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The Evolving Landscape of Data Center Engagement with Utilities
As data centers continue to expand, regulated utilities find themselves at a unique intersection of challenges and opportunities. They are obligated to support their clients, in this instance, the data center developers, but face a steep learning curve when these clients arrive with ambitious expectations and requests for substantial power, often in the hundreds of megawatts.
Scott Scharli, Director of Strategic Energy Management at Salt River Project (SRP), highlighted the pronounced differences between the operational models of data centers and utilities. He explained that colocation developers typically prepare for worst-case scenarios, ensuring their clients have sufficient computing power—even planning for peak loads on the hottest days—and then expect utilities to accommodate these demands. However, Scharli noted that the actual load rarely matches these forecasts within the anticipated timeframe, often leaving utilities to manage overbuilt infrastructure and generation assets.
To address the risk associated with stranded assets, SRP is introducing a minimum demand charge and a long-term collateral requirement, which is scheduled to start in November. This strategy mirrors similar approaches by other utilities, emphasizing the importance of customer accountability in energy usage.
Years of navigating the dynamics between data centers and utilities have led to significant lessons learned. According to Scharli, data centers are evolving by enhancing their understanding of utility planning processes and even hiring personnel with utility experience to facilitate smoother interactions.
Upcoming discussions, such as the panel titled “Data Center Playbook: Best Practices for Data Center Customer Engagement”, will take place at DTECH Data Centers and AI in San Jose next month, featuring Scharli among other experts.
Scharli emphasized that data centers push utilities to improve their customer service capabilities. However, he noted that transparency and managing expectations are vital for fostering successful relationships.
Jason Willard, Director of Business Development at Georgia Power, also recognizes the intricacies involved in engaging data center customers. He pointed out that these clients prioritize not only reliability and capacity but also sustainability, speed, and flexibility. Willard stressed the need for utilities to be agile partners, providing prompt solutions, access to renewable energy, and innovative ideas.
“Data center projects are inherently complex, involving numerous variables that must be carefully managed,” Willard remarked.
Willard identified five fundamental elements essential for successful project alignment: land, power, capital, team, and equipment. Early acquisition of the right site helps to avoid delays and supports long-term expansion. Ensuring reliable and scalable power, defining financial responsibilities, building strong cross-functional teams, and aligning on infrastructure needs all contribute to fostering effective partnerships.
The importance of robust engagement practices cannot be overstated. Transparent communication, shared planning, and proactive problem-solving are key to successful interactions between utilities and data centers.
“Regular meetings, transparent reporting, and collaborative decision-making can help mitigate potential issues and enhance the overall relationship,” Willard added, emphasizing that decisions made in the early stages of collaboration are foundational for long-term success.
The panel “Data Center Playbook: Best Practices for Data Center Customer Engagement” is set for 2:30 – 3:15 p.m. PST on Wednesday, May 28. DTECH Data Centers and AI will be held at the Signia Hotel in San Jose, California. Click here for further information and registration details.
Originally published in Factor This Power Engineering.
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