The surge in behind-the-meter (BTM) power generation reflects a grid and interconnection system failing to keep pace with demand and stands in the way of efforts needed to rehaul the grid, industry speakers told a panel today.
"If you look at a lot of the development that's happening now, more and more of it's going behind the meter, and that's a bad outcome for the industry," Amazon Web Service (AWS) vice president Kerry Person told a panel at CERAWeek by S&P Global in Houston, Texas. "Players are taking energy generation into their own hands because the system is not keeping up."
As demand for artificial intelligence (AI) surges, more data-center developers are building their own on-site generation rather than relying on the grid because they cannot get connected fast enough through the traditional interconnection process. The private power plants risk locking in expensive, high-emissions infrastructure instead of pushing investment into proper grid upgrades, renewables, and demand-response initiatives, panelists said.
"Grid-connected is always better," said Dominion Energy Virginia president Ed Baine. "It's better for the customer who was thinking about building on-site generation. It's better for the collective customers on the grid."
The shift toward self-supply makes it harder for utilities to implement demand-response mechanisms that several panelists described as one of the best potential tools for easing grid stress. Data centers rarely run their facilities at full peak load, meaning they could reduce consumption or switch to backup resources when the grid is strained.
Demand-response measures only work if loads are integrated into the system and visible to operators. While the technology exists to enable such coordination, today's market rules do not incentivize data centers and other large consumers to curtail load. Additionally, regulations tightly control when operators can use their own generating equipment and do not allow them to determine when to switch to back-up, making many of them unwilling to reduce their load. If the wealthiest companies decide to go on their own and build private power plants, it undermines a collective push for regulatory overhauls that could improve efficiencies.
These private power plants are meant to be temporary "bridge" solutions, but once these BTM, fossil fuel-fed plants have permits and sunk costs, they risk becoming permanent and intensifying a growing community backlash against data center development, said Schneider Electric president Aamir Paul.
Of the 40GW of BTM power projects that Schneider Electric is tracking, 80pc of them say they intend to connect to the grid and 20pc are saying they will remain off-grid. BTM solutions have included natural gas turbines, diesel generators and even repurposed aircraft engines, said Paul. "You know people aren't going to be excited about that, right?" said Paul, noting that these alternatives could further stoke public outcry from local residents.
"The islanded-forever, fossil-fuel intensive solution is not practical or good."
