Originally published on SF Weekly
Artificial intelligence is fueling one of the fastest periods of data center expansion in history. In many parts of the United States, utilities face years-long timelines to connect large-scale electricity users to the grid. According to energy strategist Emily Sanford Fisher, these delays are prompting developers to evaluate a broader range of power solutions to access power now, while utilities continue investing in long-term grid expansion.
“The conversation around data centers is about two things: community acceptance and how they’ll be powered,” Fisher said. “Reliable electricity has become one of the defining considerations in data center development.”
Why Traditional Utility Power Isn't Always Enough
Electric utilities, which own and operate the power grid, remain the primary source of electricity for most data centers. However, the rapid growth of AI-driven computing has accelerated demand beyond what many parts of the existing electric system are designed to support. “Our regulatory system requires that utilities build to serve known customer needs because the costs of building and maintaining the system are reflected in electricity bills. Utilities build the system that we need today, with a margin of safety for reliability,” said Sanford Fisher.
Meeting data center demand requires new transmission lines, substations, distribution upgrades, and interconnection studies. “This is big, expensive, and long lived infrastructure,” she continued, “which can take years to site, permit and construct, particularly in regions experiencing significant economic and population growth. Further, the power sector is currently facing big challenges with respect to supply chains and increasing costs.”
Developers are now evaluating alternative approaches that can supplement traditional utility infrastructure while helping projects move forward.
“Utilities are making substantial investments to expand capacity, but it makes sense that data center developers are looking at all of their options in the near term, especially when community acceptance requires that the developers demonstrate that they are not foisting electricity infrastructure costs onto other customers,” Fisher said. “Developers are evaluating how alternative resources can help bridge that gap while maintaining reliable service and reducing costs for other customers. These options include microgrids, on-site resources, and battery storage, among others.”
Microgrids Offer Greater Flexibility
One option receiving increased attention is the use of microgrids and other on-site resources, like storage. A microgrid is a localized energy system that can generate, store, and manage electricity independently or alongside the larger electric grid. These systems can combine multiple technologies, including solar generation, battery storage, and backup generators.
For data centers, microgrids can improve operational resilience while providing additional flexibility during periods of high electricity demand or grid disruptions.
Although microgrids are not appropriate for every project, they’re becoming an important consideration as developers evaluate long-term energy strategies.
“Microgrids give operators another tool for improving resilience and managing risk, particularly for facilities where uninterrupted power is essential,” Sanford Fisher said. “They may not speed up access to power, however, as the elements of a microgrid are the same pieces of equipment that utilities use and for which there are long supply chain delays.”
Behind-the-Meter Generation
Another approach involves behind-the-meter generation, where electricity is produced directly at or near the facility rather than being supplied entirely through the utility. Depending on project requirements and local regulations, this may include natural gas generation, fuel cells, combined heat and power systems, or other onsite technologies. These systems can reduce dependence on immediate utility capacity while supporting facilities that require exceptionally high levels of reliability.
However, behind-the-meter generation also introduces additional considerations related to permitting, fuel availability, emissions requirements, operating costs, and long-term maintenance.
“Behind-the-meter generation gives some projects additional flexibility, but it's not a one-size-fits-all solution,” Sanford Fisher explained. “Every project has unique operational, economic, and regulatory considerations that need to be evaluated. Moreover, onsite equipment is subject to the same delays as utility equipment in terms of siting, permitting and supply chains,” she continued.”
“Moreover, around the country, we are seeing grid operators and regulators call on data centers’ on-site resources during periods of extreme grid stress,” said Sanford Fisher. “Behind-the-meter resources are becoming grid resources. Data centers operators should recognize that these resources are not completely separate from the larger electricity system. In many cases, supporting the grid during periods of high demand can also create new revenue opportunities,” she continued.
Battery Energy Storage
Battery energy storage systems are also becoming a valuable component of many large energy projects. While batteries generally cannot supply continuous power to large data centers for extended periods on their own, they can help manage short-term fluctuations in electricity demand, improve reliability, and support integration with renewable energy resources.
This helps utilities manage electricity more efficiently while improving overall grid flexibility. For data centers, battery storage can also help accommodate short-term spikes in electricity use by supplying some of the additional power needed, reducing stress on local infrastructure and supporting reliable operations.
As Sanford Fisher explained, “the costs of battery storage continue to decrease and their value continues to increase,” because storage allows electricity to be stored when supply is plentiful, or demand is lower, then discharged during periods of peak demand when the grid is under greater strain. “While the focus has been on shorter duration storage,” said Sanford Fisher, “progress is being in bringing down the costs and improving the performance of longer duration options. These will be real game changers for data centers and the grid as a whole.”
Renewable Energy is Expanding
Renewable energy remains an important part of the conversation surrounding distributed energy resources.
While solar and wind alone can’t provide the constant power that mission-critical facilities require, they can reduce reliance on traditional generation when combined with battery storage, flexible generation, and utility service.
Rather than competing with conventional infrastructure, renewable energy complements it as part of a broader strategy to improve reliability, flexibility, and long-term grid resilience. “Data centers have the opportunity to support continued deployment of renewable energy, to reduce emissions and costs and to get power faster,” said Sanford Fisher. “Solar, in particular, can be faster to build than other generating options, including natural gas turbines, which are backordered well into the 2030s.”
No Single Solution Fits Every Project
Sanford Fisher notes that discussions surrounding alternative power sources should not be framed as choosing one technology over another.
“There's no universal blueprint for powering the next generation of data centers,” Fisher said. “The right solution depends on local grid conditions and communities, project timelines, regulatory requirements, and long-term operational goals. Success will come from combining multiple technologies in ways that make sense for each individual project.”
As electricity demand continues to grow, utilities, developers, technology companies, regulators, and policymakers are working together to identify practical approaches that can support both economic growth and electric system reliability.
The future of data center power is therefore unlikely to depend on a single technology. Instead, it will require thoughtful planning that integrates traditional utility infrastructure with emerging energy resources, enabling the electric system to meet rapidly evolving demand while maintaining reliability and affordability.