The growing demand for artificial intelligence — and the resulting boom in venture capital funding — comes with an accompanying explosion in the number and size of data centers required. Some individual data centers are now drawing well over 500 megawatts of power, but the grids simply aren’t growing fast enough to meet that demand.
With more and more data centers popping up across the country, we are grappling with a key question: how can we meet the demand for AI and subsequent new data centers while maintaining sustainability goals? Some experts are forecasting a surge in natural gas usage to meet demand, while others suggest we recommission other types of fossil fuel plants, including coal. But these options would be grave errors, given the alternatives that would keep us on-track for decarbonization.
There are ample opportunities to expedite renewable energy deployment through the use of solar, wind, hydro, and storage, while making it dispatchable. The Federal Energy Regulatory Commission recently issued new rules that will more rapidly connect new clean energy projects to the grid, lower power costs, and enhance grid reliability. Those regulatory changes have the potential to address both climate goals and blackout risks due to extreme weather and outdated infrastructure.
To effectively address the negative climate impacts of AI and expedite the adoption of renewable energy, we must take a multi-pronged approach. Righting the data center and energy demand ship will require resolving interconnection challenges, aligning utility incentives with societal goals, embracing technological solutions, and maintaining a strong commitment to sustainability.
The current process for interconnection studies creates an unnecessary bottleneck when trying to get renewables up and running. While these studies are essential for determining the feasibility of connecting renewable energy projects to the grid, they frequently take years to complete, stalling project development even before ground is broken.
It is imperative that we mandate a faster, more efficient approach. And luckily, work has already begun on this front. The recent ruling from FERC has the potential to reduce the timing that these studies take from multiple years down to well under one year. Creating standards will ideally force regional transmission organizations and independent system operators to prioritize more mature projects, and put more of the siting burden on developers to prove that maturity.
At a high level, this FERC order sends the message to RTOs and ISOs that efficiently interconnecting new resources is an urgent matter and that the status quo is unacceptable. It’s quite possible that its implementation could do more to accelerate renewable energy deployment in the U.S. than even the Inflation Reduction Act.
The untapped potential of GETs
Once interconnection studies have been completed, it does not mean that the project is immediately green-lit. From there, developers and IPPs must consider whether grid upgrades are absolutely necessary for the project’s success.
Despite the widespread availability of storage and grid enhancing technologies (or GETs), which maximize the transmission of electricity across the existing system, these tools remain largely underutilized. GETs like dynamic line rating and power flow controllers offer a way to make the most of existing infrastructure and accommodate a greater renewable energy capacity at a fraction of the cost of traditional upgrades.
Advanced reconductoring is another option for increasing grid capacity. Upgrading old power lines with state-of-the-art materials can make them work better, potentially doubling capacity in many areas and facilitating the integration of more wind and solar power. And reconductoring can be done faster and at less than half the cost of building new lines, addressing one of the major obstacles to expanding the clean energy grid.
But speed is of the essence. The critical issue is whether we are aggressive enough in adopting these new technologies to accelerate renewable grid upgrades, rather than rely on alternatives like natural gas.
Realigning utility incentives
As things stand, the incentive structure for utilities presents a significant barrier to expanding the amount of renewable energy on the grid.
Utilities, driven by profit motives, often prioritize costly grid upgrades over more efficient and innovative solutions, because those upgrades can provide higher financial returns under the existing regulatory framework. This model, known as “cost-of-service” regulation, rewards utilities for the amount they spend rather than the outcomes they achieve. It hinders the adoption of renewable energy technologies because they often require less capital investment. To truly accelerate the transition to renewable energy, we must align utility incentives with broader societal goals.
Take New York as one positive example. The state’s Climate Act mandates that New York cut economy-wide greenhouse gas emissions by 40% by 2030 and by at least 85% by 2050, compared to 1990 levels. With this, utilities are incentivized based on their ability to meet specific clean energy and efficiency goals, ensuring alignment between utility profits and energy goals. By fostering collaboration between stakeholders and prioritizing transparency and efficiency, these initiatives serve as a blueprint for broader implementation.
The need for decisive climate action has never been more apparent. The rapid advancement and widespread adoption of AI technology cannot be stalled — but that doesn’t mean that the fight against climate change is lost. It is incumbent upon policymakers, regulatory bodies, and industry stakeholders to take concrete steps to deploy more renewable energy to fuel growing energy demands.
Mike Hall is the CEO and co-founder of Anza Renewables, a solar energy equipment supplier. The opinions represented in this contributed article are solely those of the author, and do not reflect the views of Latitude Media or any of its staff.
