AI data centers just got a government-mandated fast track to the network

The Federal Energy Regulatory Commission (FERC) asked grid operators on Thursday to fast-track interconnection requests from data centers and other large electricity users.

Under the orders, six major network operators must demonstrate that data centers are “capable of connecting to the transmission system in a timely and orderly manner.” Data centers will be responsible for paying interconnection costs. The commissioners approved the orders unanimously.

FERC also provided an opportunity for network technology startups, directing network operators to consider “alternative transmission technologies.” The committee did not mention specific technologies, but the directive could include things like solid-state converters or superconducting transmission lines.

Grid operators now have 30 days to submit a report detailing how much generation capacity they must provide, if any. They also have 60 days to “defend or review electricity rates” within their regions. FERC also directed grid operators to be more accommodating of behind-meter power for data centers.

While FERC’s guidance gave data centers a fast track to connectivity, it did not address the generation capacity shortage.

Grid connections have been slow to implement partly because new power plants also face connectivity problems. At the end of 2023, grid connection demands for power plants exceeded the total capacity of the existing power plant fleet, meaning that the line connecting to the grid was longer than the grid itself could theoretically serve.

Against this backdrop, electricity demand from data centers is expected to nearly triple by 2035. Grid operators, accustomed to near-zero demand growth over the past two decades, have come under severe pressure under this burden. Some, like PJM, the country’s largest grid operator, have descended into near chaos, with major utilities threatening to walk out.

Technology companies and developers, unable to connect to the grid in a timely manner in many locations, have turned to on-site or behind-the-meter power (which is usually more expensive and complex) out of desperation.

However, not enough projects have been able to connect resulting in higher electricity prices in many areas. Wholesale electricity prices are up to 267% higher than they were five years ago, according to Bloomberg.

FERC was urged to take up the issue by Energy Secretary Chris Wright, who said in October that delays in data center network communications threaten to undermine U.S. competitiveness in artificial intelligence. Since then, public sentiment toward AI and data centers has soured dramatically.

Meanwhile, the Trump administration said Wednesday it will pay $765 million to wind energy developer Invenergy to cancel offshore wind leases near California, Maine and New York. The company said it will use the funds to build natural gas plants in the Midwest and geothermal projects in the West. One of Invenergy’s wind projects could have generated up to 2.4 gigawatts of power, enough, at peak production, to power nearly 1.8 million homes.

In all, the Trump administration has so far spent about $2.6 billion to thwart offshore wind development projects.