On August 28, 2024, Nvidia announced second-quarter earnings that beat Wall Street’s bets and increased revenue 2.5 times in the span of a year. As Nvidia is the clear leader in AI development, this underscores how important data center growth has been to technological advancement.

While the news has been focused on the data center real estate, it’s also crucial to consider the grid infrastructure that powers these projects. Increasing regulation, carbon emissions worries, and skyrocketing costs all affect the data center industry’s future. 

To continue to be economically and environmentally viable, data centers will have to find an answer to this complicated dilemma.

How Microgrids Can Be an Answer

One solution lies in data centers generating their own power instead of taking it from the grid. Microgrids — smaller grids that don’t rely on power from the big local or regional networks — can help data centers accomplish this goal. These microgrids make reliable, sustainable, and continuous energy, bringing together sources such as:

• Batteries
• Solar panels
• Wind turbines
• Natural gas generators
• Combined heat and power systems

The unique function of these microgrids is that they are multidirectional, receiving power from the grid when needed and supplying power when there is excess. This ensures that data centers have the reliable power they need without harming the environment or costing consumers. 

What Microgrids Bring to the Table

Microgrids can offer clear benefits for data centers. First, they lower energy costs by modulating energy use according to demand and offering a revenue source from generated energy being sold back to the market. 

Additionally, they offer enhanced uptime, allowing data centers a way to continue operating during storms and outages. Grocery chain H-E-B saw this firsthand when it used Enchanted Rock microgrids to stay open during and after Hurricane Beryl in July 2024. 

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For data center developers with decarbonization goals, microgrids use renewable energy sources to generate environmentally friendly power. Finally, microgrids offer more stability for the grid through frequency regulation and voltage support.

Why Traditional Models Are Hindering Innovation in the Energy Space

Though data center microgrids can be beneficial, adoption may be a challenge. U.S. energy regulation reflects a particular model whereby monopoly utilities own and operate the power plants that supply the energy and the networks that deliver it. These companies may rail against microgrid competition.

Furthermore, interconnection standards to connect microgrids to the larger grid can be costly and complex, and power rates, which are also regulated, support fixed rather than flexible costs. While these challenges are certainly important to think about, data center developers can take the following actions to try to overcome them:

• Advocating for policy changes
• Waiting for technology evolution to lower the costs of building microgrid systems
• Considering third-party microgrid ownership to provide energy as a service to the data center

These are the solutions that can help bridge the gap between governments, utilities, and data center developers.

The Unique Solution No One Is Talking About

Much has been said about artificial intelligence contributing to emissions due to increased energy demands. What experts don’t often think about is how AI can be harnessed for decarbonization efforts. 

In the future, AI may predict energy demands and optimize systems. It can also play a role in regulating energy use based on grid conditions. When all parties at play invest in innovative solutions, it’s possible to find a sustainable pace and method for technological advancement. To learn more about this timely topic, read the original article by L. Lynne Kiesling.