Indiana creates nation’s first utility to provide electricity only to data centers; reaction is mixed among stakeholders

   

Power grids across rural America are facing the challenge
of serving data centers. (Andrew Metelev via Unsplash)

Rural Northwest Indiana has given the nod to what some think may be a solution to the power generation problem associated with data centers — a dedicated utility provider. Circle of Blue reports via RuralNewsNetwork.org that the idea is to “simultaneously protect ratepayers while continuing to embrace the industry’s growth.”

Christian Thorsberg writes about the boom of data centers in the region, “where nearly a dozen hyperscale data centers are planned, under construction or already operating.” Reaction to the first-of-its-kind utility has been mixed.

The region’s largest power producer, and the one with the highest rates, announced two years ago that because of inquiries from data center projects its power load was likely to quadruple over the next decade. That led to the company’s idea of creating a subsidiary to serve only data centers. Thorsberg explains that the proposal “was drawn up to shield regular ratepayers from extra costs of adding mega-users … to [the] network.” The subsidiary “would generate and sell electricity” wholesale to the parent company, “its only customer,” which would then sell it to data centers. “The buffer for resident’s rates would come from the mathematical accounting of these transactions, which in theory would remain separate from household bills.”

The plan received unanimous regulatory commission approval last fall, and it included exemptions for the subsidiary that speeds up the process. For example, the regulatory commission “does not need to approve all aspects of financing for projects,” and the subsidiary can “pick and choose” its customers.

The region appears to be bracing itself for the impact of this plan. Critics and experts are expressing concern about the effect on the environment, the grid’s efficiency, and whether the network can support the volume of electricity expected. “I’m not against the business model,” Jaoa Ferreira, acting director of the Center for Economic and Policy Studies at the University of Virginia, told Thorsberg. “One important thing for me is that this actually results in adding production to the grid, and not just splitting electricity from everyone else to just satisfy data centers.”

 

Why can't states simply share energy to avoid blackouts? Bolstering U.S. grids requires multi-faceted plans.

As power grids across the U.S. face more challenges, including dramatic increases in national energy needs, such as electricity-sapping data centers and extreme weather fluctuations across entire regions, some Americans may be wondering why a regional grid under strain can't just borrow from a neighboring state's grid that has plenty.

There are few links between the U.S. Eastern, Western and ERCOT interconnections. (ERCOT map)

The answer is to that question is simple and complex, energy experts Sufan Jiang and Fangxing Fran Li write for The Conversation. "The U.S. bulk power system is not one seamless national grid, but three major grid regions known as interconnections — the Eastern, Western and ERCOT (Electric Reliability Council of Texas) systems. There are very few transmission lines between them, so if one has too little power, the others may not be able to help much."

In February 2021, Texas was clobbered by a series of brutal winter storms that dumped snow and ice across the state while simultaneously keeping temperatures below zero for days. Because Texas owns its own grid and shares few transmission lines with other states, ERCOT was "forced into the largest deliberate electricity shutoff in U.S. history. Operators cut power to millions of customers to avoid a total grid collapse," Jiang and Li explain. ERCOT's blackout left more than 4.5 million homes and businesses without power.

The Southern Spirit Transmission line will connect Texas to 
the Southeastern grids for power sharing. (Pattern Energy map)

In an effort to give ERCOT more options during another energy crisis, the "Southern Spirit Transmission project was announced by the Department of Energy in 2024," Jiang and Li explain. That addition "would include a 320-mile transmission line connecting Texas with Louisiana and Mississippi."

In its simplest form, a transmission line connects energy providers so they can share power. But when it comes to natural disasters and extreme weather, power lines have to withstand the storm or event. Jiang and Li write, "The answer to bolstering power grids is not just to build more high-voltage transmission lines. It is also important to harden the transmission corridors that already exist so they can withstand extreme weather and be restored more quickly after a disaster."

The federal government also regulates the sharing of grid energy between operators. "Federal standards require transmission providers to have enough electricity available in reserve to serve their own local homes and businesses safely," Jiang and Li explain. "Only excess electricity above that safety threshold can realistically be treated as power available to help neighboring grids during an outage."

A 10-year solar project in California aims to 'harvest the sun'

The Valley Clean Infrastructure Plan delivers economic value to growers, 
local governments and residents. (Map by Binh Nguyen, Canary Media )

Directors of the largest agricultural water agency in the U.S. are creating a plan to save California farmland from a decades-long water crisis, reports Jeff St. John for Canary Media.

The Valley Clean Infrastructure Plan will transform 136,000 acres of farmland that's no longer irrigable into 21 gigawatts of battery-back solar power, enough to power nine million houses, St. John explains.

The planned build will be the largest project not just in California or the U.S., but in the world, said Jeff Fortune, a third-generation farmer and the board president of the Westlands Water District.

The plans were approved in December, and the project may take 10 years or more, St. John reports. 

"The way we look at it is a new crop," a fifth-generation farmer and another director of the district, Jeremy Hughes, told St. John. "We're harvesting the sun and producing electricity."

In the next 20 years, the state will require four to five times as much new clean energy as the project will provide, according to another director, Ross Franson. 

U.S. grid needs operators to plan now with a blend of energies including batteries, gas and coal

North American Electric Reliability Corporation graph

Fueled by increased demand and shrinking power options, the U.S. electricity grid is headed toward a reliability crisis. "Tens of millions of people face a growing risk of blackouts over the next five years, according to an annual assessment by the North American Electric Reliability Corporation, a nonprofit organization that works closely with federal regulators," reports Brad Plumer of The New York Times.

As AI data center builds have continued to demand more grid power, many "utilities are retiring older coal- and gas-burning plants and aren’t adding enough generation to dependably meet growing demand," Plumer explains. The report lists regions in Texas, the upper Midwest, the Mid-Atlantic region and the Pacific Northwest as most "at risk of electricity shortfalls."

How electricity is produced is at the heart of electricity reliability and a contentious point of national political debate. "President Trump has said that policies to fight climate change and promote wind and solar energy have weakened the reliability of electric grids, since wind turbines and solar panels can’t run at all hours," Plumer writes. But renewable energy advocates say that "Trump administration efforts to hinder wind and solar projects are depriving the grid of a fast-growing source of power."

Battery build-outs can help regional power operators create a more resilient grid that can meet demand even during extreme heat or cold snaps. "In MISO, a grid spanning 15 states in the Midwest and South, more than one-third of coal plants are set to retire by 2030," Plumer reports. "But the grid operator recently instituted a plan to speed up the connection of new gas plants and batteries over the next five years."

The report offers a list of recommendations for operators to start planning now, including "speeding up permitting processes for new power plants and transmission lines, and policies to ensure that large new sources of demand, such as data centers, don’t overwhelm the grid," Plumer adds. "It also suggests that utilities and grid operators should be careful about shutting down older coal and gas plants too quickly."

Data center developments offer plenty of community reporting opportunities

U.S. data center infrastructure, with the relationship between the data center locations, transmission infrastructure and fiber optic networks. (NREL map, click to enlarge)

While rural areas may receive an economic boost from data center development in their community, the sprawling energy and water needs that AI hubs require can impact an entire region.

Data centers are a "relatively new kind of industrial infrastructure that environmental journalists may want to pay attention to," writes Joseph A. Davis for the Society of Environmental Journalists.

In areas that experience extremes of heat or cold, power-hungry AI can strain local electrical grids that may already be struggling to meet daily demand for local businesses and homes.

In addition to energy-gobbling, data centers also require enormous amounts of fresh water. Many communities across the U.S. are grappling with ongoing droughts and depleted aquifers. A data center build could leave its community thirsty.

According to Davis, here are story ideas to consider and ways to gather information:

• Find the data center(s) nearest you. Ask the PR people for a tour. There are helpful maplike resources from the National Renewable Energy Labs, Datacenters.com and Visual Capitalist.
• What is the power situation in your data center region? Do you ever have brownouts or energy conservation requests during AC season? Talk to your nearby electric utilities about load management.
• What zoning and permits do your burgeoning data centers need in order to build and operate? Have they got all the approvals they need? Did local authorities make any concessions to usual rules? Tax breaks?
• Where does the cooling water for your local data center, if any, come from? Are permits needed? What happens to the water that is discharged, and what are the heat effects on aquatic systems?
• How many jobs will be created during the construction of the data center? How many jobs after it is operating? Can local people fill them?
• Is your planned data center creating its own power plants to operate? Are they fossil-fueled? Green-powered? Nuclear? What are the environmental consequences?

Reporting resources:

• Data Center Coalition: This trade and lobbying group calls itself “The Voice of the Data Center Industry.”
• Utility companies: Power for many data centers comes from local electric utilities. Check in with your local utilities to see what requirements they have imposed (or waived) for the data center. Here’s a starting list.
• Zoning or planning boards: Siting of industrial facilities often requires approval from such bodies, or city and county councils. Find out what actions are pending and go to the meetings.
• Public utility commissions: Every state has a PUC that regulates local utilities. Check in with your PUC to see if your data center meets requirements. Here’s a list.

Opinion: As the Trump administration puts the brakes on clean energy support, many rural farmers will feel the loss

Solar panels can help cut energy costs for farm operations like dairies. 
(Photo by S. Patrick, Portland Herald, Getty via The Conversation CC)

Wind and solar power add grid support and help farmers maintain steady incomes when weather, bugs or market upheavals make farming less profitable. Particularly for rural communities, taxes generated by renewable energy help local budgets pay for schools, roads and health care. "But some of that opportunity is now at risk as the Trump administration cuts federal support for renewable energy," writes Paul Mwebaze in his opinion for The Conversation.

In areas with wind turbines, farmers lease their land in return for payments. "Those historically were around $3,000 to $5,000 per turbine per year, with some modern agreements $5,000 to $10,000 annually, secured through 20- to 30-year contracts," Mwebaze explains. Roughly a third of the $3.5 billion paid out on wind turbine leases goes to rural landowners.

Solar energy adds to a farmer's bottom line by providing cheaper electricity throughout an agricultural operation. "Farmers use rooftop panels on barns and ground-mounted systems to power irrigation pumps, grain dryers and cold storage facilities, cutting their power costs," Mwebaze writes. 

In some rural communities, renewable energy is the "largest new source of economic activity, helping stabilize local economies otherwise reliant on agriculture’s unpredictable income streams," Mwebaze adds. The Iowa turbine blade factory, TPI Composites, serves as an example of how clean energy stimulates rural manufacturing. TPI "just reopened its plant in Newton, Iowa. Tax benefits in the 2022 Inflation Reduction Act helped boost [the industry] and the jobs and local tax revenue they bring in."

The Trump administration has "rolled back many clean energy incentives. It phased down tax credits for distributed solar projects, particularly those under 1 megawatt, which include many farm‑scale installations, and sunsets them entirely by 2028," Mwebaze explains. "It also eliminates bonus credits that previously supported rural and low‑income areas."

Renewable energy is one way the federal government could continue to invest in rural America, providing energy for communities and generating a reliable income source for farmers and smaller municipal budgets. "I believe homegrown renewable energy offers a practical path forward," Mwebaze writes. "Wind and solar aren’t just fueling the grid; they’re helping keep farms and rural towns alive."

Analysis: Consumer utility bills may climb as data centers get special deals

Getty Images Plus image via The Conversation, CC

At a time when U.S. consumers are getting squeezed from all sides, the idea that average Americans may pay higher electric bills so mega-companies such as Google and Meta can get special discounts for their energy-guzzling data centers may sound unfair, but it could be true, write Ari Peskoe and Eliza Martin in their story for The Conversation.

"In our paper Extracting Profits from the Public, we explain how utilities are forcing regular ratepayers to pay for the discounts enjoyed by some of the nation’s largest companies," they write. “And [we] identify ways policymakers can limit the costs to the public."

While most utilities are sanctioned monopolies, their foundation lies in shared costs. "Splitting the utility’s costs among all consumers made perfect sense when population growth and economic development across the economy stimulated the need for new infrastructure," Peskoe and Martin write. "But today, in many utility service territories, most of the projected growth in electricity demand is due to new data centers.

When data centers are the impetus for a utility having to build more supporting infrastructure, the normal way power utilities pay for their expansion no longer works. They explain, "If state regulators allow utilities to follow the standard approach of splitting the costs of new infrastructure among all consumers, the public will end up paying to supply data centers with all that power."

A Meta data center in Louisiana provides a good example. "By our calculations, [the center will use] twice as much energy as the city of New Orleans," Peskoe and Martin add. "Entergy, the regional monopoly utility, is proposing to build more than $3 billion worth of new gas-fired power plants to meet the data center’s energy demand. … Entergy is proposing to include the costs in rates paid by all customers."

Instead of billing Meta $3 billion for its infrastructure needs, Entergy is working on a separate contract with Meta, with rates the general public won't see. Peskoe and Martin write, "Entergy has asked state regulators to keep key terms of the contract secret, and only a redacted version of its application is available online."

The fact that there are many secret deals isn't much of a secret; however, what's in the deals remains protected. "Our research, reviewing nearly 50 public utility commission proceedings about data centers’ power needs across 10 states, uncovered dozens of secretive contracts between utilities and data centers," Peskoe and Martin explain. "Unlike Louisiana, most states require utilities to submit to the public utility commission their one-off deals with data centers, but they allow utilities to conceal the pricing terms from the public."

Is anything being done to address the issue? "Many state legislatures are noticing these problems and working to figure out how to address them," they add. "Several recent bills would set new terms and conditions for future data center deals that could help protect the public from data center energy costs."

Cooling off from summer sizzle will cost nearly 4% more this year

A hose may be the cheapest way to cool off
this summer. (Photo by J. Tyson, Unsplash)

Summer sun and heat might be good for beachgoers, but climbing summer temperatures will mean spiking power bills for U.S. consumers. Reasons for ballooning energy costs include higher natural gas prices, grid upgrade costs passed on to utility customers and increased domestic demand.

"Electricity prices across the country have increased 4.5% in the past year, topping the 2.2% jump in the price of groceries," reports Jennifer Hiller of The Wall Street Journal. "Consumer prices rose 2.4% in May from a year earlier."

Whether U.S. consumers flip on fans or crank the air, most will pay roughly 4% more "because of a jump in natural gas prices, the largest source of power generation," Hiller explains. "Natural gas deliveries to power plants will cost about 50% more from June through September than last year."

That's painful. "The higher bills are putting a strain on the wallets of consumers who are already stretched thin by rising costs for food, shelter and insurance," Hiller writes. "The average household power bill will reach $784 for the combined period from June to September."

Many Americans started the summer months already behind on their electrical bills. "Mark Wolfe, the executive director at the National Energy Assistance Directors Association, said one of every six U.S. households is behind on their electricity or natural gas bills," Hiller reports. "Customers owed gas and electric utilities more than $24 billion in late payments as of March."

Despite the pinch consumers are bound to feel, several utility companies are asking regulators to approve rate increases. "In Florida, NextEra Energy’s Florida Power & Light is asking regulators to let it increase rates between 1% and 5% a year through 2029," Hiller adds. "About $9.3 billion in additional electricity costs will begin trickling down to customers in the PJM Interconnection, the country’s largest grid operator and wholesale electricity market."

In some markets, AI data centers are "stressing the grid." In other places, increased demand is partially driven by electric vehicles. "Across the U.S., the growing pains are sparking fights over how to pay for upgrades and costs," Hiller reports. "The power industry also warns that a rollback of the clean-energy tax credits offered under the Inflation Reduction Act would push electricity prices higher, too."

Some coal plants won't retire as planned, but dependence on the fossil fuel continues to decline

The Dave Johnson Mine in Glenrock, Wyo.  (Wyoming DOQ photo)

Coal's reign as king of American energy is over, but the fossil fuel still supplies about 15% of the U.S. energy grid, with some companies reversing plant retirement plans, report Austyn Gaffney and Mira Rojanasakul of The New York Times. "Utilities have extended the life of nearly a third of coal units with planned retirement dates, either through delays or by reversing course and canceling retirements entirely, between 2017 and today."

The need to power energy-hungry AI and government policy changes may explain some coal's extended life. According to Gaffney and Rojanasakul, "Utilities could be taking advantage of growth in energy demand and changes in environmental regulations to keep these plants operating."

Although recent studies show running and repairing old coal plants is more expensive than the price of building renewable stations, some utilities insist keeping them open is a needed temporary solution. The Times reports, "Utilities argue they need to keep coal units on the grid while they build out new sources of energy. . . . They’ve predicted a 20 percent increase in electricity demand by 2035."

Some energy experts point to renewables' ability to meet increased grid needs. Gaffney and Rojanasakul write, "Renewables could exceed the increase in power demand. . . . Since 2019, U.S. generation from wind and solar exceeded the growth in power demand by almost 100 million megawatt-hours. In 2024, renewables out-generated coal for more than 80% of the year."

As the energy sector diversifies, coal's continued decline seems inevitable. The Times reports, "Even the units that are kept open will continue to decline in capacity as more planned gas, nuclear, and renewables enter the grid. Seth Feaster, a data analyst at the Institute for Energy Economics and Financial Analysis, told the Times, "They’ll keep those units open to keep their options open, but it doesn’t mean they’re going to be used very much. . . . They’re just not competitive."

After years of negotiating, California has found a way to connect renewable energy sources with their stressed grid

When interconnected, solar energy can help bigger, more
stressed power grids. (APPA photo, Unsplash)

A new agreement in California has brought energy stakeholders together to help the state's taxed grid.

"For years, utilities have grappled with how to handle the ever-growing number of solar and battery systems trying to connect to the lower-voltage grids that deliver power to customers," reports Jeff St. John of Canary Media. "But distributed solar and battery resources can also be enormous assets: By holding back power when the grid doesn't need it and then sharing their extra power during periods of high demand, they can help alleviate grid strains and lower the cost of keeping the grid running for everyone."

The agreement between California regulators, utilities and clean-energy proponents has taken "nearly four years to hash out," St. John reports. "But in mid-March, the California Public Utilities Commission approved new interconnection rules that take into account how, with the right structures in place, solar and solar-plus-battery systems can be more help than hazard to California's overworked grid."

CPUC's new policy allows solar and battery projects to "modulate how much power they send to the grid with the help of either solar inverters whose power-control systems can reduce power output from moment to moment or batteries that can soak up excess solar power and inject it back into the grid later," St. John explains. 

Solving grid-interconnection conflicts is a nationwide challenge. 

St. John rreports, "Utilities have very good reasons to take a conservative, safety-first approach to interconnection. After all, they're responsible for keeping grids safe and reliable — and distributed energy resources represent potential disruptions to those grids that utilities can't directly control."