Microgrids were initially a way for large customers and utilities to keep connected when the grid suddenly became unavailable: during power outages, inclement weather or operational failures.
Today, however, an era of surging demand and new load growth is prompting a reassessment of microgrids’ potential. Some data center developers have been looking at them not only as resilience solutions, but also as assets that could supplement, or potentially even substitute, their need for a grid connection.
Last month, for example, U.S. operator Corscale Data Centers signed an agreement with microgrid developer e2Companies to use its systems to partly fulfill the energy needs of its data center pipeline. In February, Nautilus Data Technologies and Overwatch Capital partnered to deliver AI data centers primarily powered by clean energy microgrids. And in January, PowerSecure, Southern Company’s microgrid subsidiary, announced its plans to support developer Edged’s data centers around Atlanta.
James Richmond, CEO of e2Companies, told Latitude Media that the industry’s interest in microgrids is taking off fast. “The interest in the last six months is a little off the charts, because interconnections and availability of power has become a big problem,” he said.
But whether microgrids are a viable solution for powering data centers at scale, despite their high complexity and upfront costs is an open question — as is which mix of generation assets would best serve the new load type.
Speed and scalability
For a data center developer, the most obvious advantage of building a microgrid is that it can provide power fast. With a microgrid developed by e2Companies, for example, a data center developer could get access to some power up to two years faster than if they wait for the interconnection process to sort itself through, according to Richmond. And as the demand for data centers rises, timelines for getting them interconnected are skyrocketing; in certain strained regions like Northern Virginia or the Netherlands, they might have to wait up to 10 years. The potential for saving time with a microgrid is one of their main attractions for developers, Richmond added, because it “is money in their pockets.”
Duncan Campbell, VP of project analysis at Scale Microgrids, which develops microgrids based on a mix of solar and gas generation and energy storage, said that data centers are willing to shell out for power that’s available sooner.
“I don’t know if someone would pay 50 cents per kilowatt-hour for power, just to get a data center that starts at a sooner date than it otherwise would, but I do think they’d probably pay 20 cents per kilowatt-hour, so it’s pretty high value,” Campbell said. “The advantage of speed is really big… because data centers are willing to do crazy things for power right now.”
Plus, Elham Akhavan, senior microgrid research analyst at Wood Mackenzie, pointed out that microgrids are scalable, which is a big advantage in an industry that evolves as fast as data centers.
“Over the past couple of years, developers have been working with modular microgrids blocks — small sets of five- to 10-megawatt blocks that are fast to deploy and scalable,” Akhavan said. “Because data center efficiency is also improving every second, which brings down the power demand of the data centers, these blocks of modular microgrids could be aligned with the phasing development of these data centers. And as the efficiency improves, these solutions and those facing expansions could meet at a parity point.”
Control and flexibility
Aside from having more control over speed and scaling, Alvin Nguyen, who leads advisory firm Forrester’s data center services research, said that with microgrids, data center developers can have more control over the system in general. In moments of economic uncertainty, like today, that’s particularly important, he added.
“With complications due to geopolitics, tariffs, export controls, potential sanctions globally, who knows how much things are going to cost,” Nguyen said, adding that because microgrids are smaller and have a quick turnaround, they are less exposed in terms of costs than major power plants and energy providers. “The microgrid is more under your control. The power plant is not.”
Additionally, a data center equipped with both a microgrid and a grid connection has the potential to become a flexible grid asset via curtailment and demand-response programs without having to sacrifice uptime. This can be used to “make the utility happy,” according to Campbell.
“The utility can get you a high voltage power connection… but [it] is concerned about things upstream in their system, if they have enough generation and transmission capacity,” he said. “So you would use the battery to reduce your load during the times when it would be a problem for the utility.”
Recent research from Duke University suggests that in the U.S., the grid could tap into over 100 gigawatts of load just by adopting flexibility solutions, without major capacity expansion.
‘A new and scary thing’
However, microgrids also come with challenges.
For one, microgrid developers are just as vulnerable to geopolitical and economic turmoil as everybody else — for instance, the high tariffs that U.S. President Trump has imposed since taking office for the second time in January.
“Tariffs and supply chain tightness are going to impact microgrid developers, even those who have spent the past few years onshoring parts of their supply chain, as they still rely on offshore suppliers for the remaining components,” Akhavan said. “The impact will mean more delays and more dollars per kilowatt for microgrids. And microgrids have always been one of the most expensive [distributed energy resources].”
Plus, it’s a “new and scary thing” for data centers operators, who have historically been sensitive to the quality of their uptime, according to Campbell.
And in a world where data center developers are aiming for gigwatt-scale campuses, it’s still unclear whether big microgrids can still be economically feasible, despite the modular nature of many of them.
“For very big data centers, you would need utility-scale storage, and because of tariffs, the availability of storage is uncertain,” Akhavan said, adding that unless energy storage becomes cost-competitive with conventional assets, natural gas, and even a natural gas microgrid, would still be more economical than a renewable-based microgrid.
That said, there are already projects underway at the gigawatt scale.
Last February, Sheldon Kimber, founder and CEO of Intersect Power, told Catalyst’s Shayle Kann that “we’re moving into an era where grid connection is optional and should be optional.”
“So I’ll give you an example. We’ve got two multi-gigawatt scale data center sites in the panhandle of Texas — one of them is three gigawatts, one of them’s over a gigawatt,” he said. “They’re capable of being fully off-grid if you want them to. They’re on gas. They have multiple gigawatts each of wind and solar on-site, [and] the ability to interconnect batteries for similar capacities.”
But it’s “a new thing, nobody’s done that before ever,” Campbell said. “It’s a big challenge to not only get everybody comfortable with microgrids, operating data centers at the uptime requirements they need, but also doing microgrids at a bigger scale than they’ve ever been done before. That’s giving everybody a little bit of heartburn.”
