The great (energy) power grab

The US has an energy problem. US data centre growth has led to ballooning demand in the past few years, following decades of stagnant growth. There are a lot of obstacles to addressing this gap, but one of the main ones can be characterised as a discrepancy of timelines between different stakeholders – data centre companies, financial backers, technology companies and utility companies.

“Nowadays, the data centre people come from the world of move fast and break things. The utility people don’t move fast and do not break things. They are careful, so precision and timeliness are always their choice. So there is a cultural mismatch,” Mike Jacobs, senior manager for energy at the Union of Concerned Scientists and former policy director at numerous renewable energy and energy storage companies, tells Investment Monitor.

At the SelectUSA Investment Summit in Washington, DC, this May, CEOs, industry association representatives and government officials all noted that access to energy was becoming one of the biggest concerns for businesses with major investment projects in the US.

“From a technology perspective, our biggest concerns are basic. It is power and water; those are two incredibly important resources that increasingly require a lot of thoughtful planning, not just next year, not five years from now, but 50 years from now. We need to be mindful of that as we are picking sites,” LEGO Systems president Skip Kodak noted on a panel about future trends reshaping business and society.

This view was echoed by Hindalco Industries managing director Satish Pai, who noted the energy-intensive nature of his industry. “So, 40% of the cost of making aluminium is power, so very often when you buy aluminium, you actually buy power,” Pai explained. As the competition to access power heats up, he said, the US would have to increasingly choose between energy-intensive projects such as data centres and aluminium smelting.

As the mismatch between energy demand and what the grid can provide intensifies, companies are starting to try to bypass the grid entirely and opt for ‘behind-the-meter’ (BTM) solutions. Legislation is also starting to catch up, particularly as people grow concerned about the impact energy-hungry data centres are having on their utility bills.

The extent of the problem

According to TSLombard, US electricity consumption between 2005 and 2020 was basically flat, growing by only 0.1%. This quickly changed after a dip during the Covid pandemic, and from 2021 to 2025, electricity consumption grew by 2.1%. This has ushered in higher utility prices in some areas of the US – a reality that has contributed to the growing backlash to data centre developments.

“Data centres accounted for 4.4% of total US annual electricity consumption in 2023; but by some projections it could grow two-times or more by 2028,” Grace Fan, TS Lombard analyst, writes in a note.

A 2025 Schneider Electric study assessing the US’ capacity to support data centre growth found that, based on current demand and the real capacity of the grid, the grid will likely be constrained and less stable during times of stress, and function below its recommended safety margins in many US regions between 2025 and 2030. Waiting times for data centre grid connections vary between three and seven years, depending on the region.

“Speed is really critical here. We have got over half of the US grid regions that are going to operate below their recommended safety margins in the next few years,” Erica Fitzgerald, director of federal government relations at Schneider Electric, said on a panel about AI at SelectUSA. “That means more delays, more outages, more affordability concerns.”

The grid is under ‘stress’ at times of peak demand. This will happen more often, not only because of data centre growth but also thanks to trends like extreme weather conditions and the electrification of the country’s industrial infrastructure.

The immense bottlenecks around energy underline the need for site selection processes to prioritise long-term infrastructural capabilities, as well as other readiness factors.

Going behind-the-meter

As it has become clear that long wait times for grid connection and limited energy supply will be the case for the foreseeable future, data centre companies have started to power operations in creative ways.

BTM solutions, where energy is produced on-site via methods that bypass the grid entirely, have become popular. These can include renewable energy systems, but gas projects have seen more significant growth. According to the Federal Energy Regulatory Commission, the US currently has 565GW of gas-fired power available. If all new gas projects in the pipeline are completed, this could add nearly 253GW to the energy grid. This renewed interest in gas has been met with criticism as it is a significant source of greenhouse emissions. Coal power, which has been in decline in the US since the mid 2000s, has also seen renewed interest. Multiple plants that were set for retirement are now being kept online.

While it is unlikely that all these projects will actually be completed, the interest underlines the lengths companies are going to to expand the energy supply in the short term. Industrial sites have used BTM solutions for a long time, but these have usually been deployed alongside grid connections.

Ambitious BTM options present technical challenges as well. One data centre under Oracle and OpenAI’s Stargate project in New Mexico has gone through several proposals for its energy supply.

Oracle first planned to build two gas-fired generators, which were set to include smaller ones provided by Siemens, GE and Mitsubishi. This plan faced backlash from federal and state regulators and the local community. The air quality permit applications were withdrawn in April, when it was announced that Oracle would partner with Bloom Energy to generate on-site electricity with fuel cells. Fuel cells produce energy directly from chemical reactions.

“Fuel cells are more commonly used by the space agencies for work in satellites off the Earth […] They are not well adopted […] It just sounds like they are finding the market for power supplies is exhausted and they are desperate,” Jacobs says.

He explains that the first version of the plan, where the gas facilities would enable them to completely bypass the grid, was unique. “I know of no industrial facilities in the US that have built such a scheme,” he says. “In my opinion, the change from this scheme to the updated idea using fuel cells is also unprecedented and even riskier.”

While the fuel cells are a more sustainable option than the original gas plants, they will still run on natural gas.

Regulations are catching up

As backlash grows, data centre pushback is becoming a rare bipartisan issue in some places in the US. At the federal level, the Trump administration has announced the Ratepayer Protection Pledge, a voluntary agreement requiring AI and tech companies to absorb the electricity costs associated with data centres.

However, the pledge is voluntary, and the real change is happening at a state level where ‘bring your own power’ legislation is increasingly popular. Earlier this year, the Oklahoma Senate passed the Data Center Consumer Ratepayer Protection Act of 2026, which will require projects that put a strain on the grid to cover their own costs.

“I think the main reason America would be a little reluctant for some of these data centres would be, is my power going to go up? I think that is something that as states, we are having to wrestle with, to make sure that a consumer’s power is not going to go up if you have a data centre,” Oklahoma Governor Kevin Stitt told Investment Monitor on the sidelines of SelectUSA.

According to a University of Virginia database, there have been more than 700 changes to data centre legislation in the past few years. These gather around four pillars: utility rates and grid reliability; water consumption and scarcity; environmental and community impacts; and transparency and secrecy. A research project called Data Centre Watch found that $64bn of data centre projects have been stalled or cancelled due to local opposition.

Multiple cities have passed data centre moratoriums and even full-on bans in the past few years. The biggest has been Seattle, which is the home base for some of the technology companies building hyperscalers, such as Amazon and Microsoft. Maine nearly became the first state to pass a data centre moratorium recently, but the proposal was vetoed by the governor at the last minute.

Questions about future demand

Given the infrastructural bottleneck and the accelerating rate of data centre growth for years, it is worth asking whether we are due for a slowdown or a ‘catch-up’ period.

There are some signs this may already be happening. New US data centre capacity slowed down significantly in the last quarter of 2025. During this period, 25GW of data centre capacity was added to the US’ energy supply, 50% less than in the previous quarter.

“Developers shifted to focusing on the existing pipeline at the end of last year as opposed to new projects as load queue constraints weighed on the market,” Bern Hetz-Shargel, global head of grid edge for Wood Mackenzie, said in a note.

In December 2025, PJM Interconnection – the largest grid operator in the US – hosted its annual auction to procure power plant commitments for July 2027–July 2028. The auctions take place to ensure there is sufficient generation capacity to meet projected demand. For the first time in history, PJM fell 5.2% short of reliability requirements because there essentially were not enough suppliers to meet the higher demand. However, it then said that this outlook could be improved, especially given “an expected reduction in the forecasted peak demand for the 2027/2028 delivery year”.

The frontier technology of the moment is now at odds with the electrical systems we take for granted. Jacobs warns that this is part of the problem.

“They are not trying to reinvent the wheel,” he says of Oracle’s BTM attempts at the New Mexico project. “They are reinventing the most complicated machines humans have ever made.”