Flexible Power Use by US Data Centers Is Fiction, Report Says

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(Bloomberg) — The idea that data centers can shut down during peak demand times — not requiring the buildout of power plants — is a concept that could cost utility customers billions of dollars, according to a new report.

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Proposals to build massive new data campuses that promise to throttle back during grid emergencies without adding new generation are poised to tack on as much as $5.48 billion in annual capacity costs while adding billions more in actual energy costs, according to an analysis Thursday by Monitoring Analytics LLC, the independent market monitor for PJM Interconnection LLC. 

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“The assertion that large new data center loads can be demand-side resources and do not require new capacity is a regulatory fiction,” Monitoring Analytics said in the report. Given data centers typically require 99.999% electricity reliability, “the option to interrupt these customers is not a viable solution.” 

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PJM, which manages the 13-state eastern grid stretching from the mid-Atlantic to the Midwest, is home to the largest concentration of data centers in the world and soaring power demand has strained aging infrastructure, driven up costs for consumers and become a political flashpoint. 

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The monitor’s analysis for the first time quantifies the cost of making data centers flexible as a way to extract more use out of grid without adding to it — meaning they shut down during periods of extreme stress. Earlier this year, Duke University published a pivotal paper that said the existing US grid has about 100 gigawatts of “headroom” to add new demand if data centers throttled back at certain times.

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The analysis modeled the increase to annual capacity costs procured through PJM auctions if 20 gigawatts of new data center demand were added to the grid and 90% of the new demand promised to shut down completely in extreme events, according to the report. These would be payouts to data centers to potentially serve as emergency resources for a few hours of the year.

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Even if 100% of new demand sources participated, capacity costs would still climb by about $396 million, the analysis found. The way to prevent other consumers for paying for data center growth is if those big consumers built plants capable of generating the power they need, the report said.

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