U.S. Federal regulators order grid operators to speed power to energy-hungry AI data centres

Technology analyst Daniel Bader speaks about new polling on how Canadians feel about AI data centres and what's driving opposition to them.

WASHINGTON — U.S. Federal regulators on Thursday ordered regional grid operators to help large energy users connect more quickly to the nation’s inefficient and aging electric transmission system, a step they said is needed to accommodate surging demand from power-hungry artificial intelligence data centres.

U.S. Energy Secretary Chris Wright had urged the U.S. Federal Energy Regulatory Commission to act in an effort to help the United States better compete with China for superiority in the fast-growing AI sector.

Tech companies and data centre developers welcomed the chance to connect faster to the country’s power supply for the biggest energy users ever built in the United States, including some that consume more electricity than a small city.

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Utilities, states and regional grid operators had worried that the Republican administration’s plan would remove their authority to manage the process, but FERC said the order leaves states in control of retail electric rates, terms and conditions. Clean energy advocates had urged regulators not to undermine state-level efforts to require the use of renewable energies, and came away satisfied Thursday.

The commission’s actions come as a backlash grows against data centres over concerns about the massive amounts of energy and water they use and fears about noise and air pollution, water shortages and a loss of open space or farmland.

Unanimous vote and affordability

FERC members voted unanimously to direct six regional grid operators to ensure that AI data centres and other large power users are “able to connect to the transmission system in a timely and orderly manner.”

Laura Swett, an appointee of U.S. President Donald Trump who chairs the commission, called the vote “historic” and said it would push the country’s electricity market into the future while respecting states’ rights, protecting reliable electric service and shielding ratepayers from shouldering the costs of connecting big power users to the grid.

“I know that Americans across the country are concerned about affordability, and so are we,” Swett said, referring to the five-member commission. She said that, as chairman, “I am taking extremely seriously the mission that Congress has entrusted us to ensure that rates are reasonable.”

The vote comes eight months after Wright asked the independent agency to take more control over ensuring that the vast network of massive computing warehouses needed to power AI are connected quickly to high-voltage transmission lines.

Data centres would pay the full cost of any grid upgrades needed for their connection, under the commission order. But that order can do little to address the tightening energy supplies that are driving up electricity bills in some areas and raising warnings of blackouts as the construction of data centres outpaces the speed of new power plants coming online to serve them.

Robert Montejo, a lawyer who represents data centres, said the most important message from FERC’s action is that AI “has fundamentally changed the electricity landscape. The grid and prior policy were not built for the pace and scale of demand we’re seeing from AI infrastructure, and FERC is signaling that standing still is no longer an option.”

The six regional grid operators under the order serve 200 million Americans, or two-thirds of FERC’s jurisdiction. FERC, meanwhile, invited utilities that handle their regional transmission systems to also participate and analysts said the agency could eventually pressure them, too.

A search for power

Tech giants are scrambling to find enough power for their data centres and report that, in some places, it will take years to connect to the electric grid.

The Edison Electric Institute, which represents investor-owned electric utilities, said FERC’s order builds on regional and state processes already underway while “supporting flexibility and innovation.”

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Besides power bottlenecks, the tech industry is running into widespread opposition from communities where residents don’t want to live next to or near a data centre.

More than 4,000 data centres now operate in the U.S., according to one estimate, with an additional 3,000 planned or under construction.

Trump has tried to deflect public concerns about AI, seeing the fast-evolving technology as crucial for the U.S. to attract foreign investment and maintain its economic and military prowess. He signed an executive order this month establishing a framework for the federal government to vet the national security risks of the most advanced AI systems for up to a month before their public release.

In December, FERC took an earlier step to help data centre operators get electricity quickly, voting to allow tech companies to effectively plug a data centre directly into a power plant and Thursday’s order sought to ensure that option is accessible around the country.

Power demands from data centres

FERC told grid operators to respond within 30 days on how they will ensure there is adequate power supplies for new and future data centres, and within 60 days on plans to integrate large power users in line with the new guidelines. Swett told reporters after the meeting that she hoped faster connection processes are in effect in “as little time as possible.” She didn’t set an exact timeline.

Jeff Dennis, executive director of the Electricity Customer Alliance, said FERC’s order is responsive in particular to big power users and state regulators.

Tech giants are confronting unclear rules to connect data centres to high-voltage transmission systems, while state regulators need more clarity on who should bear the cost of regional transmission projects approved at the federal level, he said.

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Rob Gramlich, a Washington-based energy consultant, said states should quickly develop rules to accommodate large power users and prevent cost shifts to residential and business customers. FERC could assert broader jurisdiction over interconnection issues if states don’t act quickly, he said.

Data from the Electric Power Research Institute shows that data centres now account for about 5% of U.S. electricity demand, but could triple by 2035.

Tech companies have continued to raise their spending on building and equipping data centres, but there is evidence that construction is lagging and projects are hitting roadblocks, either because of permitting delays, growing local opposition or bottlenecks around gas turbines, transformers and skilled labor.

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Matthew Daly And Marc Levy, The Associated Press

Levy reported from Harrisburg, Pa.