When to colocate data centers with generation

The idea of colocating data centers with behind-the-meter generation is picking up steam, including large projects in Memphis, Texas, and Utah developing significant on-site capacity, mostly from combined-cycle gas plants. The main argument is speed to power. Building your own generation allows data centers to sidestep the challenges involved in grid upgrades, transmission, and permitting. But when does a good idea jump the shark? In this episode, Shayle brings Brian Janous back on the show to talk about why a data center might not want to colocate generation. Brian is co-founder and chief commercial officer at data center developer Cloverleaf Infrastructure. He makes the case for relying on alternatives instead, like batteries, grid-enhancing technologies (GETs), advanced conductors, and a range of other non-generation options to take advantage of untapped capacity in the existing grid. Shayle and Brian cover topics like: Whether 24/7 loads actually needs 24/7 power and why utilities solve for peaks, not 24/7 needs The constraints of colocation, including gas constraints, added complexity and cost, and permitting challenges The complexity of multiple-party solutions involving VPPs, GETs, and other alternatives vs. the relative simplicity of single-party generation Why both Shayle and Brian are skeptical of on-site nuclear Resources: Catalyst: The case for colocating data centers and generation Latitude Media: AEP, Dominion argue there’s no such thing as ‘isolated’ colocation for data centers Catalyst: Explaining the ‘Watt-Bit Spread’ Catalyst: The potential for flexible data centers Credits: Hosted by Shayle Kann. Produced and edited by Daniel Woldorff. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor. Catalyst is brought to you by Anza, a solar and energy storage development and procurement platform helping clients make optimal decisions, saving significant time, money, and reducing risk. Subscribers instantly access pricing, product, and supplier data. Learn more at ⁠go.anzarenewables.com/latitude⁠. Catalyst is supported by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform by visiting ⁠energyhub.com⁠. Catalyst is brought to you by Antenna Group, the public relations and strategic marketing agency of choice for climate and energy leaders. If you're a startup, investor, or global corporation that's looking to tell your climate story, demonstrate your impact, or accelerate your growth, Antenna Group's team of industry insiders is ready to help. Learn more at ⁠antennagroup.com⁠.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Speaker 00

  Latitude Media, covering the new frontiers of the energy transition.

• 0:07Shayle Kann?

  I'm Shayle Khan, and this is Catalyst.

• 0:11Speaker 02

  I don't think there's a credible argument for behind the meter nuclear at a data center in the near future, and by near future, I mean the next couple of decades.

• 0:21Shayle Kann?

  We're just saying not on site. I mean, that's the distinction I want to make here is like, we are going to, and I think we should build a lot of new nuclear in the US. I just don't know why it needs to be co-located with data centers.

• 0:31Speaker 02

  No, I don't think it does, because it doesn't solve all those problems that you're talking about.

• 0:36Shayle Kann?

  Coming up, near, far, wherever you are, you'll be powering my data center.

• 0:50Speaker 00

  Demand flexibility is now an essential part of the data center's speed to power playbook. But how do data centers actually curtail load? Gridbeyond is the end-to-end solution for flexible energy management. Gridbeyond's advanced DRS and VPP platform is tailored to what data centers care about most: maximizing reliability, intelligently meeting curtailment obligations, reducing costs, and managing all your distributed resources in one place. Ready to transform your distributed energy management? Get started at gridbeyond.com. Catalyst is brought to you by Antenna Group, the communications and marketing partner behind the most influential companies in energy, climate, and infrastructure. For three decades, Antenna has helped ambitious companies stand out, build market leadership,

• 1:34Speaker 00

  and become category-defining brands. From breakthrough startups to global industry leaders, their team brings the expertise, relationships, and track record to accelerate your momentum. Learn more at antennagroup.com.

• 1:48Speaker 03

  The power plant for the modern grid isn't a building, it's a network. Energy Hub's DRS platform connects batteries, EVs, thermostats, and commercial and industrial sites into virtual power plants that over 230 utilities dispatch as reliable grid capacity day in, day out. VPPs deploy in 60 to 100 days at 40% to 60% less cost than traditional infrastructure, and they perform like conventional generation from day one. Learn about the flexibility platform for the modern grid at energyhub.com.

• 2:23Shayle Kann?

  I'm Shayle Khan. I invest in early-stage companies at Energy Impact Partners. Welcome. All right, so here's the thing that often happens, a cycle that plays out again and again and again. Here are the conditions precedent to this cycle. There has to be a hot market with lots of activity, lots of investment and plenty of hype. And then a trend begins. A few players start to do something new. It catches on, it gains steam, and at some point, it kind of jumps the shark. And then everyone starts talking about doing that thing, or just doing it. But the original rationale for it has kind of been lost, and people stop questioning exactly why it makes sense. I've been wondering whether that's starting to happen lately in a particular part of data center

• 3:05Shayle Kann?

  world, specifically the idea of pairing onsite power generation with data centers behind the meter. There are so many announcements about this right now, ranging from it actually happening, for example, the XAI data center that is actually running on generators, or there's a big meta project in Louisiana that's going to build a bunch of new natural gas, to very speculative things, which is where I would put a bunch of the announcements around new nuclear getting co-located with data centers in various locations. We have talked about this a little bit before in a different context with Sheldon Kimber, who's the CEO of Intersect Power, which is adopting a strategy, at least in part, of co-locating wind, solar, storage, and some natural gas with data centers they're building, especially in Texas. But I was having this

• 3:50Shayle Kann?

  conversation about when it does and doesn't make sense to put generation onsite a couple weeks ago with my friend Brian Janis. You have heard Brian on the show before. He's the co-founder of Cloverleaf Infrastructure. He's the former head of energy at Microsoft, and he thinks about this stuff day in and day out. Anyway, it was a good conversation, so I thought we would do it again in front of mics. So with no further ado, here's Brian. Brian, welcome back. Thank you. Appreciate you having me again. Okay, first thing, when you're developing a new data center, campus, LAN, whatever, when you're developing a new data center, what are the basic requirements from a power perspective, and there are a bunch of other requirements, what are the basic requirements that you have from a power perspective? What has to be true?

• 4:37Speaker 02

  What has to be true is you still have to have a very high level of availability of power. I mean, outside of crypto operations, any sort of modern, whether it's an AI data center or a cloud data center, still necessitates a significantly high availability of power, in part because the CapEx costs associated with the infrastructure you're putting in there are so high. You want to have high utilization, plus the services that you're serving out of that, whether it's AI inferencing or some sort of traditional cloud application, still requires a high level of availability. The one area that comes up a lot in this discussion is training. And so does this training, can that act a little bit more as a batch workload? And it's true, by definition, it can.

• 5:21Speaker 02

  And at the same time, nobody wants to build a $20 billion training model and just turn it on and off, you know, every time the electricity starts to cut out.

• 5:31Shayle Kann?

  Well, isn't it true that, my understanding from having now seen a few actual load profiles from these data centers, is that actually it is kind of operated in batch? Like, independently it is. There's spiky load profiles, actually, right? But it's sort of a different question as to whether there can be peaks and valleys in the load profile versus whether there are forced peaks and valleys as a function of the electricity availability, right?

• 5:57Speaker 02

  Exactly. Yes, exactly. And I was talking to a big AI operator about this the other day, and their response to this was, "We don't want any surprises." Like, if we need to go down, and it was more of like, if we need to go down, we'd rather go down for a week than go down for a few hours every afternoon. Like, we'd rather just know that it's coming and plan for it, but, you know, to be like completely dispatchable on an unplanned basis would likely be more problematic.

• 6:28Shayle Kann?

  Okay. And so then the basic paradigm is connect the data center to the grid. The grid provides, generally speaking, high reliability, not quite high enough reliability to what you want. So you also put a UPS on site, which just bridges seconds to minutes of power outages, basically. And then you generally put backup generators on site as well, which are supposed to, you know, fill in the blanks where you have longer outages. So that architecture, grid connection, UPS, backup gen set, that's the kind of basic, like dominant paradigm, right?

• 7:07Speaker 02

  Correct. Yeah. Particularly for your traditional cloud data centers, you'll see that. I think with some of the AI training sites, we've seen it's more of a move away from backup generators. Some of that is in part because of that batch, like they could handle an outage if it ever happened. And keep in mind, like the outages we're talking about, that the generators there to protect are pretty rare, because we're talking about these sites being connected at very high voltages on the transmission system. So, you know, we're talking about like, you know, winter storm, Yuri sort of events that you're really concerned about. So in that case, both for that reason, and I think out of necessity, because especially if you're talking about these gigawatt scale sites we're seeing, you're

• 7:51Speaker 02

  not getting diesel generators permitted at that sort of scale, anyway.

• 7:55Shayle Kann?

  Though, didn't XAI, that, that, the Colossus site, they just kind of did it, right? Anyway?

• 8:02Speaker 02

  They just kind of did it. It still wasn't at the scale of, you know, even recently, the sites that OpenAI has been talking about, that was recently now sort of with Oracle, like just today, really, or the last week, we've seen, you know, those were, you know, 1.3 gigawatts in Port Washington, Wisconsin, that I'm quite familiar with, another 1.4 gigawatts, I believe, in Abilene. I think for those kind of sites, it would be very difficult to Permit that scale of diesel generators in most markets.

• 8:31Shayle Kann?

  Right. Okay. But I guess the first point I wanted to make here is that because what we're going to talk about here is this concept of of co-locating generation with with data centers that seems to be fairly hypey at the moment. But I wanted to first clarify by saying, actually, a lot of data centers, most data centers, certainly all cloud data centers do have onsite generation already. It's just backup generation. And so when we talk about the things like demand response and making data centers flexible and so on, you know, there is existing generation onsite that could theoretically serve that in a lot of data centers. I think the limitation to that tends to be an air permit one, right? You you have limits to how much you can operate those generators if they're diesel, anyway.

• 9:13Speaker 02

  That's right. Yeah. And we were always, you know, having to look at, you know, as we would build campuses larger and larger, we're sort of eating into those emissions allocations. And so you end up with less runtime, less ability to test those generators, you know, to keep them operational for emergency purposes.

• 9:30Shayle Kann?

  Okay. So that's the first clarification. There is generation onsite, but it's kind of limited. It's expensive. It's dirty, generally speaking. But the thing that people are talking about a lot more now, and you see these announcements coming, I think, from left, right and center, is this concept of co-locating generation that's not intended to be backup generation. It's intended to either be it's intended to be prime power, either to entirely serve the load of the data center, though I think that might be, you tell me what you think. I think that's more of a mirage than anything else, more likely sitting there, operating 24/7 or as close to 24/7 as it can alongside a grid connection ultimately. So can you straw man for me the argument for like when you might actually want to do that?

• 10:14Speaker 02

  Yeah, I mean, the argument is that if I go to utility and they tell me it's going to be five to seven years to get the connection at the scale I want, then maybe it's faster for me to just build my own generation. So that that's the argument. And it's sort of further bolstered by the idea that, which I actually think is. A false idea, but an idea that because I'm putting a 24/7 load on the grid, I need to match it with a 24/7 generation source. And you hear that a lot out of the current administration about, well, wind and solar can't help us do what we need to do because they're intermittent. So we need to have lots of base load generators because we need to connect these data centers and we need to keep the lights on. So that's the other part of the argument, that I need to match the output of this resource with what I need to input into my data center.

• 10:59Shayle Kann?

  Okay, so two-part argument there that you made. The first part is time to power, speed to power, which is the term that has overtaken the industry. That, I think intuitively makes sense and you do hear about these extraordinarily long interconnection times. The interconnection queues are remarkably clogged. There are hundreds of gigawatts of theoretical data centers sitting in the load interconnection queue of some utilities. And so, of course, it makes intuitive sense that if you have the capacity to come online earlier via bringing your own generation, some of these data center operators would certainly do that. Why do you think that that is, at least to some degree, a mirage?

• 11:40Speaker 02

  Well, I think there's a number of reasons why. One, it assumes that while there's congestion on the electricity grid, there's not on the gas grid, and that's just not true. Like everything, there are certainly places I can go to get abundance amount of gas to supply a data center, but it's not true universally. It's not true that I can just always stick a pipe in the ground and get unlimited amount of gas to build a data center.

• 12:05Shayle Kann?

  And we should clarify that these generators folks are building, at least today, it's all gas, basically. It's not all gas. We should talk about some of the other things people are talking about too, but most of it is gas.

• 12:13Speaker 02

  Most of it is gas, yes. So assuming what they're talking about in any sort of off-grid consideration today, at least you want to do it in the 2030s or 2020s, it's going to be gas. So there are congested, lots of congested parts of the gas grid. So that's problem number one. Obviously, we have lead time issues with the generators themselves, which has been much discussed. You also have to deal with the integration issues into the data center itself. So Data centers really, I mean, anyone who's designing a data center has always designed for two sources of power, right? You have the grid source and then you had your backup generator source. You could island, you know, people talk about data centers becoming

• 12:57Speaker 02

  microgrids. Data centers have always been microgrids. They've always been designed to do that. And so getting to the level of redundancy that you would want in that system would require a significant overbuild of that system to meet the standard specification of any typical data center engineer. And then when you think about that overbuild, then you get into the cost element. Because actually, one of the arguments that's made for off-grid is that, well, I don't have to pay all this T and D, so it's going to be cheaper for me to just have my own islanded system. And almost no case would that ever be true. Because you would overbuild that system to meet the level of reliability. And we're not even getting it to the level of reliability related to the intermittency

• 13:41Speaker 02

  sometimes of gas and the idea that you could actually get a firm gas connection, but we'll put that aside. But let's say you have a, you know, a data center, it's 100 megawatts of IT. You've got a PUE of, let's say, 1.2. So now I'm at 120 megawatts of generation. And now I'm also thinking about having some sort of N plus redundancy. So I'm going to put in another unit, you know, depending on the size of the units, you know, maybe I'm putting in another 20 megawatts or 30 megawatts of generation on top of that. So now I'm at 150 megawatts. And now I start to operate the data center. Well, most data centers significantly underutilize their peak, theoretical peak capacity. So you might only be running that thing at 90 megawatts, you know, on average.

• 14:24Shayle Kann?

  Or less, right? I mean, on a 24/7 basis, right? Like, I just, I just was talking to a data center operator who said that their average actual utilization relative to nameplate capacity is like 40 to 50% over the course of a year.

• 14:37Speaker 02

  And so, you know, you can quickly do the math on if I'm paying $2,700 to KW just roughly for that generation, and I'm having to overbuild it by, you know, maybe even 2X, right? The per kilowatt hour cost of that system is extraordinarily high. I mean, extraordinarily high. And if you look at it in a place like Texas, for instance, where the, the average price for electricity on any given day is actually pretty low, like the, the real time price, maybe sitting around $20 a megawatt hour. So you go off-grid in Texas. And you're paying somewhere between $150 to $200 a megawatt hour 24/7, and your neighboring data center connected to the grid is paying $20 for that same power. Now, I'm leaving out the T and D.

• 15:20Shayle Kann?

  Yeah, yeah.

• 15:21Speaker 02

  Stuff on top of that. But the average cost of electricity in the market in Texas is pretty cheap most of the time. And the only argument you ever had for building something like a baseload generator in Texas is that sometimes the price would go to $5,000 or $9,000 a megawatt hour. But with the massive amounts of solar and storage coming out of the grid, which you've probably talked about in another show, we're not seeing those spikes anymore. We're not seeing the scarcity of pricing.

• 15:48Shayle Kann?

  Yeah, we haven't talked about it that much. Volatility in ERCOT is down, which is interesting.

• 15:51Speaker 02

  It's way down. Yeah, it's way down. So you don't have the scarcity pricing anymore, which is effectively sort of the proxy for a capacity market there, is that you don't have a capacity payment. But every once in a while, if you're dispatchable or 24/7 running, you get these really high rent payments. But if those don't exist anymore, which is not to say they couldn't come back, but they've certainly been decimated the last couple of years with solar and storage. It makes that economic argument even harder.

• 16:16Shayle Kann?

  Okay, so now I'm going to bring your term back to you, though, of course. You coined the term the bit watt spread. And the core principle of the bit watt spread is you have to understand that actually the cost of electricity is sort of not important in the context of the revenue and earnings you're going to get off of operating a data center. So assuming that that remains true here, yes, maybe it is not actually cheaper to build your own generation. But if it does get you faster time to power, that probably is a trade you would make, right? Just on a pure economic basis.

• 16:48Speaker 02

  It probably is. In a lot of cases, you would. Yeah, so it's not a deal killer that you're paying that much for power. It's just something you have to take into consideration, that you're not getting necessarily an economic benefit for doing that. And you're still competing with others that might be able to get good access elsewhere. And they're going to obviously end up with much better margins than you. Still, it may not stop you from doing it because you'd rather have the revenue versus not have it. And that's generally the argument that's made in the off-grid scenario is, well, I can't get the power anyway, so I might as well do it this way. Now, I... And we can kind of get into sort of what are some of the strategies that would actually get you that power. And I tend to be maybe more optimistic about the availability

• 17:33Speaker 02

  of grid power than others. It's like, almost like a lot of the industry just throw out their hands and like, well, this is hard with the utility. So I'm just going to go, you know, kind of take my ball and go home.

• 17:43Shayle Kann?

  I think that's the key difference between, at least I've heard you articulate that you're thinking here and others, which is that I think the assumption otherwise is that necessity is the mother of invention. And there is necessity in the sense that like, we're just, we can't find sites where you can get connected with a large enough data center fast enough. And so even if it is suboptimal, even if you're going to sacrifice a little bit of reliability, or you need to overbuild and you need to pay more, even if all those things are true, we're still going to have to do it if we're going to build out the data center capacity that everybody wants and maybe needs. I think your view is a little different in that you actually don't think, you think there

• 18:22Shayle Kann?

  is more headroom in interconnection capacity on a reasonable timeframe on the grid. Is that right? Do I have, have I characterized your view right?

• 18:32Speaker 02

  Yes, that is my view.

• 18:34Shayle Kann?

  And why do you think people are missing that?

• 18:38Speaker 02

  A couple of things. First of all, and it only took us, what, 20 minutes maybe into this to mention Tyler Norris's name. So Tyler's paper about flexibility, which everyone's talking about, and rightfully, I was actually just with Tyler this week talking about this. Tyler's paper does a great job articulating my perspective, which is the problem we're trying to solve here is not that I need 24/7 generation to match a 24/7 load. It's that I need to solve for the summer peaks and the winter system peaks in order to connect a load. That's what a utility does. And I think it's a, I think there's a misunderstanding that when you go to utility and say, okay, where's the power going to come from? The utility goes and solves for 8,760 hours. Where's your power going to come from? That's not what they do. They look at would the incremental

• 19:23Speaker 02

  addition of this load on the system cause me to exceed what I can supply on the hottest summer day and the coldest winter morning? So first of all, it's a capacity problem, not an energy problem. And so flexibility, being able to identify sources where we can, whether it's on the customer side of the meter or the utility side of the meter, unlock more flexibility and unlock more capacity on that system is really the goal. The second part is, in addition to the time element, there's also this sort of space element. I mean, the way to think about the electric grid is it's about moving power through space and time. Right? You generate it at a particular time. You move it through space with transmission lines.

• 20:05Speaker 02

  You can move it through time with storage and with other types of flexibility. And so when you think about the orchestration of that system, the argument that you're hearing somewhat from the current administration is that, well, we can't possibly do it without lots more baseload generation. All the while, while they're canceling transmission lines, like the Grain Belt project. But the transmission line itself is a substitution for baseload power. Because if you can move more power over more space, you're reducing the need to have to generate that power on the other end of that congestion. So in that sense, transmission and generation are sort of substitutionary. And storage is the same way.

• 20:45Speaker 02

  If a company like Form Energy is really successful at scaling up 120-plus-hour batteries, you actually need less transmission because you can put batteries on those sides of those congested lines and store it for time. So this whole notion that we need X, fill in the blank, tech. You know, I need combined cycle plants running very high utilization to supply data centers just isn't true because it's not. You have to look at that in the context of what are all the other things that we have on the system that are able to meet that same need, but just in some different combination of space and time. And so for that reason, I just, I think there are ways that we can solve this problem in terms of getting more out of the existing grid. And that includes things like grid-enhancing technologies.

• 21:28Speaker 02

  It includes using varying durations of storage to help alleviate transmission connection. It includes advanced conductors. There's a lot of tools that we have, virtual power plants. You know, I mean, I could keep going on and on about there's all these different things we have. The problem is, I think, for most people, they boil it down to this simplistic, you know, 24/7 is 24/7 versus I can orchestrate all these things and in essence replicate that 24/7 output. I just did it with a dozen different things rather than one thing, which my view is, not only is that going to be faster because a lot of these things already exist or are relatively easy to deploy,

• 22:10Speaker 02

  it's also going to be cheaper because there's less overall infrastructure I have to build, and it's going to end up being more sustainable.

• 22:19Speaker 00

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• 23:03Speaker 00

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• 23:45Speaker 03

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• 24:29Shayle Kann?

  We've talked about this a little bit before and I'm curious because it's evolving fast. What's your view of how the how the model for that evolves? I mean, I think the other thing that is appealing about the I'm just going to put a generator on site at the data center is that you have a single agent, right? Whoever's developing the data center says, okay, I'm gonna, I'm gonna go buy a bunch of gas turbines and I'm going to put them on site and that's going to reduce my load to the grid and it's all in my control. Whereas some of the things that you're talking about, it's a multi-party problem, right? Like grid enhancing technologies have to be deployed by the utility. There's nobody else to do it. So it involves more coordination. We're starting to see some

• 25:10Shayle Kann?

  of these sort of interesting novel programs emerge where utilities say, if you're a large load and you want to get interconnected, you can bring your own generation, bring your own capacity, I guess. And they can include batteries in that or things like that. But what are you seeing happen? Is there like, is there a programmatic, scalable way to use the mixture of resources that you're talking about as opposed to it all being these like unique, snowflaky bilateral type of deals?

• 25:38Speaker 02

  Yeah, look, to be honest, this is where my argument maybe falls apart, right? Because the orchestration of this is the real challenge. Like, in theory, like what I'm describing is faster, cheaper, and more sustainable. And I do believe we can add a lot of capacity to the existing grid. And yet, I have to orchestrate this behind 3,000 different utilities in the United States and, you know, multiple different RTOs with different rules about how they have credit capacity. And so this orchestration opportunity really is, I think, the huge opportunity to end up in a world where we actually do connect a lot more of this stuff to the grid, rather than end up in a world where everything is bifurcated behind the meter, which I think is a, is a worse outcome. And so it does require a lot of innovation.

• 26:24Speaker 02

  And some of that is just sort of boots-on-the-ground work, and that's sort of what Cloverleaf does. We go work with utilities to try to figure out, you know, on a case-by-case basis, how do we implement these things and how do we get these load connected faster? But then there's other pieces like, you know, doing the actual grid analytics, which there's numerous companies we could talk about that are doing that sort of thing, like Arenia, or folks that are trying to come up with new business models, like Greg Care around how you, you know, implement these things, and many others. So I'm encouraged by, a lot of folks are sort of honing in on this problem and trying to figure out, you know, how do we reduce the friction here? How do we help utilities to understand, you know, hey, here's a better way to do this

• 27:09Speaker 02

  that would enable more rapid load growth in your system, where you're not losing out to these sort of off-grid competitors, if you will?

• 27:17Shayle Kann?

  The other version of an onsite generation thesis that I've seen that, I don't know, on its face seems semi-logical to me is, it's not about off-grid. It's not about like, okay, my grid connection's coming in five years. I'm going to put generation onsite and go off-grid until the grid connection arrives necessarily. It's about reducing the, what you look like to the grid from an interconnect capacity. So like, if you want to site a 500-megawatt data center and the utility says, "I've got 300 megawatts for you at this site." Throw probably more than 200 megawatts onsite, again, for redundancy purposes, but throw some amount of generation onsite and operate it such

• 28:00Shayle Kann?

  that you never pull more than your maximum interconnect capacity on the grid, and then you unlock a site that is at a scale smaller than what you otherwise would have been able to do. Does that have legs to you?

• 28:11Speaker 02

  That does, yes. Because what you're there doing in that case is you're already starting to work on that orchestration with the utility. Now, the question in that scenario is, putting that generation behind your meter, the fastest, most efficient way to do that orchestration, you know? Or is putting a...

• 28:31Speaker 02

  A long duration battery on the utility side of the meter solve the same thing. Or does

• 28:35Shayle Kann?

  It's sort of again, it's a question of like, what is optimal to which I'm pretty sure I know the answer versus like, what is fastest and easiest to do.

• 28:42Speaker 02

  Yeah. And in some ways, you know, the less infrastructure you have to build, the faster it's going to be. Right. So you know what the argument you would make is, well, the fastest way to do it is through like a virtual demand response sort of program. Like, take a bunch of loads that would agree to get off during certain hours in exchange for some price. Like, you're not building anything there. You're just orchestrating, you know, a VPP. So

• 29:05Shayle Kann?

  Which we should just pause on that for one second because it's an interesting concept and I've started to hear people talking about it a little bit. As far as I know, nobody has actually implemented this wherein you say that the concept here is, let's keep with my example. I want to put a 500 megawatt data center in a given location. The utility says I've got 300 megawatts of capacity that is deliverable to that location. But if you can get 200 megawatts of demand response, or whatever the number is, you can get, you can aggregate enough load that can shed itself within that deliverable zone. So there's like a geographic constraint to it. Then we'll count that as capacity. It'll be counted the same as if you had put a generator that's going to just shave your peak onsite at the data center, which I think is a, I think is a good idea.

• 29:49Shayle Kann?

  There's a lot of nuance to it, like getting capacity accreditation for demand response at that level is nuanced and it's geographically constrained and all of that. But

• 29:58Speaker 02

  Yeah.

• 29:58Shayle Kann?

  But clever.

• 29:58Speaker 02

  You have to understand the rules and we are pretty close to doing that on a couple of projects. So we've been working really closely with Fultus and some others on this concept. And working to convince utilities and grid operators of this approach. The first pushback you get from especially vertically integrated utilities as well. You know, if I do a VPP, then I'm not building anything. Right. Like I want rate base. Our counter argument to that is that if you can utilize that VPP as the bridging solution. You end up getting to connect that load sooner. You get that load for life. And you do get to ultimately build against that load long term. And if you really help the utility see this isn't about like, you know,

• 30:43Speaker 02

  not getting to build your rate base. It's about meeting the customer need as quickly as possible with the least amount of friction. So that's what I like about that approach. So it does take some work to get it. And you're right, no one's done it at a at any real scale yet. But I think we're going to see it pretty soon.

• 30:58Shayle Kann?

  OK, so I took us on a little bit of a tangent there. But you were talking about this sort of various ways in which you can do the something reduces the interconnect limit that you require for the data center. A virtual power plant being one instantiation of that. A long duration battery and the transmission system being another instantiation of that. Onsite generation being a third or onsite storage, I suppose, for that matter.

• 31:22Speaker 02

  Right, yeah, any of those could work. And so really that goes back to that orchestration question of like, what is the right type of resource that could be orchestrated together to meet the resource adequacy requirements for the interconnection? And that could be any number of different things. And so ideally, you would want to have a tool where you could take any point of interconnection on the grid and any amount of load you wanted to pull off that grid. And it would spit out, here's, here's a stack of capacity, least cost to most cost that would meet that time duration that you're you're aiming for. Right, like that's what the answer you want every time you go to do a point of interconnect.

• 32:02Shayle Kann?

  Yeah, and in the ideal world, that piece of magic software that does that thing is used and trusted by both the utility and the customer.

• 32:09Speaker 02

  That's right, because it's got to be used to actually say yes by the utility, by the grid operator, that stack is all accredited capacity. Check the box, you can connect at that load level.

• 32:20Shayle Kann?

  Right, right. I look forward to that day when that is possible.

• 32:23Speaker 02

  Me too, me too. When you find that company that has nailed that perfectly, please let me know, because we will be their first customer.

• 32:30Shayle Kann?

  Yeah. I think before we go, I mean, we talked about most of the different types of resources people are talking about putting behind the meter. We obviously talked a lot about natural gas. We talked about batteries to some extent. What do you think about the sort of like onsite wind solar combo stuff? You see some of this happening in like West Texas because there's space and good wind and solar resources.

• 32:50Speaker 02

  Yeah, I think you can do it to a certain degree and you definitely need a lot of space. So you take it like what what intersect is doing, I suppose, maybe the best example. I've talked to Sheldon about this and I think it does require certain parameters of space. And that's you're not going to be able to do that everywhere. So I do think that is going to meet part of the demand of the market and you're seeing some of these plans through these massive campuses. There's the one in Amarillo now that's being talked about is like 11 gigawatts and all these things.

• 33:22Shayle Kann?

  Is that the Fermi?

• 33:24Speaker 02

  Yeah, I think that's the Fermi one.

• 33:25Shayle Kann?

  So that one's interesting because it also includes the next technology I was going to talk about, which is in theory, it includes a bunch of.

• 33:30Speaker 02

  Yeah, exactly. So, I mean, that's, that's great. And I mean, clearly there's demand for that. But just like everything we're talking about, there's no like silver bullet. There's no like, that's, that's still going to be a relatively small percentage of the overall market, because we can't put everything in West Texas. Right? We still are going to have the tendency to want to be closer to major metros where that sort of land availability is going to be really challenging, especially when we start talking about, you know, gigawatt and multi-gigawatt scale. There just aren't that many sites that can do that.

• 34:04Shayle Kann?

  Yeah. Well, okay. So just talking about nuclear for a second, because there have been Fermi is a good example. That's the company that was founded by Rick Perry, former Secretary of State, or sorry, Secretary of Energy and Governor of Texas. They went public in or they're going public in a weird transaction right now. But yeah, they're trying to build this like mega, mega data center campus that that includes natural gas, but in the future will include nuclear. But it's they're not the only one. There've been a few other announcements that, you know, I saw one of the nuclear microreactor companies announced like a framework deal with a with a data center operator with a colo company. I know Oaklow's got some kind of partnership with Switch. Here's the thing. Let me, I'll just jump ahead of this one.

• 34:48Shayle Kann?

  As we've explained the logic of putting onsite generation, I don't know that any of it holds for new nuclear because you don't get the faster time to power. You're obviously not building that generation before you can get the interconnect, right? Like unless your interconnect is, I mean, you've talked about like a, what was it? London or somewhere where

• 35:07Speaker 02

  Yes.

• 35:07Shayle Kann?

  It's like a 2038

• 35:09Speaker 02

  Yes.

• 35:09Shayle Kann?

  Timeline.

• 35:09Speaker 02

  Yes, exactly.

• 35:11Shayle Kann?

  All right. So maybe in London, but most places you can get interconnected faster than you can build the new nuclear reactor. I should say I'm bullish on nuclear in the US. I just, I'm realistic about the timeline. So it's not a time to power thing. It's probably, it's almost definitely not cheaper power, especially in the early days. And you presumably are already going to have your full grid interconnection for the full capacity of the data center by the time you get there. So I kind of don't understand the logic. It is power dense, like you can do it in theory where you don't have land, but I just kind of don't understand how it makes sense.

• 35:46Speaker 02

  I don't think there's a credible argument for behind the meter nuclear at a data center in the near future. And by near future, I mean the next couple of decades. But part of the problem you're going to have too, is if you're talking about a brand new unit, like a new type of generator unit, like the availability questions are going to be enormous, right? So you're going to want to see that thing operate for 10 years before you say, I've got enough data to say, I'm going to plug in my $20 billion, $50 billion data center into that machine. So it's just hard to imagine that that is going to have any type of uptake, even in the 2030s. Like, I just don't see, like, and I'm with you, like, I am bullish some form of new nuclear, you know, coming to market.

• 36:30Shayle Kann?

  We're just saying not onsite. I mean, that's the distinction I want to make here is like, we are going to, and I think we should build a lot of new nuclear in the US. I just don't know why it needs to be co-located with data.

• 36:40Speaker 02

  I don't think it does because it doesn't solve all those problems that you're talking about. Like, it's not meeting that sort of felt need of data centers today. And maybe we're still in the same predicament in the mid 2030s. I don't think we will be, but I agree. I don't see that you're going to have a huge uptake of that.

• 36:57Shayle Kann?

  All right, Brian, fun as always to talk to you about this stuff. I appreciate you doing it in front of a mic and I'm sure we will have an excuse to do it again pretty soon.

• 37:05Speaker 02

  I hope so. It's always fun, Shell. Thanks a lot.

• 37:09Shayle Kann?

  Brian Janis is the co-founder of Cloverleaf Infrastructure. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. This episode was produced by Daniel Waldorf. Mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I'm Shayle Khan, and this is Catalyst.