How the data center boom is forcing utilities to step up

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BIANCA GIACOBONE | It’s a remarkable time to be a utility in the U.S. 

After years of being tepid at best, load growth is now rising at unprecedented levels, led by new manufacturing, electrification, and the artificial intelligence boom. In particular, the data center sector’s urgent need for electricity is forcing utilities into a challenging balancing act: between the needs of large loads, and regulators’ concerns about affordability. 

 Stephanie Chesnick Cutter, who heads power and utilities for EY’s global and Americas practices, says that this is forcing a new level of collaboration between utilities and data center developers, which have historically been “two fundamentally different businesses.” As a result, “utilities are learning that they need to operate differently,” she told Latitude Media. 

As Cutter highlights in a recent report about the new data center collaboration for utilities and developers, the lessons utilities are learning encompass everything from how to structure teams to capital prioritization to how to deal with projects. 

 “That can mean a new level of focus on large load customers, with dedicated teams that are specifically building relationships and working through transparent communication and negotiations,” she said. 

Six of the 14 utilities included in the report are already adopting more “disciplined” project management models, with large, organized teams working to deliver data center projects. And an increased attention to how to make the most of their financial capital is another important trend. “You’re seeing utilities divesting non-core assets when the market is favorable, and taking on capital investments from financial sponsors and other parties,” Cutter said. “While that’s happened in the past, there’s an increase in the frequency at which it’s happening now.”

But one of the most important changes utilities need to implement is a shift from a project-by-project model to a portfolio one, according to Cutter. 

“Rather than handling every request individually, [utilities need to] look across the service territory and understand how all the different data center projects fit together, treating them as a portfolio,” she said. After all, even if every project has unique needs, there are more similarities than differences between data centers. Five of the 14 utilities included in the report have adopted a portfolio-like approach, with four others considering it.

This approach could even lead to utilities pushing to “bundle” different data centers operated by different hyperscalers in the same place, creating an “ecosystem” where different players collaborate to build shared infrastructure, and to optimize capital, workforce, and processes like community engagement. “There is high competition for power [among data center operators], but if there were a location where you could build shared infrastructure, it could potentially accelerate the timeline and access to power for all involved,” Cutter said. 

For the most part, these are all changes and upgrades that most utilities were already considering. But the challenge of load growth and the new dynamic with the data center sector has instilled a new urgency in how they approach change. 

 “There's a lot of benefits and positives that can come out of this, because it is forcing everybody to take a hard look at the ways of working to figure out how to move forward at a pace,” Cutter said. 

FEATURED PODCAST

 How AI is changing our digital energy footprints

STEPHEN LACEY | OPEN CIRCUIT | We’re witnessing a profound shift from discrete AI tools to always-on AI companions — systems that provide constant feedback, conversation, and support. Sound familiar? It’s the 2013 movie “Her” becoming reality. 

In this episode of Open Circuit, we have a conversation with MIT’s Vijay Gadepally from our Transition-AI conference about how the spread of artificial intelligence is reshaping our digital energy footprint. 

As a senior scientist at MIT’s Lincoln Laboratory and CTO of cloud computing company Radium Cloud, Gadepally has an inside view on the energy intensity of reasoning models, AI agents, and chatbots. He details how simple tasks are now becoming energy-intensive computing events.

Gadepally also explains how operations per watt have improved dramatically, why better software can dramatically reduce emissions, and what it will take for computing innovations to keep pace with our growing appetite for AI.

MORE NEWS

 *The Economist | How America’s AI boom is squeezing the rest of the economy — “Many analysts think America’s economy is headed for a rough patch…But in one area, the economy is surging forward. American firms are building the infrastructure needed for AI at a breakneck pace. One estimate puts the AI boom’s contribution to real GDP growth at 40%.” 

CNBC | OpenAI’s Sam Altman sees AI bubble forming as industry spending surges — “Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes.”

*Bloomberg | AI Is Siphoning Up Venture Money, Spurring Talk of Bursting Bubbles — “It reminds me of the pre-dotcom crash,” Nnamdi Okike, co-founder of 645 Ventures said. “I think we are in a bubble both in the venture market for AI and the public markets.” 

 Data Center Dynamics | Google to invest $9bn in cloud and AI infrastructure in Oklahoma — “The investment will be used for the development of Google's upcoming data center campus in Stillwater, and the expansion of its existing facility in Pryor.”

*The Information | Data Center Developer Plans $25 Billion AI Facility Near OpenAI Site — “Vantage Data Centers, which develops data centers for large cloud providers, said it is building a large-scale artificial intelligence facility in Shackelford Country, Texas, a 20- minute drive from Oracle and OpenAI’s “Stargate” data center in Abilene.” 

Latitude Media | Google, Kairos, and TVA ink historic next-generation nuclear deal — The Tennessee Valley Authority inked a PPA with Google-backed reactor developer Kairos, marking the first such deal in the US between a utility and a fourth-generation nuclear company.

Reuters | Equinix enters into multiple advanced nuclear deals to power data centers — The advanced nuclear electricity deals include power purchase agreements for fission energy and pre-ordering microreactors for its operations. 

TechCrunch | Aalo Atomics raises $100M to build a microreactor and data center together — “The startup says that the Aalo-X prototype will also have an “experimental” data center built next door, a detail that sounds more like a marketing ploy than a technological innovation.” 

Latitude Media | Meta is using a familiar energy strategy for its newest AI data center — Meta’s $800 million AI data center will serve as the anchor customer for a 100-megawatt solar farm in South Carolina, which will be developed, owned, and operated by independent renewables developer Silicon Ranch, in coordination with state-owned utility Santee Cooper. 

Reuters | Data center owners urge US Treasury to keep renewable energy subsidy rules — Wind and solar energy subsidies have enabled the industry to grow quickly and stay ahead of competition from China, the Data Center Coalition said.

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CHART OF THE WEEK

This chart by analysts at Jefferies shows how hyperscalers are expected to spend more on AI infrastructure in 2025 and 2026 than analysts previously thought, as their commitment to AI growth keeps getting stronger.

RESOURCES + EVENTS

• The HackSummit returns to New York December 10-11. Meet 500 industry leaders exploring abundance in energy, supply chains, climate adaptation, and defense including the founders of Crux, Endolith, Navier, Durin, Earth AI, Brimstone, Meala, and Rainmaker. Reserve your place, the super early bird rate ends tomorrow, August 21.

• Also tomorrow, August 21, 2025, Latitude Media’s Maeve Allsup will speak with Ken Rahn of FlexGen and Keaton Horner of Orennia about how utility-scale BESS can accelerate interconnection, improve resilience, and manage AI workload power volatility. You can sign up for the webinar here.

• On September 10, 2025, Latitude Media’s Scott Clavenna will participate in a cross-sector panel discussing the energy impact of AI deployments. The panel is part of Yotta 2025, a digital infrastructure event that will take place in Las Vegas.

• Southwest Power Pool is introducing a new service to streamline the interconnection of large flexible loads.

• A new report by Wood Mackenzie looks at how the data center surge is driving up costs for transformers.

• This new report about the state of AI in business by MIT’s NANDA initiative finds that the vast majority of businesses’ generative AI initiatives are falling flat. You can read the Fortune story here.

• You can find JLL’s new North America Data Center Report – Midyear 2025 here.

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