The Impact of Data Centers on PA’s Clean Energy Goals
Introduction & Summary
Data centers, the huge warehouse-size buildings containing innumerable computers and the related equipment needed to make them run, seem to be popping up all over. And everywhere you turn it seems there are proposals for more data centers. Data centers serve many purposes. Some are designed specifically to support Artificial Intelligence (AI) applications and databases. Some house specialized computers for cryptocurrency “mining.” Some are more general purpose “cloud computing” hubs that support email, web searches and online shopping. Regardless of a particular data center’s function, a common characteristic is how much electricity they require to keep the computers humming and the air conditioners cranking to dissipate all the heat that the computers generate.
What will be the impact of the electricity needed to sustain these massive concentrations of computing power? We can look at this from several perspectives. This paper focuses on how the data center buildout will affect the transition to clean, carbon-free electricity. The bottom line: data centers are going to extend Pennsylvania’s reliance on electricity generated by burning fossil fuels and substantially delay the transition to a clean electricity future.
Environmental Goals for Electricity
In thinking about the impact of data centers’ heavy electricity consumption, three environmental goals stand out: (1) The need to transition as quickly as possible to clean electricity. (2) The importance of electrification, that is, households and businesses shifting from oil and gas to electricity, which is heavily influenced by the cost of electricity relative to other fuels. (3) Achieving greater environmental justice by reducing the concentration of power plants and other polluting industries in low-income and minority residential neighborhoods. The focus here is on the first of these goals, the transition to clean energy and how the rapid growth of data centers will affect the achievement of that goal. In the future, I will examine the impact of data centers on electricity prices and environmental justice.
Impact of Data Centers on Achieving Clean Electricity
To combat climate change, we need to generate electricity from cleaner sources of power. We need to reduce and eventually eliminate the use of fossil fuels, as burning them produces CO2, one of the most potent greenhouse gases. Unlike many states, Pennsylvania’s current clean energy goals are pretty feeble. The Alternative Energy Portfolio Standard (AEPS) adopted in 2004 only requires that 8% of our electricity be generated from renewable sources. Some states have targets in the 30 to 50% range. Governor Shapiro has proposed legislation that would require 35% of energy to be clean by 2035. This is a start, but not nearly enough to combat the climate crisis. Unfortunately, even this 35% goal has been opposed by many in the state legislature.
Growth of Data Centers and Electrical Load
Pennsylvania is witnessing significant growth in the number of proposed large data centers. Our queries found 18 projects planned across the Commonwealth. However, of these, currently only three appear to be approved and under construction. Others have received Pennsylvania industrial development grants for planning and site development, so they have a reasonable chance of moving forward. Many data center projects are listed as “pending approval.” Whether development hurdles, financial feasibility, and approvals will be achieved are open question.
All of the proposed data centers require a large capacity electrical connection to the distribution grid or on-site power. Of the 18 projects identified, the power capacity required ranged from 35 to 300 MW, with an average of just over 100 MW. Several projects anticipated multiple stages, eventually growing to as much as 4,500 MW at full build-out! For reference, 1 MW of capacity would serve peak needs of somewhere between 125 and 200 single-family homes, so a 100 MW data center will demand the capacity of 12,500 to 20,000 homes. This is equivalent to half of the homes in Allentown, Pennsylvania’s third-largest city!
Data centers are currently designed to be able to run almost all the time, 24 hours a day, every day of the year. So capacity is designed to meet the peak load. There will be seasonal variation, as cooling requirements vary by season. Further, data centers will be designed with back-up capacity from either on-site or alternative power sources on the grid.
While all of the proposed data centers are unlikely to be built, political pressure (for jobs and new tax revenues) means that many will be sited in PA. We will need to "share the grid" with many of them. Even if only a portion of the proposed data centers are built in Pennsylvania, we could expect a rapid increase in demand for electricity. If only ten of the 100 MW data centers eventually get approved and built, that is still more than five times the demand of all of Allentown’s homes!
Impact of Data Centers on PA’s Clean Energy Goal
The projected rapid growth in electrical load from data centers will make achieving the clean energy goal much more difficult. Except for two major data centers that are co-locating at or near a nuclear generating station and will have long-term power purchase agreements with the nuclear plant operator, all proposed data centers anticipate relying on fossil gas to generate electricity. Some propose relying on power from the grid, while others anticipate installing on-site generation. At the margin, Pennsylvania's electrical capacity is met with fossil gas.
Power from the grid. PJM Interconnection Inc. (PJM) is the Regional Transmission Organization and Independent System Operator for Pennsylvania and parts or all 12 other states. To ensure grid reliability and keep electricity costs more affordable, PJM operates a competitive energy market and also regulates the interconnection and addition of generators and large loads to the grid. Any large load seeking to join the PJM grid must submit an interconnection request. PJM evaluates each request to determine its impact on the grid and whether that new load can be accommodated at that location with existing supply or requires additional generation. If more generation is required, there are three options: postponing the retirement of older, less efficient, and more polluting power plants, adding new generation, or limiting the capacity made available. In PJM, certain fossil power plants that otherwise could be retired due to their extreme CO2 emissions and higher operating costs are being kept online. These are plants that would only run at times of peak demand due to their high cost of operation and maintenance.
The second option for accommodating rapid load growth is to add new generation to the grid. Power developers must submit an interconnection request, which, as with large loads, has to be evaluated by PJM for its impact on the grid. PJM has a long queue of proposed generation projects, including many solar, wind and solar/battery hybrid projects awaiting evaluation for interconnection. Generation projects, usually intended to support data center requirements and therefore getting political support, are seeking ways to “jump the queue,” that is, get in line ahead of other projects waiting for permission to interconnect. From a clean energy standpoint, this is terrible because it allows fossil-fired electricity access to the grid ahead of clean renewable sources. Moreover, gas-fired generators have a long lifespan. So once online, they will be spewing CO2 and other pollution for 20+ years.
On-site generation. If the grid cannot accept the large load or if the cost is too great or the interconnection schedule too long, a data center developer can consider on-site electricity generation. Gas-fired combined cycle or combustion turbines seem to be the default choice for on-site generation. Electrical transmission upgrades would not be required. However, on-site generation requires fuel, so gas supply pipelines may have to be extended to the data center and long-term contracts signed with gas suppliers.
Back Up Power. As noted above, data centers are designed to run around the clock. Whether the data center relies on power from the grid or on-site generation, there must be a source of backup generation when the grid cannot supply sufficient power or the on-site generators suffer an outage or must be taken offline for maintenance. Diesel generators are the most commonly proposed back up. Large diesels can produce 2 to 4 MW capacity and at full load will typically burn several hundred gallons of diesel fuel per hour. Providing back up for a 100 MW data center could require 25 to 50 or more diesel generators. Burning a single gallon of diesel produces about 22.4 pounds of CO2. If you do the math, 24 hours of full backup for a 100 MW data center using diesel generators would emit around 2000 tons of CO2, as well as generate substantial noise and other serious pollution, exacerbating the adverse climate impact of the data center.
Nuclear generation. Using nuclear power to supply electricity for data centers is an exception to the almost complete reliance on fossil fueled generation. At least two data centers in Pennsylvania are being built or proposed adjacent to nuclear power plants. Amazon Web Services is building a large data center in close proximity to the Susquehanna Generating Station in Berwick, PA . It will have a power purchase agreement with Talen Energy, the owner of Susquehanna to supply all the power for the data center. Similarly, Microsoft has a contract with the owner of the Three Mile Island Generating Station in Dauphin County, PA to restart the closed unit to supply power to Microsoft’s adjacent data center. Additionally, there are very early discussions of a data center being built near the Limerick Nuclear Power Plant in Montgomery County, PA.
Reducing the Environmental Impacts of Data Centers
Achieving Pennsylvania’s clean energy goal is crippled by the retention of older, less efficient, more polluting coal and fossil gas-fired power plants on the grid as well as the addition of new natural gas-fired combined cycle or combustion turbines, either on the grid or on-site at the data center.
To address the clean energy goal, there needs to be accelerated approval of interconnection requests from solar, wind, and hybrid solar-battery and wind-battery generation. Similarly, there should be accelerated planning, design, and development of long-distance transmission to bring renewables into Pennsylvania from areas with greater solar and wind resources. If more of these renewable generation resources were available on the PJM grid, then more of the dirty, highly polluting, inefficient fossil generating resources could be retired or at least displaced in the dispatch queue, meaning they would rarely be used.
Can clean, renewable electricity sources power the expansion of data centers? Solar and wind are intermittent sources of power, dependent on the sun shining or the wind blowing. However, with the development and rapid decline in the cost of batteries and other long-duration storage, it is more and more possible for renewables to satisfy the continuous power requirements of data centers. For a 50 MW data center in Pennsylvania, close to a square mile of solar panels with long-duration storage would be required to meet its full capacity requirements. But they need not all be co-located with the data center. Electricity from solar with battery storage is now cost-competitive ($/MWh) with new fossil gas-fired generation.
Nuclear power is another option, not renewable but free of CO2 and other emissions. Earlier, we discussed how two major data center developers are being located adjacent to legacy nuclear plants to take advantage of their clean, high-availability power. Some data center developers are also considering Small Modular Reactors (SMRs) as a non-fossil fuel source of electricity for data centers. SMRs, under development by several different companies, are expected to be rated anywhere from 80 MW to 300 MW. The promise is that SMRs will be manufactured and deployed more quickly and less expensively than conventional nuclear power plants. They can be installed as a single unit or several together. Their energy density, that is, the amount of power that can be produced in a given land area, is even greater than that for fossil-fueled power plants. The power output specs for SMRs appear to match pretty closely the requirements of medium to large data centers. Despite nuclear power still being quite controversial, if the licensing and deployment of SMRs can be accelerated, they could help stem the onslaught of fossil-fueled electric generation at least for future generations of data centers.
Recommendations
Streamlined grid interconnection approval process for renewable resources.
Accelerated long-distance transmission planning.
Adopt clean energy incentives such as the cap and invest approach embodied in the Regional Greenhouse Gas Initiative (RGGI) used in New England, New York, and other Mid-Atlantic states or the proposed PACER program in Pennsylvania. This would provide additional market signals to retire the dirtiest, most CO2-intensive generation resources.
Streamline solar, wind, and hybrid project site acquisition and development processes, making larger projects more feasible for developers to consider renewables as part of the generation mix for the data center.
Require that at least 25% of data center power should be sourced from renewables – solar, wind, hybrid.
Adopt incentives and policies to encourage early privately funded SMR deployment (once the technology is proven) in Pennsylvania in conjunction with other data center policies.
Summary and Conclusions
(We Are Screwed but Should Fight On!)
The advent and likely development of large data centers represent a real threat to Pennsylvania’s environmental and clean energy goals. The Commonwealth has never been a leader in this domain. Data center development is likely to set us back even further. There will be more electricity generated with fossil fuels, producing CO2. The air will be dirtier and less healthy. Because all the new generating equipment could be online for 20+ years, Pennsylvania’s transition to cleaner electricity will be delayed.
As listed in the recommendations, there are policies and regulatory decisions that could help mitigate the worst impacts of data center development in Pennsylvania. However, Pennsylvania’s institutional, political, and economic environment is biased against changes that would require a clean energy approach to powering our data center future. PJM, the non-profit grid manager and operator, is jointly owned and controlled by the incumbent owners of power plants, transmission infrastructure and the electric distribution utilities in PJM’s territories. Its charter is to ensure system reliability at a reasonable cost. Environmental stewardship has never been an equally important part of its mandate. Due to its ownership and decision-making structure, decisions reflect the interests of the member owners. There can be significant disagreement among the members, but the eventual compromises are usually pretty conservative. PJM is currently weighing what rules should be applied to large data center loads seeking to connect to the grid. A draft rule may be submitted to the Federal Energy Regulatory Commission (FERC) as early as January 2026.
The other influential institution, the Pennsylvania Public Utility Commission (PUC), operates within, makes decisions, and issues regulations to implement the laws of the Commonwealth pertaining to electricity generation, transmission and distribution systems. The PUC cannot easily step outside the bounds of legislative mandate. The PUC is currently drafting a Large Load Tariff Order that could be issued within the next several months. The Pennsylvania legislature is currently considering legislation (HB 1834) that would direct the Public Utility Commission to set rules for data center interconnection and for the tariffs that could be charged for such loads. An early version of this bill actually included the requirement that 25% of data center power come from renewable sources, but it is our understanding that this requirement is no longer in the bill.
In terms of state politics, it would seem that the data center bandwagon, or more accurately, steamroller, is fired up and ready to roll. Governor Shapiro and much of the legislature, perhaps swayed by the promise of industrial development, jobs and tax revenue, are supporting rapid data center development. Threats that developers will go elsewhere if they do not get support reinforce the political effort to move forward. Full speed ahead, using fossil gas to generate the necessary electricity also gets wholehearted support from the shale gas interests in the state legislature.
Concerned Pennsylvanians need to continue telling their elected representatives and the Governor that a clean, healthy environment and clean, reasonably priced electricity are just as important as the expected benefits from these huge data centers. Also, citizen and environmental groups have some presence at the PUC and PJM. Urge the groups you are involved with to assert our rights to clean, reasonably priced electricity in those forums.
We will provide an update in a future newsletter on the results of Pennsylvania state legislation, actions by the Public Utility Commission and by PJM in shaping the data center future.