NRDC Report: A Better Path to Managing Data Center Load Growth
States and grid managers must act to keep data centers from fleecing consumers on their bills and making the grid dirtier and less reliable.
WASHINGTON, D.C. – With the surge in data center construction already costing Americans billions more on their electricity bills, a new report details what states and grid managers should do to keep costs and emissions in check while managing the AI-related surge in electricity demand.
The report, At the Crossroads: A Better Path to Managing Data Center Load Growth, details the ways the burst in construction of data centers is straining electric grids. In the nation’s largest grid territory, PJM, data centers were responsible for $9.4 billion in additional costs in the previous capacity auction; those costs likely surpassed $10 billion in the latest auction.
“Customers are literally paying the bill for the failed data center policies we have today. Without new actions from states and grid operators, data centers are going to continue to make electricity more expensive and polluting, and less reliable,” said McKenna Beck, a policy analyst at NRDC (Natural Resources Defense Council) and the lead author of the report. “But, done right, we can have the data centers the technology industry wants while also keeping customers’ bills in check and protecting the environment.”
The report has one clear conclusion: If states incentivize data centers, those incentives should include criteria that protect consumers and minimize their negative environmental and economic impacts. Done right, data center development should address local concerns and also bring robust community benefits, provide flexible loads, self-fund new zero-carbon energy investments, match clean energy with demand on an hourly basis, and optimize energy usage to be the most efficient.
Recommendations in the report include:
- Require utilities to charge tariffs for new data centers that cover their true costs to the grid so other customers don't have to subsidize them
- Require or offer faster grid connections for data centers that agree to shut down during periods of peak power demand
- Require data center customers to contribute to programs that alleviate financial burdens for other customers such as low-income payment programs, and energy efficiency and demand response programs
- Speed up grid connections of new zero-emissions power generation with advanced planning tools such as automated planning processes
“Data center load growth is a challenge of unprecedented scale and magnitude in the modern electric system,” said Jackson Morris, director of state power sector policy at NRDC. “But with the right policies, we can harness this growth to develop a cleaner, more reliable and affordable power system. Every challenge is also an opportunity, and states should take this opportunity to help build the power system we need for decades to come.”
NRDC (Natural Resources Defense Council) is an international nonprofit environmental organization with more than 3 million members and online activists. Established in 1970, NRDC uses science, policy, law and people power to confront the climate crisis, protect public health and safeguard nature. NRDC has offices in New York City, Washington, D.C., Los Angeles, San Francisco, Chicago, Beijing and Delhi (an office of NRDC India Pvt. Ltd).