The Federal Energy Regulatory Commission (FERC) recently rejected a request to increase electricity production for a data center located next to a nuclear power plant in Pennsylvania. The United States will need to quickly increase its electricity production to meet future demand from AI and large data centers. This decision shows how difficult this task will be.

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 the Susquehanna Steam Generating Station, a nuclear power plant that generates 2.5 gigawatts of electricity per year, rather than from the grid.

Under the deal between Talen and Amazon, AWS must meet contractual power commitments that were expected to increase in increments of 120 MW over the next few years, ultimately reaching 960 MW. In June, PJM Interconnection, the organization that oversees wholesale electricity markets in Pennsylvania and 12 other states, filed an application with FERC to allow the nuclear plant and local utilities to increase the amount of electricity delivered to the data center from 300 MW to 480 MW. MW.

The proposal was rejected because it was too vague and failed to demonstrate why 300 MW is not enough to meet AWS’s needs. FERC’s decision does not void the agreement between AWS and Talen. Instead, it limits the amount of electricity the Susquehanna Steam Generating Station can supply to AWS’s data center to 300 MW until federal regulators rule otherwise.

Travis Fisher, director of energy and environmental policy studies at the Cato Institute, tells Reason that FERC made the right decision. Like Fisher and other opponents of the measure See, approving the request would have allowed AWS to draw more electricity from the grid without paying for it. This could encourage more co-located establishments to do the same.

The co-located facilities have received support from some utilities and industry experts which claim they can bring production to high-load customers, such as data centers, faster than through the standard regulatory process. And because there is no need to build an additional transmission network (the cost of which is passed on to consumers through higher rates), co-location facilities can result in savings for taxpayers.

FERC’s decision likely won’t impact big tech’s interest in nuclear power to meet data center energy needs. “The energy-intensive demand from big tech is still there and likely to grow. FERC’s decision narrows contracting options slightly, but even colocation is still on the table if colocated loads are willing to pay for transmission service over network,” Fisher said. said.

While facility co-location may be an innovative solution to accelerating next generation, the real problem at hand is reforming the nation’s cumbersome permitting process, said Kent Chandler, senior energy and environmental policy fellow at R Street Institute. Reason.

The interconnection queue, which represents the backlog of energy projects seeking approval to connect to the grid, has “increased eightfold over the past decade, and is now more than twice the size total installed capacity of the existing US power plant fleet, ” according to at the Lawrence Berkeley National Laboratory.

Developers also face embarrassment from states and the federal government. environmental reviewsrestrictive regulations and NIMBYism that make it nearly impossible to build projects on time and on budget. For example, the 550-mile SunZia transmission project, first proposed in 2006, work only started last year and is expected to start commercial operation in 2025.

A second Trump administration, which will likely rescind the mandate of the Environmental Protection Agency. greenhouse gas rule for power plants and rolling back parts of the Inflation Reduction Act “will improve grid reliability, make wholesale markets more efficient, and control costs for consumers, making FERC’s job easier,” says Fisher.

Yet, in the absence of a comprehensive permitting reform plan reducing the role of the federal government, U.S. developers will not be able to quickly expand power generation to meet future demand.