Cost tradeoffs versus grid power

The data center industry's approach to power is undergoing a major transformation. What was once a straightforward connection to the grid has become a complex, strategic challenge. At the Advancing Data Center Construction conference, Mike Netzer of datacenterhawk spoke with Tim Stephenson, Director of Power Generation for Aligned Data Centers, to discuss the shift toward onsite power generation and its implications for the sector.

One of the key shifts highlighted was the move from traditional grid reliance to "behind-the-meter" power solutions. This approach creates an independent, self-sustained power source solely for a data center campus, disconnected from the public grid. With utility infrastructure struggling to keep up with the industry’s 15-17% annual growth in power demand, onsite power generation offers operators greater control, reliability, and the ability to build facilities in areas where grid power is insufficient or unavailable. As Stephenson explained, “We’re looking at being completely off the grid, developing power designed exclusively for our data centers.”

The transition to onsite power requires more than simply replacing grid power with a single alternative. Aligned employs a hybrid approach, integrating technologies like natural gas combustion turbines, reciprocating engines, and fuel cells to handle diverse power needs. Modern computing loads are volatile, spiking from 30% to 100% usage within milliseconds, so Aligned also incorporates battery energy storage systems (BESS), synchronous condensers, and supercapacitors for added stability. This layered strategy ensures reliability and prevents power disruptions.

Onsite power generation brings clear advantages, including guaranteed availability, independence from utility curtailments, and scalable capacity that can grow from 100 megawatts to a gigawatt. However, these benefits come with challenges. Costs are significant, with natural gas power costing 7 to 8 cents per kilowatt-hour—higher than grid power, which benefits from economies of scale. Additionally, developing onsite power requires navigating complex permitting processes for air and water, securing fuel supply infrastructure, and addressing potential community concerns about hosting a private power plant.

Data centers demand near-perfect uptime, and onsite power plants must deliver. Stephenson revealed that Aligned designs its private power plants for 99.9% reliability, far surpassing traditional commercial plants. This is achieved through modular designs and redundancy. Instead of relying on large, single units, Aligned’s plants use smaller modules like individual turbines or fuel cells. This modularity allows maintenance on one unit without disrupting overall power supply, ensuring continuous operation.

As grid constraints persist, the shift to onsite power will become more widespread. Site selection is already evolving, prioritizing access to natural gas pipelines over proximity to grid interconnects. While natural gas serves as a key bridge technology, the long-term vision includes cleaner, advanced energy sources. Small Modular Reactors (SMRs), though promising, remain several years away from commercial viability, with Stephenson estimating a 7-8 year timeline.

The future of data center power lies in a sophisticated mix of technologies, strategic site selection, and innovative energy solutions. By embracing onsite power generation, operators can gain greater control over their energy needs while building infrastructure for the next era of growth.

Moving Toward "Behind-the-Meter" PowerA Multi-Layered Power StrategyBenefits and ChallengesBuilding for Unmatched ReliabilityThe Future of Data Center Power