What Is the Role of Policymakers, Advocates, and Tech Companies?

We've seen tech booms and busts before. Let's not let this one revive fossil power and leave states with pollution and grid problems. Policymakers need to balance the hype with sensible laws to protect communities. We need binding laws and regulations, not just corporate goodwill, to ensure clean energy meets growing data center demands. 

Without policy, increased electricity needs will lead to more fossil fuel use and grid pollution. While some tech companies are building new renewables, others are buying power from existing projects or simply buying power from the grid. If new demand from these data centers is not met with new renewable energy, this demand will be met by running existing fossil plants more often or by building new ones.

Without policy intervention now, states will struggle to hit their climate targets, and utility monopolies and tech companies could pass the cost of generation and grid needs onto everyday customers. We can meet this challenge with clean energy, and it’s important we get this right.

How Can States Address AI Energy Demand and Hit Their Clean Energy Targets?

States are almost always in the vanguard when confronting new policy puzzles. Absent a federal clean electricity standard, states can pursue these four solutions, right now, without Congress:

1. Requiring additionality and the “three pillars”

First, we should make sure that data centers don’t just claim existing clean energy for themselves, while the wider grid ramps up fossil fuel plants to meet higher demand. Tech firms must be responsible for funding the new clean energy needed to meet their needs. To do that, we can borrow from a proven approach Evergreen and other advocates are calling for in the buildout of truly clean hydrogen, referred to as the “three pillars.” 

To ensure that data center load doesn’t increase grid pollution, its electricity must come from clean energy that has three key attributes: additionality, regionality, and time matching. These three pillars, like those needed to ensure clean hydrogen is truly clean, will ensure that renewable energy serving data centers is newly built and is generated in the same location and time that it is needed. Without these three attributes, data centers will still be increasing pollution on the grid, even if they are claiming “clean” energy on paper.

Some tech companies are already pursuing additionality and hourly-matched renewables to serve their data centers. But others are not: Amazon is claiming existing nuclear power for one data center in Pennsylvania. By claiming existing clean power that otherwise would have gone to other users and not building any new clean energy to compensate, this project will increase pollution on the grid. Other companies are making no renewable energy purchases at all—Goldman Sachs has projected that 60 percent of data center load is set to be served by gas plants through 2030.

State policymakers need to step up. In the absence of a federal clean energy standard, or federal three pillar requirements, states can require additionality and the other pillars on their own. In states with tax credits or incentives for data centers, lawmakers should condition that support on additionality and hourly matching requirements.

States without these incentives could require all new data centers (or those above a certain size) to provide additional and time-matched renewables to meet their power needs. Similar requirements could be set for cryptocurrency mining or other activities with extreme power demands and relatively small economic benefits. Without these safeguards, state climate targets are at risk.

2. Protecting customers from higher bills

States can also create safeguards for consumer costs to prevent some of the world’s wealthiest companies from passing their costs onto everyday customers. When massive new hyperscale data centers are built, grid costs can skyrocket. These facilities need both new power generation and accompanying grid infrastructure, potentially including new or upgraded transmission and distribution lines and substation upgrades.

The cost of these upgrades is likely to be socialized and passed on to other customer classes less able to afford them, including residential ratepayers, small businesses, and low- and moderate-income households.

States, either through legislation or action by the public utility commission, should require utilities to create specialized tariffs and rate classes for data centers. These actions would prevent the cross-subsidization by other ratepayers of this new inflexible load and would ensure data centers are paying their fair share.

Specialized green tariffs (voluntary utility programs that allow customers to buy renewable energy at a special rate) could incentivize tech companies to pay more and support the growth of new clean energy sources. Green tariffs could include new or advanced nuclear plants or other clean technologies that, despite higher construction costs, can provide consistent, around-the-clock power, better meeting the specific needs of data centers.

Duke Energy’s new Accelerating Clean Energy tariffs allow tech companies to (voluntarily) bear the cost and risk of bringing new nuclear and long-duration storage online. They allow companies to achieve their own clean energy goals earlier without pushing costs onto other customers. These tariffs should be designed to encourage flexibility in energy demand and to reflect the full cost of new data center energy demand. Since data centers often run at high capacity around the clock, they put extra strain on the grid compared to other electricity users, and the huge profits that AI creates allow these companies to afford higher rates that fully pay for needed upgrades.

3. Creating interconnection fast tracks

The long timeline needed to build new power generation is a critical bottleneck to powering AI and data center growth with clean energy. Interconnection fast tracks could speed up clean energy deployment and allow new data centers to come online faster. Utilities and grid operators can offer expedited interconnection tracks and faster interconnection studies to data center projects under certain conditions.

State lawmakers or utility regulators can require the creation of such fast tracks. To receive such carrots, tech companies could be required to sponsor or assist in interconnection studies, agree to pay for transmission upgrades, or provide certain amounts of renewable energy or energy storage behind the meter. By providing additional resources to unclog the interconnection backlog, data centers can be built faster and all customers will benefit from new, low-cost clean energy coming online sooner.