- The electricity demands of data centers and other power-hungry industrial customers pose significant concerns about grid reliability and rising costs
- The most immediate answer — one discussed by the president and by the governor’s energy task force — would be to have these customers build or procure their own power supplies, but North Carolina law needs to change first
- Consumer-Regulated Electricity (CRE) legislation would let them set up voluntary, off-grid arrangements to secure their own power, thereby protecting the grid from reliability and cost concerns
After years of steady electricity demand, the steep rise in artificial intelligence (AI), data centers, and certain other power-hungry industrial customers poses distinct problems for power grids as currently regulated. North Carolina is hardly immune to these problems.
Electricity consumers in North Carolina are beset with several pressing needs:
- How to obtain new energy generation resources specifically to cover the data centers’ needs
- How to protect the reliability of the grid from this new power demand before enough new generation comes online
- How to shield households and other customers from rate increases from having to build all those resources
- How to protect ratepayers from the risk of data centers’ bubble bursting and stranding the grid with expensive but superfluous resources
Policymakers must find an answer that addresses all those needs simultaneously. If that’s not challenging enough, however, they must find it soon.
Nevertheless, decisions regarding the electrical grid are governed largely by the North Carolina Utilities Commission (NCUC), which is a deliberative public body and therefore slow.
Letting Big Tech “build, bring, or buy” their own power
In some parts of the country, major tech companies have announced agreements to receive power from existing nuclear facilities or even to develop new ones. For example, in 2024, Google announced an agreement with Kairos Power in California to develop “six or seven small modular nuclear reactors (SMRs)” to fill their power requirements for AI. Amazon has announced agreements to develop SMRs in Washington state, explore doing so in Virginia, and partner with an existing nuclear facility in Pennsylvania to power their AI operations. Microsoft’s AI operations will receive power from the nuclear reactor at Three Mile Island, which had been closed but will be reactivated for the project.
During his recent State of the Union address, President Donald Trump acknowledged people’s concerns that “energy demand from AI data centers could unfairly drive up their electric utility bills.” He announced a new strategy of letting these major tech companies “build their own” power plants and “produce their own electricity.”
Shortly afterward, Fox News reported that Amazon, Google, Meta, Microsoft, xAI, Oracle, and OpenAI will meet at the White House in early March to sign a “Ratepayer Protection Pledge” to provide their own power for their data centers. According to White House spokeswoman Taylor Rogers, this initiative means that the companies will “build, bring, or buy their own power supply for new AI data centers, ensuring that Americans’ electricity bills will not increase as demand grows.”
Addressing North Carolina’s need for new legislation first
Here in North Carolina, Gov. Josh Stein announced on Feb. 16 that the North Carolina Energy Policy Task Force (which he had created by executive order to promote energy affordability but also solar energy, meaning it will often work at cross-purposes) had released its interim report. The governor’s press release stated that this initial work was “focused on identifying policy and technology solutions to address the state’s growing energy needs, fueled by data centers, advanced manufacturing operations, and population growth.”
The report included several recommendations. Of interest here is Recommendation 2:
Develop options to enable “Bring Your Own Capacity” and alternative capacity procurement pathways, including potential clean energy specific pathways. Potential options could include legislation enabling large customers to procure their own capacity through new generation, storage, or distributed energy resources; a clean transition tariff; provisions included within a large load tariff allowing for choice in generation resources, or sleeved power purchase agreements [defined as “a three-way contractual relationship between the customer, the utility, and a third party supplier”]
As the task force observed, the biggest obstacle to companies bringing their own capacity is current state law, which prohibits “the sale of electricity to the public for consumption (including third-party power purchase agreements) by entities other than public utilities, municipal utilities, and electric cooperatives” (see G.S. § 62-3.(23)).
Energy policy expert Travis Fisher writes in a recent RTO Insider about an idea called “Consumer-Regulated Electricity” (CRE), which provides companies a way to “develop or join a private, fully off-grid energy system.” The idea is simply this:
CRE would enable a new, islanded system with no physical connection to the regulated grid. A data center could join many others on an industrial campus powered by whatever resources make sense — solar, batteries, gas turbines, nuclear reactors, you name it — and operate without connection to the utility grid.
Importantly for North Carolina, CRE would provide the answer to the pressing electricity needs listed above without being subjected to the bureaucratic pace of the NCUC. As Fisher and Glen Lyons explain in a Feb. 3 Cato Institute Briefing Paper:
CRE would resolve a central tension in today’s electricity policy: how to welcome new industrial investment without socializing its costs. By creating a parallel track for new load growth, CRE would allow states to attract new electricity-intensive industries at zero cost to taxpayers and ratepayers. At the same time, CRE would create space for rapid innovation in generation, transmission, and system design—experimentation that is nearly impossible within the highly risk-averse regulated grid.
Finally, CRE would supplement rather than harm the existing electricity system. By allowing voluntary, off-grid arrangements for sophisticated customers, CRE would protect households from rising costs, relieve reliability constraints on the grid, and help states meet the defining electricity challenge of the coming decade: speed to power.
Fisher and Lyons point to New Hampshire, Ohio, West Virginia, Oklahoma, and Utah as states that are already experimenting with CRE and similar legislation. The American Legislative Exchange Council offers model CRE legislation for state policymakers.
Keeping North Carolina’s power grid reliable and shielding ratepayers from rising costs, while still enabling data centers and other large-load industrial customers to meet their power needs is a challenge for policymakers. Fortunately, they don’t have to solve everything. They merely need to give the private sector the freedom to “build, bring, or buy” from systems off the grid. Consumer-Regulated Electricity (CRE) would grant this freedom and, in so doing, open the way for innovation in electricity provision while not harming the reliability or cost of the power grid.
