Someone Has to Invest in the Grid. Why Not Data Centers?

Jane Flegal of Searchlight Institute, an energy expert, discussed America’s aging electricity grid and the increasing strain from data center development. She highlighted that the U.S. has significantly underinvested in transmission and grid infrastructure over the past decades, leading to major concerns from regulators. While the grid would require substantial investment even without data centers due to its age and deferred maintenance from the 1960s and 70s, the sudden and centralized demand from data centers has accelerated these needs. Flegal explained that the question of who pays for these upgrades is complex. Funding through the rate base disproportionately affects low-income earners. She argued that data centers, which drive much of this new demand, should contribute more, potentially through take-or-pay commitments or upfront financing of transmission projects. She acknowledged the difficulty in differentiating between incremental investments solely for data centers versus broader grid upgrades needed for decarbonization. An environmentalist in Virginia, for example, expressed concern that utility funding directed toward data center-specific transmission might divert resources from renewable energy projects. Flegal clarified that while this is a valid concern, the U.S. grid requires dramatic expansion for electrification goals regardless of data centers. She views data center build-out as an "accelerant" for necessary investments, provided planning is done correctly. She noted that while tech companies like Google are investing in some shared infrastructure like advanced conductors, most hyperscale investment is for their own load. Flegal emphasized the need for policy and regulatory changes, including federal permitting reform, advocating for a political coalition to solve these structural grid issues.