, and reduce the need to rely on higher-emitting resources during peak hours or periods of system stress.
Importantly, well-designed, customer-sided programs can deliver benefits directly to the communities that need them the most. Energy efficiency could lower power bills for households and reduce energy burdens in low-income communities. Large-load customers are uniquely positioned to contribute to these outcomes by directly investing in community-focused programs.
The next step is implementation
Customer-funded EE and DSM programs are not new. But given the rapidly evolving risks that data centers pose to the grid, scaling up these programs now is instrumental in mitigating their impacts.
The settlement establishes these critically important pathways, yet participation remains voluntary. Realizing its potential depends on how data centers and regulators implement these programs.
Many data centers have corporate social and environmental goals aligned with these programs. Given the significant impacts of data center developments and the enormous wealth behind these developers, now is the time for data centers to deliver on the economic benefits they have promised by opting into these programs.
A growing trend beyond Kansas
Demand-side solutions are gaining increasing attention in other states. Legislation recently passed in Minnesota makes it a requirement for data centers to pay into an energy conservation and weatherization fund to benefit low-income customers. And data centers might be required to curtail their load or provide capacity resources to reduce peak demand, such as in Texas’s passed legislation or in FERC’s recently issued order to PJM.
Data centers are reshaping our energy future. They can either deepen the challenges or help solve them. The Kansas settlement has shown that collaboration and innovation can create win-win solutions that protect affordability, reliability, and our climate.
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