Most Americans don’t think about where their electricity comes from. They plug in their phone charger and their device begins to charge without a problem. As they scroll through their charging phone, they use various apps that require cloud storage to operate, such as Instagram, Facebook, Twitter (or X). Behind the scenes, data centers are processing and storing the data generated over websites and applications.

Now, with the advent of AI services, like ChatGPT and Google’s Gemini, larger and more advanced data centers are needed to process endless amounts of information. Large language models are needed to support AI interfaces, so the demand for data centers is booming, and in turn, the need for even more electricity to support them continues to soar.

Energizing Small Town Data Centers

As the demand for power skyrockets, companies are exploring new avenues to secure electricity for their data centers. Traditional locations near large cities are reaching their limits, and areas of land that can fit a data center are getting even more expensive, prompting tech companies to consider smaller cities. According to an article from the Washington Post, major tech companies are looking for land and grid hook-ups in much smaller cities like Columbus, Ohio, Altoona, Iowa, and Fort Wayne, Indiana.

The article also mentions how state energy providers are significantly increasing their energy demand forecasts due to the number of data centers that are projected to be built over the next several years. Not only does the grid have to contend with new data centers, but the increasing need for EV charging stations nationwide and steady conversion to all electric household appliances. As the share of the EVs on the road continues to grow, so will the demand for electricity needed to charge them. When it comes to household appliances, more and more new construction is using electric stoves and electric heat pumps to replace your normal reliance natural gas for heat. The steadily increasing demand for electricity from both EVs and household appliances will compete for grid capacity with data centers even more in the future. This is why proper planning for grid expansion and enhancement is so pressing.

Neighborhood with Solar Panels
solar panels

Innovative Solutions for Future Energy Needs

Meeting the future energy demands of data centers involves more than just building more power plants. It requires a multi-faceted approach, including connecting new power sources to the grid efficiently. Wind and solar projects, while beneficial, often face lengthy approval processes according to a recent CNBC article. Streamlining these processes is essential to ensure timely connection and utilization of renewable energy sources.

Microgrids also present a promising solution. These small energy grids can operate independently of the larger grid, allowing companies to manage their own power consumption and production. Homes with solar panels and battery storage already function as microgrids, providing resilience during power outages. The increased threat of severe weather and the desire for reliable, local power sources are driving interest in microgrids.

David Kopera Financial Analyst

“We will likely see a rise in the use of microgrids based on multiple factors like the increased threat of severe weather knocking out power on an aging grid combined with the lack of certainty around how fast new utility scale power production can be brought online to meet demand. More consumers want certainty and a local power source they have better control over lessens those concerns.”

David Kopera, Financial Analyst

Powering with SMR

With natural gas plants adding carbon dioxide into the atmosphere, and solar and wind projects taking time to be connected to the grid, companies like Microsoft are looking for a different zero emission power source to supply electricity to their data centers: nuclear. Not just any nuclear plant, but a small module reactor (SMR). This is smaller and theoretically cheaper to build than the massive nuclear plants you see powering regional grids. These SMRs are the perfect size to power a microgrid for a factory or data center. The company that owns them can easily control and manage the electrical output without having to rely on the larger stressed grid.

One company that is trying to capitalize on private industry’s demand for clean power is Oklo. Oklo is in the process of building a microreactor to prove that they are a viable option to power the future of AI. Smaller than a SMR, microreactors could directly power data centers without the emissions that would come from a natural gas plant. What’s even better is that Oklo’s first microreactor will be run on recycled fuel – a concept that could be a game changer for the nuclear industry.

This leads to the question, why don’t we produce more SMR’s to solve this problem? SMR’s are still very new and only have minimal commercial units operating. Regulations and testing are still in development, but there are various types of SMR’s that are being researched to see what may be the safest and most efficient. As mentioned earlier, integrating these into existing grids is not so simple. On top of grid integration concerns, nuclear is highly regulated, for good reason, and will take time to get approval. However, the benefit of SMR’s and micro reactors is since they are a standardized design, they would only need an initial sign off on the design and then they can be constructed without the need for permits for each new reactor. Federal or local permits and approval would be needed for the location the reactor is being installed on, thus reducing cost and time to build. This may require technological upgrades and changes to infrastructure. Even though there are obstacles to increasing nuclear energy production, it is a possible great solution for clean energy.

The increasing energy demands driven by AI advancements and the shift towards electrification present both challenges and opportunities. By embracing innovative solutions with strategic investments and forward-thinking policies, the path forward is clear: through collaboration, innovation, and dedication, we can power a bright and prosperous future for all.


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