There are a lot of people against data centers. But right now there is little coherence to the opposition and virtually no concrete proposals other than “ban them.” Most opposition to data centers comes from a lack of trust of tech companies, the government, and politicians. People feel like AI is being forced on them; and opposing data centers is a practical way to fight back and regain some control over their lives.
As someone who spent many of his formative years holding a protest sign and learning about how the workers, united, will never be defeated, I can appreciate both the general anxiety as well as the feeling of empowerment that comes along with political mobilization. This is part of what makes America a special place and we should treasure this freedom.
I’ve also written a book on the origins of political advocacy organizations, and when there’s not a clear ask and no room for a genuine solution, the movement will eventually fade and the status quo will return. Banning new data centers is a good negotiating tactic, but the ultimate goal should be bringing new large electrical loads onto the system in a positive way. Some existing sleight-of-hand tactics, like non-disclosure agreements and secret negotiations should be done away with ASAP. But negotiations with the community over how to distribute the benefits of a data center are where the most equitable solutions will be found.
Why a Community Energy Portfolio Standard is the Best Solution to Data Center Growth
The one thing every town, city, and state could require today that would solve the data center problem is to implement a Community Energy Portfolio Standard (CPS). Think of a CPS like an RPS (Renewable Portfolio Standard), where a certain amount of energy has to be procured in a certain way. States require utilities to procure a certain amount of their power from renewable energy, which has helped grow the solar and wind industry. Data centers could be required to abide by CPS requirements as a condition of their operational permits.
Here’s how a CPS would work. Every data center that wants to begin operating must track its power consumption, even if it is self-generating its own power. In order to receive permission to operate, it must show that it is procuring a minimum percentage of its energy from the surrounding community (the eligibility radius should allow for enough capacity). A good number to start with would be 25%. Let’s say a large data center uses 750,000 MWh of electricity per year. In order for it to operate at that level, it would have to procure 187,500 MWh from the local community. That would be about 18,000 homes with solar on their roofs, for example.
This procurement should also include energy efficiency projects like insulation and heat pumps, more efficient lights and pool pumps. Basically, as long as the total MWh threshold was hit, the data center would be in business. That’s it. We don’t need to overcomplicate things and introduce a bunch of weird regulatory constructs. And we definitely don’t want to put utilities in charge of procuring this energy. Just let the market work it out and don’t let a datacenter operate unless it can prove that it hit its CPS requirements on an annual basis.
Yeah, but what about…
One objection to solar panels is that they only produce energy when the sun is shining, and so you’d need to find a way to solve for the other hours of the day. In fact, there are certain hours of the day where the grid is already maxed out and more solar won’t help at all! In California, the biggest issues are in the evening when the sun has set and air conditioners are still running. Other places are seeing winter morning peak demand and still others see seasonal fluctuations in the fall and spring.
Every grid has certain locations and certain times of the day that need help. The best way to get help where the grid needs it is to allow the CPS to give these hours extra credit. It would be pretty easy to say that any hour that’s already a problem for the grid should earn 2x the rate of non-stressed hours. The same could hold for any location that is stressed. If you set up the CPS so that a data center got extra credit for procuring energy when and where it was needed most, not only would you help the grid, but the people living in those areas would get an even better deal.
It might be hard to fathom 18,000 homes getting solar in an area, but this is actually a pretty realistic number. Doing solar installations at scale would also bring down the costs. Rather than sending people out ringing doorbells trying to make a one-off sale, imagine if community members could just sign up for a free installation, pick their preferred time, and be assured that a certified contractor would show up and guarantee the work. Remember, if the solar panels don’t produce, the data center doesn’t get to operate. So there’s a clear incentive to make sure that 100% of the savings are delivered.
If data centers had to make these local investments, the money that’s now going to fund new fossil fuel gas and coal plants would be spent instead hiring local workers to build clean energy. The boost to the local economy and the reduction in pollution, along with massively lower bills and a more resilient grid would make this a much easier sell in any community. There are issues with noise that still need to be addressed, and there are likely other land and water-use restrictions that local communities will want to impose. But fundamentally, if we can require new data centers to offset their energy impacts by investing in community energy resources, the end result will be beneficial for both the companies that are making these investments in the first place as well as the local communities who are sharing their resources to make it possible.
Farther into the policy weeds, regional transmission congestion is also a problem that data centers are making worse. Strategically located DERs can help, but current rules make it difficult for their contributions to count. CPS resources should automatically be enrolled into wholesale markets to be valued for their contributions to congestion relief. PJM and other independent system operators have been dragging their feet on implementing FERC order 2222, making it difficult for small systems to participate in wholesale energy markets. Some quick wins would be to give credit to batteries for pushing energy back into the grid and making sure that these types of resources qualify for Bring Your Own New Capacity (BYONC) requirements.
A final benefit to the CPS is that it would reduce the amount of speculative projects in the interconnection queue. Companies that were serious about data center construction would start working well ahead of interconnection to build out the infrastructure to meet CPS requirements. If these data centers were built and then abandoned, the worst thing that would happen is that a bunch of people would have gotten free solar panels. Without CPS, there’s a good chance that communities will be paying data center bills for generations to come.
So that’s it. Solve the data center problem with a Community Energy Portfolio Standard. The amount of capital flowing into PPAs for VPPs will be unlike anything we’ve ever seen and the mobilized opposition to data center construction will have achieved a tangible result, improving the lives of hundreds of thousands of families around the country.