What is co-location?
Co-location is a practice in which data centers and other large customers are built next to an existing power plant and shares its interconnection with the grid to leverage often underutilized land and sometimes take advantage of efficiencies in securing access to power.
Does Exelon support co-location?
Yes. Exelon believes that co-location can help support the nationwide energy transformation and economic development. However, it’s important to have the right policies and rate designs in place.
Exelon works with data centers and other large customers to meet their service needs, no matter where they are located. But as long as they are connected to the grid – even if their first point of connection is a generator – co-located data centers are network load; they use network services, and they need to contribute the cost of network infrastructure providing those services. Every user of the grid pays their share, no matter where and how they connect to it.
When implemented correctly, co-location can provide a range of advantages that support both the energy sector and the communities in which they are built:
- Enhances efficiency by maximizing the use of existing infrastructure and land.
- Stimulates economic growth by generating employment and investment in the local neighborhood.
A rational approach to co-location – one that encourages economic development while prioritizing customer protection and grid reliability – is essential as we seek to have consistent and fair co-location practices adopted across the nation.
How can co-location be done in a way that’s best for customers?
Co-location can offer real benefits, but our concern is that without appropriate regulation, data centers may evade paying their fair share of costs of the grid and the grid services that they use. This can lead to the reallocation of these costs to existing customers, imposing an unjust financial burden on them – now and into perpetuity. Additionally, data centers need to be appropriately regulated to ensure they can interconnect safely, to avoid the risk of grid disruption and unreliable connection for other customers.
Exelon believes the solution to balancing co-location benefits with customer protection can be simplified in two principles:
Co-location interconnection and generators must undergo careful studies and regulation to ensure they are able to interconnect safely without causing wider grid disruptions.
The co-located load must be treated as a retail customer and pay equitable rates for the use of grid support.
Ultimately, data centers must pay their fair share to cover grid costs to ensure that the benefits of co-location are not accompanied by an undue burden on existing customers.
Related News Articles
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Summary
Giant tech companies scouring the country for electricity supplies have zeroed in on a key target: America’s nuclear power plants.
The discussions have the potential to remove stable power generation from the grid while reliability concerns are rising across much of the U.S. and new kinds of electricity users—including AI, manufacturing, and transportation—are significantly increasing the demand for electricity in pockets of the country.
Instead of adding new green energy to meet their soaring power needs, Big Tech would rather divert existing electricity resources to serve them. That could raise prices for other customers and hold back emission-cutting goals.
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"AEP, Exelon challenge PJM interconnection pact for Amazon data center at Talen nuclear plant", Utility Dive 6/26/24
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If such a proposal is approved by the Federal Energy Regulatory Commission (FERC), it would change the way this data center pays for electricity and allow the tech giant to avoid paying for the upkeep of America’s electrical grid.
If Amazon’s plan goes through, not only will there be less electricity available for average consumers to power their homes and businesses, but the energy that is available will be more expensive.
Public Utilities like Exelon and AEP are working to stop Amazon’s cash grab and are working with FERC to explain how this proposal would negatively impact consumers.
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"A.I. Frenzy Complicates Efforts to Keep Power-Hungry Data Sites Green", The New York Times 2/29/24
Summary
Across the country, new data centers are being built that are known as hyperscale, or facilities that are far larger than those of previous generations. In full force, some of these hyperscale data centers use as much power annually as the entire San Francisco metro area.
The owners of these hyperscale data centers are often big tech companies like Amazon, Microsoft, and Alphabet, all of whom have strong commitments to reducing their carbon emissions. However, as their need for more and more clean energy grows, the average consumer’s access to this clean electricity could be in jeopardy.
That’s because new hyperscale data centers seek to avoid paying their fair share of network services and network infrastructure by plugging directly into non-carbon-emitting power sources like nuclear energy plants. Because of their massive need for power, it’s possible for big data centers to demand more energy than these power plants can produce, which means there is less clean electricity available for other consumers to power their homes and businesses.
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"Data centers could use 9% of US electricity by 2030, research institute says" Reuters 5/29/24
Summary
Data centers could use up to 9% of total electricity generated in the United States by the end of the decade, more than doubling their current consumption, as technology companies pour funds into expanding their computing hubs, according to a new study from the Electric Power Research Institute.
These data centers require massive amounts of power for high-intensity computing and cooling systems. In fact, some new large data centers require the same amount of electricity needed to power 750,000 homes.
While many of these data centers are needed to power the future of AI, the Big Tech companies behind these data centers are looking for ways to lower their costs, even at the expense of the average consumer simply trying to power their home or small business.
To do this, Big Tech companies are working to position their data centers at the exact same location as power plants, allowing them to plug directly into power sources and cut themselves off from the electric grid. However, because of their massive need for power, it’s possible for big data centers to demand more energy than these power plants can produce.
If allowed to go through, such a system would jeopardize average electricity consumers’ access to clean, affordable electricity.
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AI-Driven Power Demand is Set to Jump 900% in Chicago Area, Exelon CEO Says", Bloomberg 4/18/24
Summary
Artificial intelligence is poised to drive a 900% jump in power demand from data centers in the Chicago area. The increased power demand in the Chicago area is roughly equivalent to the output of five nuclear plants.
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As this demand for power increases, it’s critical that America’s grid continues to be well-maintained. In the current system, all consumers of power are responsible for grid maintenance with a percentage of every kilowatt of electricity consumed being invested into ongoing grid infrastructure. However, the owners of big data centers are trying to change that to benefit themselves and jeopardize average consumers.
To do this, the owners of these large data centers – which are often Big Tech companies like Amazon, Alphabet, and Meta – are seeking to position their new facilities at the exact same location as powerplants in order to allow them to plug directly into the power sources and cut themselves off from the electric grid.
Their seeking to do this, because it would allow them to avoid paying for the maintenance and upkeep of the electric grid. The result of this would be an increase in the cost of electricity for all average consumers working to power their homes and businesses.