Data Centers Are a Hot Mess, but Maybe There's a Way Forward

By Maurice Carter, Co-Founder & President

Is It a Data Center or A Power Plant?

Data centers are a hot mess!  Whether you're a big supporter or the most ardent opponent, you don't need me to tell you that.  There's every reason to want to slow things down, so it makes sense for the City of Covington and Newton County to put moratoriums in place, as they did recently.  But it's critical we use these timeouts to better understand the issues and the not-so-obvious solutions to some of the most vexing problems these massive facilities pose.

Concerns over soil and water impacts, noise and light pollution, heavy water use, electricity consumption, and air pollution, have communities across Georgia and the Southeast pushing back on data centers in their area.  Meanwhile, in the Georgia General Assembly, lawmakers are proposing a variety of bills meant to put guardrails around data center projects to protect Georgia taxpayers and ratepayers.

The concerns are many, but I am going to delve specifically here into issues around electricity demand:  including risk to ratepayers, grid reliability, and air quality concerns.  There are some emerging ideas we should be following.

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If You Build It, Will They Come?

​The extra electricity utility companies say they must generate for data centers is staggering.  In December, the Georgia Public Service Commission (PSC) approved a request from Georgia Power to invest over $16B to build 10 gigawatts (GW) of new generating capacity and upgrade existing transmission infrastructure.  Consumer watchdog and environmental groups have questioned the reliability of Georgia Power's estimates, raising concerns about the risk to Georgia ratepayers and the impacts of increased pollution from expanded fossil gas-fired generation.

But an even bigger threat is emerging.  Facing delays of up to seven years for utilities to serve them power, a growing number of data center developers are turning to alternative solutions to generate their own electricity without connecting to the power grid.

​Michael Thomas publishes the Distilled Newsletter, where he follows developments in clean energy technology.  More recently, he founded the company Cleanview to aggregate and sell data and analysis to clients.  Part of that analysis includes reporting on data center projects and industry trends.  In a recent report titled "Bypassing the Grid: How Data Centers Are Building Their Own Power Plants," Thomas wrote:

"As a company, our main job is to track data centers and power projects. Still, much of this data shocked us. The public narrative is that data centers are waiting for grid connections and 5-7 year turbine backlogs. But that narrative is lagging what is actually happening on the ground in rural counties across the country."

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Time Is Not on Our Side

What shocked Thomas and his colleagues was finding 46 data centers with a combined capacity of 56 GW  planning to build their own “behind-the-meter” electricity generation, representing ~30% of all planned data center capacity in the United States.  Aside from the obvious risk that Georgia Power might not find paying customers for that 10 GW of new capacity, the other major concern is air  pollution.  Lot's of it.  One or more power plants operating in every community!

Thomas and his team compared the public statements about data center projects to the equipment  orders and permits being sought.  What they discovered:  "Most of the press releases we found mentioned 'all of the above' strategies that include renewables. But ~75% of the generation equipment we could identify (23 GW) was natural gas-powered. Virtually none of the developers planned to build renewables in the short term."

They are also mostly planning to use less-efficient (read dirtier) equipment to achieve speed to market.  "Power generation efficiency is out," he writes. "Speed to power is all that developers care about."  Thomas even found one data center project purchasing equipment from a company that current only sells ship engines.

For a worst-case demonstration of how badly a singular focus on speed can harm a community, consider the two massive data centers Elon Musk's xAI is operating in Memphis with dozens of illegal, unpermitted gas turbines.  Closer to home, Sustainable Newton is concerned about plans by the Houston-based energy company VoltaGrid to install gas-fired power generation for a data center on Hazelbrand Road being built by the company ServerFarm.  In December, we joined the Southern Environmental Law Center and Altamaha Riverkeeper in filing comments challenging VoltaGrid's permit application to the Georgia Environmental Project Division (EPD).

What If We Told You None of This Is Necessary?

​Regardless of where the electricity comes from -- building out centralized, utility-owned generation (the Georgia Power approach) or from tech companies installing their own on-site power capacity -- wouldn't we all be better off if neither of these had to happen?

Isn't there some other way?  Yes.

Waste Not, Want Not

Spoiler Alert:  Conservation isn't America's strong suit.  It's a bi-product of generations growing up with what seemed like a limitless supply of land, water, and clean air, so we haven't been encouraged to use our resources efficiently.  In the Southeast, it turns out, we are REALLY BAD at conserving energy.  Worse than the rest of the country by far.

Last week, the Southern Alliance for Clean Energy (SACE) hosted a webinar to review their recent "Energy Efficiency in the Southeast Seventh Edition Report."  In their report, SACE scores the efficiency performance of each utility using an index created by dividing energy efficiency program savings, expressed in megawatt hours (MWh), by the total MWh the utility sold its customers. Efficiency programs are the rebates and other incentives utility companies offer customers in order lower their energy consumption. 

By rolling those performance figures up by state and region, SACE shows the Southeast is significantly behind other regions of the US.  And, except for Duke Energy, every utility in the Southeast is performing well below the national average for large utility companies.  We shared some of the key findings from the SACE report recently on our social media channels.  Below also is the video replay of the webinar.  Watching it will clue you in on just how big the efficiency opportunity is for Georgia Power and the other utilities in the Southeast.

​It's disappointing utilities in our region haven't done more to help residential, commercial, and industrial customers use electricity more efficiently and consume less of it.  But that weakness is also a major opportunity now, when we need every available kilowatt to meet escalating demand.  The electricity we save is capacity we don't have to build and fossil fuels we don't have to burn.

A significant factor holding our region back on efficiency is a regulatory environment that incentivizes building new generation and transmission capabilities, rather than investing in efficiency.  The non-profit American Council for an Energy-Efficient Economy (ACEEE) recently published a report arguing that implementing energy-efficiency measures and shifting electricity usage to lower-demand times are two of the fastest and cheapest ways to satisfy new demand for electricity.  They estimate those methods could meet much, if not all, of the nation’s projected load growth at only half the cost of building new infrastructure.

The non-profit publication Grist interviewed the report's author, Mike Specian, who explained that building infrastructure is considered a capital investment, and utilities can pass that cost on to customers, plus an additional rate of return, or premium, which is typically around 10 percent. Energy-efficiency programs, however, are generally considered an operating expense, which aren’t eligible for a rate of return. This setup, he said, motivates utilities to build new infrastructure rather than conserve energy, even if the latter presents a more affordable option for ratepayers.

Changing the current dynamic will require a different posture from the Georgia PSC and other regulators. But just this week, PSC members voted 3-2 to reject an appeal from environmental groups asking the board to reconsider their approval in December of Georgia Power's 10 GW fossil-fuel buildout.  Among data presented to encourage the PSC to reconsider was a report from Greenlink Analytics and Science for Georgia summarizing their findings after extensive modeling and analysis on data center load projections southeastern utilities used to justify building new capacity.  Their findings say utility company load forecasts are likely grossly exaggerated:

"Across nearly all simulations, utility estimates landed above what the model considers a reasonable upper bound. Excluding the technological advancement model, the likelihood of utilities' predicted growth is approximately 1 in 500, or 0.22%."

But for now, changes to the incentive structure motivating utilities will have to come from new legislation or changes to the PSC makeup in future election cycles.

Of course, there are other ways to accelerate energy efficiency, and one of those is the federal government.  The Biden administration passed the Federal Inflation Reduction Act (IRA) to provide homeowners tax credits and rebates for energy improvements.  However, the Trump administration terminated the tax credits at the end of 2025, as part of a larger effort to roll back nearly all IRA provisions.  One glimmer of hope for Georgians remains from the IRA, in the form of rebates for low and moderate-income households.  While funded by the federal government, these programs are administered by the state.  But Georgia and North Carolina are the only southeastern states able to lock in funding before it was gone.  The Georgia Environmental Finance Authority (GEFA): offers two programs:

• Home Energy Rebates (HER) -- focuses on whole-home energy efficient retrofits and upgrades, with the total rebate amount being affected by income level and the amount of energy saved.
• Home Electrification & Appliance Rebates (HEAR) -- helps low-and-moderate income households secure savings on specific appliance purchases.

These programs were piloted in late 2024, before going live in 2025, and to-date, Georgians have claimed $17.8M in up-front cost savings.  Another $155M remains available to these income-qualified programs. (We have a webinar coming up on February 26 to discuss these rebates and how to benefit from them.  Register here.)  The HER & HEAR rebates are good news for Georgia households seeking to use less energy and save money.  But it's still a drop in the bucket vs. what it will take to move the needle on statewide electricity use.

So, with utility companies lagging behind and no incentives to do better, the Georgia PSC declining to change that, and the federal government rolling back its incentives, where can we turn for the investments required to free up wasted electricity to avoid building new generation?

How About These Guys?

​Enter data center hyperscalers.  They're hyper-focused on speed to market -- to the point they'll use anything they can get their hands on to generate electricity to power and cool their servers.  Many of the larger companies (though not all) also have public images to bolster and sustainability commitments they can't just ignore.  Locally, we've seen Amazon working with the City of Covington to build infrastructure for water reuse to lower consumption.  What if something similar were possible on the energy side of the equation?  A quick way to find electricity without a multi-year buildout of new fossil gas-fired power plants or firing up of hundreds of on-site gas turbine, engines, and generators?

Last September, the home electrification non-profit Rewiring America published a report titled "Homegrown energy: How household upgrades can meet 100 percent of data center demand growth." The authors assert data centers can meet all of their electricity needs from the grid by investing in just two home energy solutions, which will provide a third overarching benefit beyond meeting the data center energy needs:

1. "Hyperscalers could meet one third of their projected additional capacity needs by paying for heat pumps in select households that currently use inefficient electric heating, cooling, and water heating, thereby creating capacity on the grid from a subset of households."
2. "Hyperscalers could more than meet their total planned capacity needs by paying for battery storage as well as rooftop solar for homes well suited for it. This will create new generation capacity on the grid."
3. "Hyperscalers’ immediate investments in these solutions will forge the technological and economic pathways that transform America’s entire energy system. What starts as an urgent solution to AI’s power hunger becomes the foundation for an all-electric economy — efficient, resilient, affordable for households, and perfectly suited to position the U.S. as a global leader in the industries that will define this century."

"Nationally, peak demand is roughly 850 gigawatts (GW), while average load sits just over half that level. The real challenge lies in fewer than 200 hours per year — typically during heat waves or cold snaps — when demand spikes. So this is not primarily a generation problem; it’s a utilization problem."

Smart Appliances, Smarter Grid

In December, the industry publication Utility Dive reported on analysis by the  energy policy group AnnDyl, examining data center buildout in Ohio.  Their research determined a hypothetical 200-MW data center could offset 10% of its peak load by investing $50 million in low-cost residential efficiency upgrades.  That same story provided updates on the Rewiring America report, including a follow-on finding that data center hyperscalers investing in millions of heat pumps, batteries and solar systems across the United States would create up to 1.1 million new jobs over the next five years.

Installing well-understood, field-proven home energy solutions is an actionable strategy that can produce immediate results -- exactly what the data center companies need.  Longer term, energy technology experts are already developing and piloting advanced solutions to give utility companies even greater control over how electricity demand impacts their grids. Former US Department of Energy Director for Loan Programs, Jigar Shah, described those possibilities recently in an article for another utility industry publication, T&D World, explaining "How Electric Utilities Can Lead Through the Affordability Crisis." 

In the piece, Shah writes "So far, the conversation about powering AI has focused almost entirely on building new generation. But the grid already has substantial unused capacity. Nationally, peak demand is roughly 850 gigawatts (GW), while average load sits just over half that level. The real challenge lies in fewer than 200 hours per year — typically during heat waves or cold snaps — when demand spikes. So this is not primarily a generation problem; it’s a utilization problem. The opportunity is to get far more value out of the grid we’ve already paid for."

He then explains how adding grid storage, rewarding consumers for demand flexibility, deploying grid-enhancing technologies, and leveraging virtual power plants (VPP), can all help utilities to get more out of the existing grid, without imposing costs or risks on existing customers.  These are also places where utility companies, data center hyperscalers, utility regulators, and local governments can all collaborate for the benefit of everyone involved.

And THAT's the bottom line.  These are the conversations that should be taking place now, alongside discussions about tax incentives, increasing the tax base, and creating jobs.  The local ordinances being rewritten at the City of Covington, Newton County, and elsewhere need to be focused on putting these discussions and collaboration at the center of of the development process.  We must find ways to grow and adapt that don't require sacrificing the reliability and sustainability of our water and energy systems and the livability of our community.  Thankfully, there are encouraging avenues to explore.

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