Nuclear

New study favors co-locating data centers with nuclear plants

The former Chief Operating Officer of PJM Interconnection speaks to concerns that data center co-location would result in unfair cost shifting.
New study favors co-locating data centers with nuclear plants
(Talen Energy owns a large majority of the Susquehanna Nuclear Station in Salem Township, Pennsylvania. Source: Talen Energy.)

A new study is highlighting the benefits of co-locating data centers at nuclear power plants in competitive electricity markets.

In “The Co-Located Load Solution,” Michael Kormos, the former Chief Operating Officer at PJM Interconnection, said co-locating data centers with nuclear would reduce the pressure of building out additional transmission capacity, thus avoiding long interconnection delays. Deliverability on the transmission grid would then be freed up for other newly-interconnecting resources, typically wind and solar projects.

“By not taking service from the transmission grid, the new load expedites the timeline but must pay for its behind-the-meter delivery facilities and assume the costs and risks of not being served by the grid,” the report reads.

Kormos also argued data center co-location would ensure integration costs are concentrated on the data center owner and not spread to other electricity users, addressing concerns others have raised.

Exelon and American Electric Power (AEP) are protesting a proposal that would result in the co-location of an Amazon Web Services (AWS) data center at Talen Energy’s Susquehanna nuclear plant in northeast Pennsylvania.

In a filing to the Federal Energy Regulatory Commission (FERC) last month, the parties said the proposed Interconnection Service Agreement (ISA) raises unresolved questions and could result in unfair cost burdens on ratepayers and negatively impact market operations and reliability.

Most notably, Exelon and AEP asserted the pending ISA between PJM Interconnection, Susquehanna Nuclear and PPL Utilities would allow the data center to derive benefits from the transmission system without paying for them.

But Kormos argued these concerns have very little to do with the co-location itself. He said costs wouldn’t be shifted to other customers if the data center is truly behind-the-meter.

“In my experience, it is far more likely that connecting a data center to the grid in front of the meter will require more transmission upgrades than colocating it behind a generator, which does not rely upon the grid for service,” he said.

According to a declaration attached to Exelon and AEP’s protest, the parties argued the ISA could result in the data center avoiding transmission costs of up to $140 million per year, shifting these costs to PJM customers.

Kormos said this specific calculation is nothing more than the revenue the transmission owner would have been paid if the data center had connected in front of the meter where it would take grid service.

“In the co-location scenario, the extension cord to the grid is cut – the data center does not cause grid costs to be incurred, cannot take any service from the grid, and is not a customer of the transmission owner,” he said. “There are no costs to shift in the co-location scenario.”

Exelon and AEP have called on FERC to set a hearing to address these issues described or, alternatively, for the ISA to be rejected. They argue the implications of this case are important and claimed if the AWS data center was permitted to avoid significant costs, other generators and large consumers might pursue similar arrangements.

Data centers project to be significant drivers of growth in electricity demand in many regions. According to a study released by EPRI, data centers could consume up to 9% of U.S. electricity generation by 2030 — more than double the amount currently used.