Federal regulators back plan to speed power to energy-hungry AI data centers

The Federal Energy Regulatory Commission (FERC) unanimously voted to accelerate the connection of large energy users, including AI data centers, to the national power grid. This decision follows an appeal from Energy Secretary Chris Wright, who emphasized the importance of competing with China in the AI sector. While tech companies and data center developers have welcomed the prospect of faster grid connections, the plan has raised concerns among utilities, states, and regional grid operators about their authority to manage the process. Clean energy advocates also worry the move might undermine state-level renewable energy mandates.

The commission’s action comes amid a growing public backlash against data centers due to fears of rising electricity prices, significant energy and water consumption, and their impact on local communities and resources. FERC Chair Laura Swett described the vote as historic, designed to modernize the electricity market and protect ratepayers by ensuring data centers bear the full cost of any necessary grid upgrades. Despite this, the order does not address the tightening energy supplies contributing to increased electricity bills and blackout risks, as data center construction often outpaces new power plant development.

This federal intervention was prompted by persistent power bottlenecks, with tech giants reporting multi-year waits for grid connections in some areas. Beyond power issues, the industry faces widespread community opposition from residents concerned about lost open space, farmland, rural character, and the environmental footprint of these facilities. Companies like xAI, Google, Microsoft, Meta, Oracle, OpenAI, and Amazon have signed a "Ratepayer Protection Pledge," committing to build or acquire new power sources, cover infrastructure upgrade costs, and use backup generation to prevent blackouts. Rob Gramlich, an energy consultant, noted that while the order leaves retail rate control with states, quick action is needed from states to prevent cost shifts to consumers, warning that FERC could broaden its jurisdiction if states fail to act. Data from the Electric Power Research Institute indicates data centers currently account for 5% of U.S. electricity demand, projected to triple by 2035, with Virginia alone potentially reaching over 40% by 2030.