FERC orders faster grid interconnections for data centers amid capacity concerns
The Federal Energy Regulatory Commission mandated grid operators to expedite interconnection requests from data centers, but the rule does not resolve existing electricity supply shortages.
The Federal Energy Regulatory Commission (FERC) issued orders on Thursday requiring six major grid operators to prioritize and fast-track interconnection requests from data centers and other large electricity users. The operators must demonstrate that data centers can connect to the transmission system in a timely and orderly manner, with the facilities bearing the interconnection costs. The unanimous commission vote also opened the door for grid-technology startups, directing operators to consider alternative transmission technologies such as solid-state transformers or superconducting lines.
Grid operators have 30 days to report any available generating capacity and 60 days to defend or revise regional electricity rates. They are also instructed to be more accommodating of behind-the-meter power for data centers. While the orders create a “fast lane” for data-center connections, they do not address the broader shortage of generating capacity.
At the end of 2023, requests for new power-plant connections exceeded the existing fleet’s capacity, lengthening the queue for grid access. Demand from data centers is projected to nearly triple by 2035, straining operators that have previously seen minimal growth. Some operators, including PJM, have reported operational challenges as utilities consider withdrawing from the market.
Tech firms have increasingly turned to on-site generation to meet their power needs, a more costly and complex solution. Meanwhile, wholesale electricity prices have risen sharply, with rates up as much as 267% over the past five years, according to Bloomberg.
"Delays in data center grid connections threaten U.S. competitiveness in AI," said Energy Secretary Chris Wright in October, prompting FERC’s action.
In a separate development, the administration announced a $765 million payment to wind developer Invenergy to cancel offshore wind leases, with the funds earmarked for natural-gas and geothermal projects. This follows roughly $2.6 billion spent to halt offshore wind projects.
