When to colocate data centers with generation

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Sep 12, 2025

Brian Janous, co-founder and CCO of Cloverleaf Infrastructure and former head of energy at Microsoft, discusses the burgeoning trend of colocating data centers with power generation. He delves into the advantages of on-site power but warns of challenges such as gas constraints, complexity, and permitting issues. Janous argues for alternatives like batteries and grid-enhancing technologies. The conversation also questions the true necessity of 24/7 energy and the potential pitfalls of integrating on-site nuclear power.

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INSIGHT

High Availability Trumps Intermittent Savings

Modern cloud and AI data centers require very high availability because of massive capex and service needs.
Operators prefer predictable, planned downtime rather than frequent short interruptions.

INSIGHT

Speed To Power Isn't A Free Pass

The main argument for on-site generation is speed to power when utility interconnection timelines are long.
But behind-the-meter gas generation brings gas-grid, permitting, integration, and overbuild reliability challenges.

INSIGHT

On-Site Generation Is Capital-Intensive Per MWh

Building full on-site generation to meet N+ reliability massively increases capital cost per MWh.
In many markets that raises 24/7 costs far above grid prices, making it economically unattractive.

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The idea of colocating data centers with behind-the-meter generation is picking up steam, including large projects in Memphis, Texas, and Utah developing significant on-site capacity, mostly from combined-cycle gas plants. The main argument is speed to power. Building your own generation allows data centers to sidestep the challenges involved in grid upgrades, transmission, and permitting.

But when does a good idea jump the shark?

In this episode, Shayle brings Brian Janous back on the show to talk about why a data center might not want to colocate generation. Brian is co-founder and chief commercial officer at data center developer Cloverleaf Infrastructure. He makes the case for relying on alternatives instead, like batteries, grid-enhancing technologies (GETs), advanced conductors, and a range of other non-generation options to take advantage of untapped capacity in the existing grid. Shayle and Brian cover topics like:

Whether 24/7 loads actually needs 24/7 power and why utilities solve for peaks, not 24/7 needs

The constraints of colocation, including gas constraints, added complexity and cost, and permitting challenges

The complexity of multiple-party solutions involving VPPs, GETs, and other alternatives vs. the relative simplicity of single-party generation

Why both Shayle and Brian are skeptical of on-site nuclear

Resources:

Catalyst: The case for colocating data centers and generation

Latitude Media: AEP, Dominion argue there’s no such thing as ‘isolated’ colocation for data centers

Catalyst: Explaining the ‘Watt-Bit Spread’

Catalyst: The potential for flexible data centers

Credits: Hosted by Shayle Kann. Produced and edited by Daniel Woldorff. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor.

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