Data center firms could purchase electric utilities and add renewable generation in the United States, says Simon Mahan, executive director of the Southern Renewable Energy Association, which represents the wind, solar, storage and transmission sectors.
From pv magazine USA
pv magazine: Why might a data center firm consider buying an electric utility?
Simon Mahan: Of course, this concept is hypothetical. But if you look at artificial intelligence and data center growth, access to significant quantities of energy is starting to become a bottleneck for a lot of these major companies—the Amazons, the Metas, the Googles of the world. If you look at a major electric utility, like an Entergy, that’s maybe a $40 billion company. And some of these data center companies are multi-trillion-dollar companies. To them, the market capitalization of a utility is kind of a rounding error.
And the data center firms are pushing for more and more generation, almost without hesitation with regards to price. So maybe there’s a company out there that would consider purchasing an electric utility. They could get control over their energy supply, and create long-term cost certainty.
I mentioned Entergy as a $40 billion corporation, but there are many electric utilities or utility subsidiaries valued at just a few billion dollars. Southern Company carved off Gulf Power and sold it to Florida Power and Light for about $7 billion in 2019. Dominion purchased SCANA in South Carolina for about $15 billion, also in 2019. There are also cooperative utilities that may be interested in a public-private partnership, and smaller municipal utilities.
So there are smaller electric utilities out there that data center companies could purchase to make it easier for them to build generation and secure their energy supply.
pv magazine: How could a data center firm’s purchase of an electric utility speed solar and wind deployment?
Simon Mahan: A data center company that owns an electric utility could issue requests for proposals or build their own generation resources, including wind and solar.
Also, a big chunk of the time that it takes for a utility to plan a new generation resource is for them to identify a customer and negotiate a rate plan with the customer. A utility must also show a state regulatory commission that a proposed power plant is going to be used and useful.
In the concept of a data center company acquiring a utility, you can resolve a lot of those questions at the front of the discussion because the data center company is creating the load, and can get direct wholesale prices for the energy that a new power plant would generate, especially if the load is paying for the new generation. That makes it a lot easier for a state public service commission to approve that generation, and to show that they’re not going to charge other ratepayers the cost of building this new infrastructure.
So, there are a number of things that streamline all generation resources if you are coupling a buyer and a seller effectively into one company.
pv magazine: You’ve said that data center firms’ interest in co-locating generation and load relates to your concept. Can you say more on that?
Simon Mahan: This discussion is very close to the discussions around co-location of generation and load. As a case in point there’s interest in effectively putting a nuclear reactor behind the meter for a large-scale data center in PJM, the nation’s largest grid region, and if anybody had suggested that ten years ago, it would not have been viewed as a possibility. But now folks are trying to figure out how much generation can we get back behind the meter on these large loads.
In some regions like the Southeast, where you have territorial acts, by law the only companies that can have retail customers for electricity are the electric utilities, and so you can’t, for instance, do a co-location deal where a renewables developer serves a data center facility directly in South Carolina. But if the data center firm bought the utility company, it could co-locate generation with its load and sell the electricity from its utility division to its data center division.
pv magazine: Would a data center’s purchase of an electric utility require regulatory approval?
Simon Mahan: Yes, absolutely, or for any arrangement with a municipal utility or a cooperative utility, that would require approval from its governing body.
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