Regulations Are Making It Harder To Meet the Nation’s Power Demands
The Federal Energy Regulatory Commission (FERC) recently rejected a request to increase power generation for a data center located next to a nuclear power plant in Pennsylvania. The U.S. will need to rapidly scale up power generation to meet future demand from AI and large data centers. This decision shows how challenging this task will be. Â
In March 2024, Talen Energy sold its 960-megawatt (MW) data center to Amazon Web Services (AWS) for $650 million. The data center is a co-located facility, meaning it will draw electricity directly from Susquehanna Steam Electric Station—a nuclear power plant that generates 2.5 gigawatts of power annually—rather than from the grid.Â
Under the agreement between Talen and Amazon, AWS must adhere to contractual power commitments that were slated to increase in 120 MW increments over the next few years, eventually reaching 960 MW. In June, PJM Interconnection, the organization that oversees wholesale electricity markets in Pennsylvania and 12 other states, filed a request with FERC to allow the nuclear power plant and local utility to increase the amount of electricity going to the data center from 300 MW to 480 MW.Â
The proposal was denied for being too vague and failing to demonstrate why 300 MW is inadequate to meet AWS’ needs. FERC’s decision does not void the agreement between AWS and Talen. Instead, it limits the amount of electricity that Susquehanna Steam Electric Station can provide to AWS’ data center to 300 MW until federal regulators decide otherwise.Â
Travis Fisher, director of energy and environmental policy studies at the Cato Institute, tells Reason that FERC made the right decision. As Fisher and other opponents of the measure see it, approving the request would have allowed AWS to draw more electricity from the grid without paying for it. This could incentivize more co-located facilities to do the same.Â
Co-located facilities have received support from some utilities and industry experts who contend that they can bring generat
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