(AP) HARRISBURG, PA Tech firms seeking a quick resolution for their rapidly expanding electricity needs are increasingly trying to negotiate direct plug-in agreements with power plant owners rather than going through the possibly more costly and time-consuming process of connecting to a failing electric system that serves everyone else.
It’s making some wonder if it’s fair to exempt large power users from paying for the system and if redistributing power to higher-paying consumers will leave enough for others. Federal regulators are working rapidly to determine what to do about it.
The main attraction is the data center that Amazon Web Services, a cloud computing subsidiary of Amazon, is constructing in Luzerne County, Pennsylvania, adjacent to the Susquehanna nuclear facility.
This agreement, known as a “back-the-meter connection,” between the plant’s owners and AWS is the first of its kind to be presented to the Federal Energy Regulatory Commission. A agreement that would eventually deliver 960 megawatts, or roughly 40% of the plant’s capacity, to the data center has been rejected by FERC for the time being. That is sufficient to power almost half a million homes.
That puts the contract in limbo, along with others that would probably follow. It is unclear how the change in presidential administrations may impact the situation or whether FERC, which blocked the agreement on a procedural basis, will take up the issue again.
In September, the owner of Dauphin County’s decommissioned nuclear power plant on Three Mile Island declared that, for data center purposes as well, it will attempt to reopen the facility by 2028.
According to Bill Green, director of the MIT Energy Initiative, the corporations are really dissatisfied because they now have a very large business opportunity. Additionally, they risk missing the business opportunity entirely if they are put in line for five years, for instance. I’m not sure whether that would be five years, but years nonetheless.
What s driving demand
The demand for data centers, which require electricity to run servers, storage systems, networking hardware, and cooling systems, has increased due to the quick development of cloud computing and artificial intelligence.
This has sparked plans to develop small modular nuclear reactors, pull nuclear power plants out of retirement, and construct new natural gas plants or utility-scale renewable projects. California-based Oklo said in December that it would supply data center developer Switch with 12 gigawatts of nuclear waste-powered power from tiny nuclear reactors.
The economy and national security, especially keeping up with China in the battle for artificial intelligence, depend on the rapid expansion of data centers, according to federal officials.
The agreement with Susquehanna addresses AWS’s internal needs for dependable power sources that don’t release greenhouse gases that warm the world, such as coal, oil, or gas-fueled power plants.
Fast center setup is another goal of Big Tech. However, efforts to move away from fossil fuels that warm the planet are already placing a strain on the power supply, and tech’s ravenous demand for energy comes at a time when this is already the case.
According to Aaron Tinjum of the Data Center Coalition, they can construct data centers in a few years. However, he said that in other places, it can take up to four years, and occasionally even longer, to connect to the crowded electrical grid.
Their development timeframes would be delayed by years if they were to plug straight into a power plant.
On Tuesday, January 14, 2024, the Susquehanna nuclear power plant is in operation close to Berwick, Pennsylvania. (Photo courtesy of Ted Shaffrey)AP
What s in it for power providers
Theoretically, Susquehanna would be able to sell power for more money through the AWS agreement than they would by selling into the grid. The primary owner of Susquehanna, Talen Energy, estimated that the agreement would generate up to $140 million in electricity sales in 2028, but it did not specify the precise amount that AWS would pay for the power.
After years of financial hardship and dissatisfaction with their payment in the larger electricity markets, other nuclear plant operators are particularly embracing the profit potential. Many claim they have been forced to contend with a plethora of low-cost natural gas and state-subsidized wind and solar energy in some areas.
By avoiding the expensive construction of lengthy power lines, power plant owners claim that the arrangement helps the general public and frees up more transmission capacity for everyone else on the grid.
FERC s big decision
Many more gigantic data centers and other large power users, such as bitcoin miners and hydrogen plants, could be made possible by a favorable FERC verdict, according to analysts.
The November FERC rejection, which was 2-1, was procedural. Commissioners’ recent remarks imply that they were not prepared to make a decision about regulating such a novel matter without further research.
Arguments for and against the Susquehanna-AWS agreement are currently being heard by the agency.
In a filing to FERC, Monitoring Analytics, the mid-Atlantic grid’s market watchdog, stated that if the Susquehanna-AWS model were applied to all of the region’s nuclear power reactors, the consequences would be severe.
According to the report, energy prices will rise sharply, and there is no way to meet the growing demand for electricity even before large power plants are removed from the mix of sources.
Separately, two electric utility owners who profit from constructing and supplying power in deregulated states have objected to the Susquehanna-AWS agreement, arguing that it amounts to freeloading off a grid that regular consumers pay to construct and maintain. Exelon, based in Chicago, and American Electric Power, based in Columbus, Ohio, claim that the Susquehanna-AWS agreement would spare AWS from having to pay $140 million annually.
Owners of Susquehanna’s say the data center won’t be connected to the grid and wonder why maintenance costs should be covered. However, some argue that the power plant itself should not be allowed to make agreements with private clients that might raise prices for others because it is profiting from taxpayer subsidies and ratepayer-subsidized services.
According to Jackson Morris of the Natural Resources Defense Council, FERC’s decision will have significant national ramifications since it would establish a standard for how FERC and grid operators will respond to the oncoming flood of comparable petitions from nuclear power plants and data center firms.
At a hearing in November, American Electric Power vice president Stacey Burbure warned FERC that it must act swiftly.
According to her, the problem is already here, and it will be too late if we take the usual five years to resolve it.