Three years ago, if a distributed energy company approached a data center developer and encouraged them to rely even partially on onsite power, they would have said I would never do that or that’s crazy.
That’s according to Duncan Campbell, VP of data center solutions at Scale Microgrids, speaking at the DERVOS conference on New York’s Governor’s Island last month. But today, he continued, many data centers are beginning to view onsite, behind-the-meter power as essential; the question, the panel went on to discuss, is whether this growing embrace will mean that battery storage can truly compete against onsite thermal options.
Arguably the single greatest priority for data center developers is speed to power. In much of the country, the interconnection queue for large loads like data centers is so clogged that securing even small amounts of power takes years. Sean Jones, who works on Tesla’s Megapack product, said that load growth has created a sense of competition between potential sources of power: off-grid solar and storage versus behind-the-meter gas — versus waiting sometimes years for an interconnection to the utility’s network.
A key element of this competition, he added, comes down to price: As gas turbine costs increase and wait times stretch longer, batteries get more appealing.
It’s early days, but there is certainly some evidence that storage could win out. Last week, BloombergNEF upped its U.S. storage projections to 204 gigawatts by 2035, even as it pared back solar and wind estimates. And a Friday note to clients from the investment firm Jefferies found that “hyperscalers present a 20 GW opportunity” for BESS through 2035, and roughly nine GW through 2030.
“With hyperscalers increasingly embracing some permutation of grid-connection and BTM backup generation, we see BESS as a complementary resource to enable flexible load management, accelerate speed to interconnection, and provide backup capacity in a redundant form factor,” the note reads.
BESS for interconnection
There has been rising interest in the idea that large loads could demonstrate with behind-the-meter batteries that they can be flexible enough to draw less power from the grid when demand is high — and therefore secure a faster interconnection. But until recently, there haven’t been any major data center-specific announcements using this model.
Mere days after the DERVOS conversation took place, though, Aligned Data Centers announced a first: a deal for a 31-megawatt, 62-megawatt-hour battery alongside a data center it’s constructing in the Pacific Northwest, which is sized to allow it to get interconnected “years earlier than would be possible with traditional utility upgrades.” The project, which relies on two-hour batteries, is planned to be operational in 2026.
The energy storage company Calibrant Energy will develop the battery in partnership with the local utility. Matt Barnes, Calibrant’s CCO, told Latitude Media that the company has worked with some of the country’s largest data center providers for more than five years, but demand for the onsite systems has spiked recently.
“The demand is strong and has grown exponentially in the last couple years as data centers increasingly recognize the critical role that energy flexibility, and specifically battery storage, can play in enabling their growth objectives,” Barnes said, specifically referencing the use of BESS to accelerate interconnection.
For more on the use of behind-the-meter resources to secure a faster interconnection, listen to the latest episode of the Catalyst podcast:
Whether these storage systems would necessarily remain behind-the-meter once interconnection has been secured, though, is an open question. Hallie Cramer Carrao, who worked in advanced energy labs for Google, told the DERVOS audience that the company’s “strong preference” is to look at solutions that can act as a bridge to interconnection. Even options that might start out as behind-the-meter generation, she added, would ideally end up front-of-meter for reasons of reliability, cost, and longer-term business flexibility.
“Batteries, I think, will also be part of the solution, but they haven’t been part of it so far,” Carrao said.
(This is an echo of AWS’ posture; Brandon Oyer, who leads carbon-free energy procurement for the hyperscaler’s data center, told Latitude Media in the wake of a high-profile deal for behind-the-meter generation with Talen Energy that their objective is to “get back to being grid-tied.”)
Other battery use cases
Meanwhile, as Jones observed on the DERVOS panel, the engineering complexity of onsite operations for large loads is very high, especially for artificial intelligence data centers that come with rapid power fluctuations. Tesla has seen data centers use Megapacks in combination with fossil gas plants to smooth out load profiles and avoid taxing the equipment too much. As Campbell put it, “you’re basically building a utility system at that point. It’s not just like some little microgrid anymore.”
That said, Jefferies noted that supercapacitors are likely better-equipped to manage the “volatile swings in power utilization” that AI data centers can experience.
For uses like demand response and capacity backup, Jefferies anticipates that the greatest opportunity is for lithium-ion batteries with two-to-four-hour durations. “We think data centers will optimize for quality and price, making Chinese LFP BESS the most compelling option,” the equity analysts wrote, though Tesla and Fluence both stand to benefit as well.
In contrast, longer-duration storage is likely to see more limited demand from data centers, Jefferies found. That said, just last week Mateo Jaramillo, CEO of the 100-hour battery company Form Energy, told Latitude Media that there has been a massive uptick in data center interest in the company’s systems — so much so that the company is expanding its manufacturing plans faster than initially planned.
