FERC Orders Grid Operators to Expedite Data Center Interconnections

The Federal Energy Regulatory Commission (FERC) told grid operators on Thursday to fast track interconnection requests from data centers and other large electricity users.

Under the orders, six major grid operators have to show that data centers are “able to connect to the transmission system in a timely and orderly manner.” Data centers will be responsible for paying the costs of the interconnection. Commissioners approved the orders unanimously.

FERC also provided an opening to grid tech startups, directing grid operators to consider “alternative transmission technologies.” The commission didn’t name specific technologies, but the directive could include things like solid-state transformers or superconducting transmission lines.

Grid operators now have 30 days to submit a report detailing how much generating capacity they have to spare, if any. They also have 60 days to “defend or revise” electricity rates within their regions. FERC also directed grid operators to be more accommodating to behind-the-meter power for data centers.

While FERC’s directives gave data centers a fast lane to connect, they did not address the shortage of generating capacity.

Grid connections have been slow to materialize in part because new power plants are also having problems connecting. At the end of 2023, grid connection requests for power plants exceeded the total capacity of the existing power plant fleet, meaning the line to get on the grid was longer than the grid itself could theoretically serve.

Against this backdrop, electricity demand from data centers is expected to nearly triple through 2035. Grid operators, which had grown accustomed to near-zero demand growth over the last two decades, have strained under the load. Some, like PJM, the country’s largest grid operator, have descended into something resembling chaos, with major utilities threatening to withdraw.

Tech companies and developers, unable to connect to the grid in a timely manner in many locations, have been turning to on-site, or behind-the-meter, power (which is typically more expensive and complicated) out of desperation.

Still, enough projects have been able to connect that electricity prices have soared in many regions. Wholesale electricity rates are up as much as 267% compared with five years ago, according to Bloomberg.

FERC was prodded to take on the issue by Secretary of Energy Chris Wright, who in October said delays in data center grid connections had threatened to undermine U.S. competitiveness in AI. Since then, public sentiment toward AI and data centers has soured considerably.

Meanwhile, the Trump administration on Wednesday said it would pay $765 million to wind developer Invenergy to cancel offshore wind leases near California, Maine, and New York. The company said it would use the money to build natural gas plants in the Midwest and geothermal projects in the West. One of Invenergy’s wind projects would have generated as much as 2.4 gigawatts of power — enough, at peak output, to supply roughly 1.8 million homes.

Altogether, the Trump administration has now spent about $2.6 billion to scuttle offshore wind developments.