Commentary
Meta’s
recent deal with Entergy would power its $10 billion Louisiana data center with 2,300 megawatts (MW) of combined-cycle gas and 1,500 MW of new solar plus storage—not enough to offset the gas usage.
Like many hyper-scaling peers, Meta
committed to supplying its operations with 100 percent clean electricity—but the 100 percent clean energy math isn’t adding up.
A
data center powered by three new gas power plants and new solar-plus-storage conflicts with corporate commitments to 100 percent clean energy, and Meta’s gas powered deal should leave Louisiana consumers and utility regulators scratching their heads.
Thankfully, clean solutions abound for data center demand. Large consumers like
Google are investing in portfolios of variable and baseload clean energy resources where utilities and their regulators allow it. A wider solution set wherein data centers bring entire energy portfolios to the party obviates the need for so much firming capacity and aligns with public policy goals of affordable, reliable, clean power for all.
Regulators should prioritize interventions that unlock these innovative configurations, including co-location and
energy parks, enabling faster load growth while mitigating customer risk and pollution.
What’s in a 100 Percent Clean Commitment?
Meta’s
negotiations with Entergy exemplify the dilemma facing utilities, power-hungry data centers, and regulators grappling with growing demand.
Most utilities and AI companies have adopted corporate sustainability goals pledging “net-zero” or 100 percent clean electricity. But off-the-shelf 100 percent clean solutions to meet this demand aren’t easy to find off the shelf.
Credit where it’s due: Meta and other technology companies have been mega-procurers of clean energy—in Meta’s case more than
11 gigawatts (GW) of carbon-free projects. This voluntary commitment to reducing pollution and supporting U.S. technological leadership deserves praise.
Meta’s Entergy deal highlights a systemic problem—utilities gatekeep market access, slowing clean energy additions and mostly limiting corporate procurement to transactional offset arrangements that encourage new gas as a reliability backstop. Corporate customers shouldn’t take responsibility for grid reliability, but they can help develop solutions that minimize locking in new infrastructure that also locks in price volatility, if the option exists.
Meta Inks a Mega Gas Deal—But Who Pays?
Regulators’ primary duty here is allocating the cost of equitably serving customers and ensuring utilities plan for grid reliability—not mediating corporate sustainability goals. But these objectives come into conflict when large customers pull investments into the utility rate base.Large customers can pay costs associated with data centers and leave consumers unharmed. Regulators certainly intend this. But costs can be difficult to attribute to specific customers, especially when they pay for some new resources and not others. And once built, new infrastructure stays in the rate base even if customers leave.
In its public filing, Entergy’s contract with Meta includes provisions to pay full revenue requirements for $3.2 billion worth of gas plants for the first 15 years of operation. Some transmission assets are also covered, while others will go into the general rate base. Presumably, Meta is also bringing the storage and solar plant to the party under its own purchasing arrangement, with the intent to sell this power to Entergy’s market zone, netting the difference.
However, gas power plants are designed to operate for 30 years or more, and transmission lines last even longer, which is out of sync for corporate consumers. And what happens if the data centers’ power demand doesn’t pan out? The recent
news and market reaction to DeepSeek, a more efficient Chinese model for AI training, indicates we’re far from done realizing efficiency gains. For context, Bain & Company
predicts data center growth will only increase costs 1 percent annually for
all customers.
The Best Laid Plans
It’s indisputable we’ll need more electricity, but just how much by when remains an open question.
Electric Power Research Institute projections exemplify the uncertainty, ranging from 5-9 percent of U.S. electricity demand being taken by data centers in 2030 (up from 4 percent today). And demand projections have been wrong before—journalist Michael Thomas
notes 2007 Energy Information Administration modeling predicted 4,700 terawatt-hours of demand by 2023…which didn’t happen.
Considering this uncertainty, utilities must pursue least-regrets solutions, and new customers should bear risks of accelerated investment. But for now, breathless claims from institutions like the North American Electric Reliability Corporation predicting catastrophic grid failures boost utility shareholders by
presuming this load will materialize.
The conventional solution to “explosive” demand growth and the preferred path of incumbent utilities will be capital investment with risk spread over all customers, as well as preservation of remaining dispatchable generation. Regulators
feel this pressure and utilities are pressing them to adjust capital plans including new gas builds.
Georgia Power’s
unusual 2024 update to its integrated resource plan is early evidence, where the utility proposed and won hasty regulatory approval for 1.4 GW of new gas and oil-fired power to meet new load growth forecasts. At least Meta had the fortitude in Louisiana to take financial responsibility for new gas.
Deals like this will only heat up as the pressure builds to grant grid access to large, powerful consumers. Thoughtless inter-utility competition to rapidly supply demand risks a race to the bottom where existing customers provide corporate welfare becoming buyers of last resort for new infrastructure.
Utilities and their regulators are not powerless. If the name of the game is shifting risk to large consumers that want access to clean power, we must get more creative than Meta’s deal. But that requires
long-overdue changes to the utility business model.
BYONCE, Meet Energy Parks and Clean Portfolios
The Meta deal does allow data center access to significant additional solar resources, an incremental benefit to consumers and in-state pollution if Meta also pays for it. This deal represents a growing trend towards “
bring your own new clean energy“ (BYONCE).
BYONCE can take many forms. Meta’s represents a low bar—a contract with the incumbent utility or directly with generation selling into a wholesale market. This allows corporate customers to claim “clean” energy attributes for accounting purposes while offsetting costs if the energy delivers to the same market as the consumer.
More innovative arrangements include Nevada’s proposed “
clean transition tariff“ to supply Google with 24/7 clean electricity from a new
enhanced geothermal project, along with others that may follow. These offerings typically include one or more generation sources, but could expand to include portfolios including demand-side resources like efficiency that better match inflexible demands. They could be structured to incent flexible behavior from large consumers if such behavior can avoid infrastructure investments, and be extended to
groups of multiple customers.
But another model is emerging wherein large consumers bring their own onsite clean energy portfolios to the party: “
energy parks.”
Rather than working clean energy deals through the utility rate base, an energy park allows large consumers to invest in and co-locate large clean energy developments behind a single interconnection point, serving the large load and the grid.
It also enables large consumers to spend their own capital on generation and other infrastructure to serve their needs, shifting risk from existing customers to new ones and reducing strain on the existing grid.
These solutions have real commercial interest. Intersect Power recently
announced its strategic partnership with Google and TPG Rise Climate to provide renewable-plus-storage solutions co-located with new data centers. With data centers as “anchor tenants,” energy parks can add other flexible sources of demand to increase renewables utilization and add more economic development opportunities to the site.
A Moment of Leverage
If gas-heavy deals like Meta’s become the default, data center-driven load growth won’t be met without risking customer costs, grid reliability, and clean air. It shifts risk to consumers and won’t scale quickly enough to meet new demand or bring the most affordable, scalable resources to market.
Creative solutions like energy parks or BYONCE broaden the solution set for large consumers and utilities, empowering more equitable risk allocation. While incumbents won’t go easily, utilities need this growth to continue creating shareholder value. Energy parks can attract new loads with what they want: faster access to cleaner, cheaper power. Regulators must bring these solutions to the table to protect consumers while meeting the load growth challenge.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
