FERC orders grid operators to prioritize data center connections

On Thursday, the Federal Energy Regulatory Commission (FERC)—the U.S. agency regulating electricity transmission—unanimously ordered grid operators to fast-track interconnection requests from data centers and other large electricity users. Under the directive, FERC required grid operators to demonstrate that these large users are “able to connect to the transmission system in a timely and orderly manner.” Data centers will be responsible for paying the costs of these interconnections. Additionally, FERC directed operators to consider alternative transmission technologies, such as solid-state transformers or superconducting transmission lines, and to be more accommodating to behind-the-meter power, which is generation located on-site at a facility rather than sourced from the main grid.

Grid operators face tight timelines under the new rules, with 30 days to submit a report detailing their spare generating capacity, if any, and 60 days to defend or revise regional electricity rates. This regulatory pressure comes as electricity demand from data centers is expected to nearly triple through 2035. Grid operators have strained under the load; PJM, the country’s largest grid operator, has descended into something resembling chaos as major utilities threaten to withdraw. This strain occurs as wholesale electricity rates have risen up as much as 267% compared with five years ago, according to Bloomberg. The grid connection backlog is severe: at the end of 2023, grid connection requests for power plants exceeded the total capacity of the existing power plant fleet. In October, Secretary of Energy Chris Wright stated that these delays threatened U.S. competitiveness in AI, though public sentiment toward AI and data centers has since soured considerably.

Meanwhile, on Wednesday, the Trump administration announced it would pay $765 million to wind developer Invenergy to cancel offshore wind leases near California, Maine, and New York. Invenergy said it would use the funds to build natural gas plants in the Midwest and geothermal projects in the West. One of the canceled wind projects would have generated as much as 2.4 gigawatts of power—enough, at peak output, to supply roughly 1.8 million homes. In total, the Trump administration has spent about $2.6 billion to scuttle offshore wind developments.

Why it matters

FERC’s mandate attempts to clear the bottleneck for AI infrastructure, but it highlights a deeper structural tension between surging data center power demand and the limited capacity of the U.S. electrical grid.