Brian Janous, co-founder and CCO of Cloverleaf Infrastructure, shares his extensive expertise in data centers and energy from his decade-long tenure at Microsoft. He discusses the pressing demand for power in AI-driven data centers and the hesitations surrounding construction amid rising costs. The conversation highlights the 'watt-bit spread' concept, emphasizing the urgent need for higher electricity prices to stimulate new energy generation. Janous also offers innovative solutions for improving electricity pricing and expediting infrastructure development in this competitive landscape.
The 'Watt-Bit Spread' highlights the urgent need for higher electricity prices to incentivize new energy generation amidst rising demand from data centers.
Data center developers face significant planning challenges due to fluctuating power demands and operational complexities, necessitating innovative infrastructure solutions.
Deep dives
The Importance of the Watt-Bit Spread
The concept of the 'Watt-Bit Spread' is central to understanding the relationship between energy supply and the demand for data services. This metric reflects the economic value generated when energy is converted into data, emphasizing the lucrative potential that exists as more companies pursue AI technologies. While demand for watts has surged, electricity prices have not adjusted correspondingly, indicating a disconnect in the market that could hinder future energy infrastructure investments. The failure to accurately reflect the value of power will result in less energy generation, which could ultimately stifle growth in high-demand sectors like AI.
Evolving Strategies of Data Center Operators
Data center operators face significant challenges in infrastructure planning due to the rapid increase in demand for power and computing capabilities. Companies like Microsoft and Meta are confronted with the dilemma of how much infrastructure to build, as their operational models differ from traditional co-location firms that lease data center capacity. They are currently navigating the complexities of construction, labor shortages, and the critical need for reliable power access, which can create delays. As the market evolves, there is a cautious approach to investment, with operators wanting to ensure their substantial capital expenditures have guaranteed returns.
Challenges for Utilities in Meeting Demand
Utilities are experiencing unprecedented challenges with the influx of large-load interconnection requests from data centers, creating tension in demand planning. The traditional utility model, which involved a long lead time for new infrastructure, is strained as companies rush to secure power for their growing operations. Utilities have become more selective, requiring substantial upfront commitments from developers to ensure the capacity is utilized effectively. This complicated dynamic means that while utilities must adapt to this new reality, there is a growing need for innovative strategies to manage infrastructure development alongside fluctuating demand.
The Role of Advanced Tariffs in Energy Infrastructure
The concept of advanced grid tariffs presents a solution for utilities to capitalize on the demand for faster power delivery from commercial clients willing to pay a premium. This model encourages utilities to invest in technologies that expedite the provision of energy resources, thus benefiting both the utility and large-scale consumers. By aligning financial incentives with customer needs, such tariffs can drive quicker infrastructure deployment while ensuring cost recovery for utilities. Ultimately, this could lead to a more robust energy grid capable of meeting the demands of a rapidly digitizing economy.
Every data center company is after one thing right now: power. Electricity used to be an afterthought in data center construction, but in the AI arms race access to power has become critical because more electrons means more powerful AI models.
But how and when these companies will get those electrons is unclear. Utilities have been inundated with new load requests, and it takes time to build new capacity.
Given these uncertainties, how do data center companies make the high-stakes decisions about how much to build? How sustainable is the rate of construction? And how much will these data center companies pay for electricity?
In this episode, Shayle talks to Brian Janous, co-founder and chief commercial officer at data center developer Cloverleaf Infrastructure. Brian recently explained how he thinks about these questions in a LinkedIn post titled “The Watt-Bit Spread,” which argues that the value of watts is incredibly high right now, and the cost of those watts is too low. Shayle and Brian cover topics like:
The unclear data center demand and high costs that are making data center companies hesitant to build
How the skills required for data center development have shifted from real estate and fiber to energy
Why higher power prices are needed to incentivize new generation
Potential solutions for better pricing electricity and speeding up the construction of new generation
Recommended resources
Latitude Media: AES exec on data center load: 'It's like nothing we’ve ever seen'
Latitude Media: Mapping the data center power demand problem, in three charts
Latitude Media: Are we thinking about the data center energy problem in the right ways?
Catalyst: Can chip efficiency slow AI's energy demand?
Catalyst: Under the hood of data center power demand
Catalyst is brought to you by EnergyHub. EnergyHub is working with more than 70 utilities across North America to help scale VPP programs to manage load growth, maximize the value of renewables, and deliver flexibility at every level of the grid. To learn more about their Edge DERMS platform and services, go to energyhub.com.
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