(Bloomberg) -- The top US energy regulator rejected a special deal that would have allowed an Amazon.com Inc. data center to use more power from an adjacent nuclear power plant.
The decision by the Federal Energy Regulatory Commission deals a blow to the efforts by big technology companies to feed their power-hungry data centers with electricity from generators located next to their facilities. Commissioners voted 2-1 against the proposal that would have increased the amount of power supplied to an Amazon data center adjacent to the Susquehanna nuclear facility owned by Talen Energy Corp.
The commissioners said the plan, which was an amendment filed by the regional grid operator on behalf of the parties, didn’t adequately prove why the special contract should be allowed under federal rules. The plan would set a precedent and the issues should be reviewed more closely, they said. FERC Chairman Willie Phillips dissented, saying that the grid operator addressed reliability issues and called the order “a step backward” for both electricity reliability and national security.
In March, Amazon Web Services paid Talen $650 million for a 960-megawatt data center campus adjacent to the Susquehanna nuclear plant in Pennsylvania, and signed a long-term agreement to buy power from the plant.
In June, PJM Interconnection, which operates the eastern US grid, serving more than 65 million people, sought approval from the federal agency to increase the amount of power used onsite to 480 megawatts from 300 MW. Utility owners American Electric Power Co. and Exelon Corp. filed a complaint opposing the move, arguing that it could threaten grid reliability and raise customer rates.
The federal order on Friday night came on the heels of a day-long FERC technical conference on the topic, which discussed the merits and challenges of co-locating data centers with existing power plants, also dubbed “behind-the-meter” demand. Phillips said that artificial intelligence and related technologies represented a generational opportunity for national security and economic growth. Data centers are driving potentially unprecedented growth in US electricity usage and the concern is that such deals will allow them to shunt costs to other consumers.
The Friday ruling hinders generators like Vistra Corp., Constellation Energy Corp. and Talen, which saw their shares rally in part on the prospects of signing more power-sales deals at a premium with deep-pocketed tech giants.
While PJM made the filing to enable the Amazon-Talen deal, the grid operator has warned that it’s facing a potential shortfall of generating supply by 2030, Stu Bresler, executive vice president of market services and strategy said in a statement for the technical meeting on Friday. Big consumers located at power plants may create reliability concerns and hinder proper planning, he said. PJM, which serves more than 65 million people from Washington DC to Illinois, has received requests from developers to co-locate 8.5 gigawatts of large load at points on the grid serving existing power plants.
“If behind-the-meter, co-located loads integrate faster than what can be reliably planned for, the industry should appreciate the potential future risks to reliable system operations,” Bresler said in the statement.
(Adds details on the decision from the second paragraph.)
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