Discrepancies in policy timelines creating complications in the AI-energy connection
In the midst of a data center boom, regulatory bodies like the Federal Energy Regulatory Commission (FERC) and public utility commissions are playing a pivotal role. They are making decisions about utility rates and load growth, with the data center load being the main focus in resource adequacy proceedings at FERC.
The Department of Energy is also addressing regulatory issues, particularly through a partnership looking at AI for permitting reform and AI for reforming the interconnection process. The speed to power is an imperative for the data center industry due to a supply constraint problem on the generation side.
Congress is currently embroiled in a reconciliation debate, which threatens to walk back key Inflation Reduction Act provisions that have encouraged the build-out of new renewable capacity. This could potentially slow down the pace of new data center construction.
The processes involving regulatory agencies like FERC and public utilities, such as Georgia Power, for planning and building the necessary infrastructure to supply power to data centers are complex. They include obtaining permits, conducting environmental and grid impact studies, coordinating grid integration, securing funding and approvals, and complying with reliability and safety standards.
FERC, however, is uncomfortable with creative, quick solutions to the supply constraint problem due to regulatory uncertainty. Georgia Power is projecting up to 9.4 gigawatts of new load in the next decade from electrification and data centers, but the state's Public Service Commission is pushing back against that forecast.
The problem lies in getting new ideas to proliferate and getting regulators to respond to transactions being negotiated by sophisticated buyers and sellers. State utility commissions are now engaged in the broader implications of data center load, beyond rate design proceedings.
Some states are still not fully engaged in the data center issue, but all are monitoring the situation. A bipartisan permitting bill is likely to be passed after the reconciliation debate, which could provide a boost to the data center industry.
Congress is focusing on the reconciliation debate and is expected to provide resources to help with various aspects of the data center issue later this year. The federal government is focusing on transmission and permitting build-out, with efforts led by the Trump administration through executive action and the Department of Energy.
Trump's administration rolled back environmental regulations to facilitate infrastructure development. However, the pause on deploying Inflation Reduction Act and infrastructure law funds has held up projects that could provide power to data centers.
The executive branch is trying to open up federal lands for data center citing. The Department of Energy is working on accelerating commercialization of technologies to power data centers, but sees this as a long-term solution. President Trump's administration made powering AI a matter of national security.
DOGE and Elon Musk have fundamentally reshaped the federal workforce, including at the Department of Energy. The federal government's focus on data centers is not just about powering the digital economy, but also about maintaining national security and economic competitiveness.
As the data center industry continues to grow, regulatory bodies will need to adapt to the changing landscape and find solutions that balance the need for rapid infrastructure development with the need for environmental protection and public safety.
