Powering Growth: Utility Challenges Facing Data Centers (Podcast)

In this episode of the Data Center Counsel podcast, Jared Berg and Bryan Clark talk with Ted Duver about the regulatory forces driving data centers to develop on-site, behind-the-meter generation. They examine how long interconnection timelines, grid infrastructure constraints and evolving regulatory frameworks — particularly in PJM and ERCOT — are pushing developers toward greater control over power supply in pursuit of "speed to power" and Five 9s reliability.

The group compares ERCOT's energy-only market and recent Senate Bill 6 reforms with more traditional ISO/RTO markets, highlighting regulatory uncertainty, cost allocation debates and the growing role of co-located generation.

Episode Highlights

[3:30] The Surge in Large Load Interconnections: The conversation begins with a look at how the rapid growth of data centers — particularly AI-driven facilities — has stressed traditional interconnection processes. In markets like PJM, generation additions and large load requests have accelerated over the past five years, creating regulatory uncertainty and extended timelines. The tension between developers' need for speed and regulators' study-driven processes sets the stage for alternative solutions.

[11:00] Cost Allocation and Public Perception: The discussion turns to infrastructure upgrades and who pays for them. When grid improvements benefit multiple customers, costs may be socialized through rate base, fueling public concern that data centers are driving higher electricity bills. Jared, Bryan and Ted explain how transmission and distribution upgrades are evaluated in rate cases and why cost allocation debates are central to today's policy discussions.

[14:40] Co-located Generation as Risk Management: The discussion explores how co-located, behind-the-meter generation allows developers to bypass interconnection bottlenecks, reduce regulatory risk and secure operational certainty. Drawing parallels to renewable developers building private generator leads years ago, the discussion suggests that data centers are now pursuing similar strategies to control timing, economics and uptime requirements.

[19:44] ERCOT's Response: SB 6 and the "Kill Switch": The group analyzes how ERCOT and the Public Utility Commission of Texas are reshaping large-load interconnection through Senate Bill 6. Proposed rules include upfront study payments, a batching system for interconnections and a "kill switch" mechanism allowing ERCOT to curtail large loads during energy emergencies. These developments increase uncertainty for data centers seeking ultra-high reliability and further incentivize behind-the-meter generation.

[34:04] The Long Game: From Backup Power to Grid Asset: The episode concludes with a forward-looking discussion on whether distributed, co-located generation could ultimately strengthen grid reliability. As regulatory frameworks mature, these resources could transition from isolated reliability tools to valuable, economically dispatchable assets that support broader grid resilience.

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