Power
Distributed energy offers rapid fix for data centre power needs
Utility structures must adapt as surging data centre demands outpace traditional grid expansion timelines.
Key points
- Data centres face connection delays averaging nearly five years, according to Lawrence Berkeley National Laboratory.
- Investor-owned utilities earn profits primarily through physical infrastructure rate bases rather than third-party capacity purchases.
- Virtual power plants and distributed resources provide alternative solutions to avoid transmission delays.
What happened
Connecting a new data centre to electricity takes nearly five years on average, compared with the 18 to 24 months required for construction, according to Lawrence Berkeley National Laboratory data cited by Renewable Energy World. This disconnect prompted the PJM Interconnection to propose rules allowing temporary power cuts to data centres during supply shortages.
To address these constraints, technology companies are turning to decentralised options. In June 2026, Google agreed to support a 100-megawatt virtual power plant, aggregating flexible devices and batteries to supply the grid. Additionally, distributed generation such as rooftop solar and behind-the-meter storage gained traction, offering operational continuity during preemptive wildfire shutdowns.
Why it matters
According to Renewable Energy World, the friction between surging demand and grid readiness stems from utility financing models. Investor-owned utilities typically secure returns of approximately 10% through their rate base, which rewards physical asset ownership. Purchasing capacity from independent third-party distributed assets does not expand this rate base, creating a financial disincentive for utilities to integrate ready energy resources.
Although the Federal Energy Regulatory Commission opened wholesale markets to aggregated distributed energy in 2020, structural reforms remain slow. Consumer demand for reliability has meanwhile spurred adoption of plug-in balcony solar across ten US states following Utah's legalisation in 2025.
What comes next
Industry leaders attending the Great Transformation summit in Oregon agreed that expanding distributed energy resources is essential. Policymakers and regulators face the task of aligning utility incentives with modern technological capabilities to ensure reliable power delivery as the energy transition continues.
Original reporting
This article draws on the following reports. Read them in full on the publishers’ sites.
Context from CEII
Grids decide whether generation becomes power that homes and businesses can rely on. Generation mix, transmission and distribution losses, and tariffs together shape reliability and the case for investment.
91.9% of people worldwide had electricity in 2024Countries in this story
Written by the CEII Desk, the Centre’s automated newsroom, from the reporting credited above and CEII’s own data. Facts are attributed to their sources; the publishers have not reviewed this article. Spotted an error? Tell our editors.
