Rebuttal: Data Centers as Grid Assets, Not Liabilities

Today’s @New York Times article, “Data Centers’ Hunger for Energy Could Raise All Electric Bills” by Ivan Penn , raises some valid concerns about the infrastructure demands tied to rising electricity use. But as someone working in this space every day, I think it misses a key point: not all data centers are grid liabilities.

In fact, data centers with behind-the-meter (BTM) generation and a commitment to demand response or interruptible tariffs can actually help reduce stress on the grid and lower energy costs for everyone.

How BTM generation helps—technically and economically

When data centers deploy BTM generation—whether from natural gas-fueled generators, combined heat and power systems, or onsite renewables like solar paired with batteries—they become active participants in grid stability. During periods of high demand, this localized generation allows data centers to island from the grid or substantially reduce their draw, which:

• Reduces stress on local transmission and distribution networks, particularly in congested urban or edge-grid areas.

• Helps defer or eliminate the need for costly grid infrastructure investments, such as new substations or T&D line upgrades, which are often funded through ratepayer increases.

• Improves load shape at the node level, enabling more predictable grid operations and supporting system-wide balancing.

In markets with capacity constraints, this ability to shave peak demand can translate into avoided costs on the order of hundreds of dollars per kW. When scaled across large data campuses, that impact reaches into the billions—savings that would otherwise be socialized across all utility customers.

Demand response and interruptible tariffs create flexibility

Data centers are ideal candidates for demand response programs due to their scalable and controllable load. Through interruptible tariffs or load-shedding agreements, they can curtail usage when the grid is most stressed, such as during extreme heat or cold. This reduces the need for utilities to run expensive peaker plants, whose costs are often passed to all customers. It also improves grid stability and defers costly upgrades, ultimately lowering the rate base burden.

It’s also worth pointing out that data centers often pay higher rates and steep interconnection costs. With well-designed, cost-reflective tariffs, data centers can contribute to local infrastructure and utility revenue stability without shifting the burden to households or small businesses.

Demand response isn’t just theoretical—it’s operational

Data centers have controllable, software-defined load and sophisticated energy management systems. That makes them ideal candidates for real-time or day-ahead demand response programs. I’ve worked with teams that participate in programs like ERCOT’s Load Resources (LR), CAISO’s Demand Response Auction Mechanism (DRAM), and various utility interruptible tariffs. Through these, data centers can:

• Curtail non-critical load or shift compute tasks to off-peak periods, often within minutes of a dispatch signal

• Avoid contributing to system peaks, reducing the need for inefficient peaker plants, which typically run at high marginal costs and emit more carbon per MWh

• Improve overall grid inertia and contingency reserves, especially when paired with fast-ramping generation or battery assets

This operational flexibility is not just theoretical—it’s measurable. In ERCOT , for example, large flexible loads like data centers can help shave peak load forecasts by hundreds of MW during extreme events. That’s real, system-wide impact.

Supporting a cleaner, more reliable grid

Many large data centers are doing more than just buying power; they’re helping modernize the grid. I’ve seen teams invest in things like clean energy contracts, battery storage, and technologies that help keep the grid balanced in real time. Through these initiatives, data centers are helping to:

• Make the grid more agile and reliable to reduce blackout risks, especially when demand spikes or a power plant experiences an outage

• Provide clean firm capacity that balances out intermittent power sources like wind and solar, enabling even more renewables on the grid

• Speed up the transition to a lower carbon, lower cost grid, which benefits everyone, not just data center operators.

These investments aren’t just about corporate sustainability goals and site resiliency; they materially enhance grid responsiveness and reliability. For instance, pairing a 520 MW battery system with on-site generation enables ultra-fast response to grid events while providing long-duration backup power for the facility. And… these aren’t future ideas. They’re happening now, and they’re making a real difference.

Smart power can make data centers net positive

The idea that data centers will automatically raise everyone’s electric bills is an oversimplification. With effective policies, the right technologies, and an openness to innovation, data centers can:

• Stabilize rates by lowering peak demand

• Strengthen grid reliability

• Support a cleaner, cost-effective energy future

Rather than scapegoating these critical digital infrastructures, regulators and utilities should continue to focus on enabling the right technologies and market structures so that data centers can evolve from grid strain to grid support.

Instead of pointing fingers, we should be building partnerships. I believe the future of energy depends on enabling critical infrastructure—like data centers—to become part of the solution, not the problem.

This article was originally published on LinkedIn.