In order to train models to accomplish many tasks previously performed by humans, artificial intelligence data centers need one thing, and a lot of it — energy. AI “hyperscalers” — massive cloud-computing organizations — are giving public utilities an unprecedented challenge as companies seek a reliable energy base load at the lowest possible price. A recent Berkeley Lab report found data centers could rise to 12% of U.S. power consumption by 2028 — up from 4.4% in 2023.
While the prospect of these clients with 24/7 energy demands could be tantalizing to utilities looking for reasons to build new baseload generation, experts say they should be wary of these hyperscaler promises. Chinese AI company DeepSeek has claimed that generative AI can work with less energy, but it remains to be seen whether or how soon U.S. companies will follow that lead to invest in energy-efficient operations. With many data centers also doing speculative planning across many different utility territories to find the best deal, it becomes tough to determine their real-life energy needs.
“There’s not a lot of good reason to think that all those data centers are going to get built,” said Karl Rábago, a renewable energy developer who previously worked as a utility executive, commissioner and federal executive at the U.S. Dept. of Energy. “As somebody who’s been a regulator but also sort of a developer and other things will tell you, there’s no way data centers are building that much demand at today’s rates.”
Hyperscalers are eager to make backroom deals with utilities on low rates for their demand, and they often succeed, eliminating the motivation to internally increase efficiency and use less power, Rábago said.
“If the legislators and the regulators and the utility are all willing to bend over backwards for your load, then you’d be dumb not to play that,” he said.
Utilities may be wising up to the risk of data centers not needing as much energy as they’re forecasting. Dominion Energy’s latest rate proposal includes a new rate class for high-energy users, such as data centers, to “ensure these customers continue to pay the full cost of their service and other customers are protected from stranded costs.” Users within that rate class would be required to make 14-year commitments to pay for the requested power, even if they use less.
If utilities continue the trend of higher rates with long-term agreements for hyperscalers, adding co-located renewables to their energy mix could become more advantageous to data center operators.
Data centers and renewables
Many of the biggest hyperscaler companies have a history of investments in renewable energy. Microsoft and Google are the Top 2 companies on the EPA’s Green Power Partnership National Top 100, with green power making up 100% and 107% of their total energy use, respectively.
“A lot of the big names that come to mind have been deeply committed to renewables for quite some time, and in the last several years have been very involved not just in purchasing renewable energy from their power providers but also engaging in project development themselves and helping get new projects built,” said Jennifer Martin, CEO of the Center for Resource Solutions (CRS), a nonprofit that offers green certifications for corporations. “For me, it’s not surprising that they would want to continue their renewable energy commitments as they’re looking at this new source of load growth for themselves.”
Over the past few years, these companies have signed solar PPAs with developers like Silicon Ranch, Avangrid and EDP Renewables, motivated largely by internal clean energy goals.
The Bancroft Station Solar Farm is part of a portfolio of Silicon Ranch projects that provide power to Walton Electric Membership Corporation (EMC) as part of the utility’s agreement to supply 100 percent renewable energy for Meta’s data center in Newton County, Georgia.
“Data centers were some of our first customers, and they’ve just continued to grow since that time,” said Adrian Markocic, senior director of market strategy at Silicon Ranch. “Since they’re the ones driving the load growth, in parallel with that, they’re also going to be one of our largest customers.”
Silicon Ranch had 2.5 GW under contract with data center clients in 2024, including with data center developer Tract, in which Silicon Ranch matches existing solar projects in the pipeline with Tract’s regional needs.
“There was a point in time when a green electron was the most valuable electron. Well, we’ve now come to a point in time where the most valuable electron is the one that comes to market first, and solar provides that electron,” Markocic said.
Tract develops data center parks that pre-plan transmission capacity, water, sewer, roads and foundations to provide customers with immediate-use campuses. Silicon Ranch assists Tract with site acquisition and interconnection processes for utility-scale solar and battery projects.
“Our relationship with Silicon Ranch has developed over the past two years based on a joint recognition that delivering speed and certainty for tomorrow’s data center scale cannot rely on the processes and commercial models that have supported data center growth to date,” said Grant van Rooyen, Tract CEO and managing partner, in a news release.
Matching data center energy needs with existing solar projects in the pipeline is the prospect of Nora Esram’s white paper for the American Council for an Energy Efficient Economy (ACEEE), “Turning Data Centers into Grid and Regional Assets.”
“Eventually, we need to build more generation and transmission. But in the next three-to-five years, we can meet that demand by looking at what we already have — assets on the grid — to figure out, how do you optimize existing assets?” said Esram, former senior director for research at ACEEE and current CEO of the New Buildings Institute.
A 2024 study by Berkeley Lab revealed nearly 2.6 GW of total generation and storage capacity was awaiting connection to the grid — over 95% of which was for zero-carbon resources like solar, wind and battery storage.
Although existing assets are plentiful, an additional push from state policy is necessary for data center developers to pursue renewables as their electricity demand soars, Esram said. These policy drivers could add state incentives for data centers that incorporate efficiency standards and contribute to the regional grid as a virtual power plant and/or microgrid.
“I think the problem is we do not have an easy way to measure what is considered a ‘good behavior’ data center yet. But that said, I think we know it’s just a matter of getting a consensus of what that looks like, and have policymakers recognize that kind of measurement is the right way to know if this data center is a sustaining investment for their regional grid or state or region,” Esram said.
The country is still figuring out how to manage the potential energy boom by hyperscaler AI data centers, but renewable energy could play an important role — with the right incentives pushing in that direction.
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