Please note that the transcript provided below is AI-generated and intended for reference. It may contain missing words, misspellings, or other small errors. To request a correction or clarification, please contact info@theclimatecenter.org.
Barry Vesser, The Climate Center (00:00:18):
Welcome everyone. My name is Barry Vesser. I am with The Climate Center and we are super excited to have this discussion. Data center seems to be on a lot of people’s minds these days. And we are really, really fortunate to have a panel of people, experts in this area from different perspectives who will provide very different perspectives on data centers and data center development. I want to thank our sponsors who really make this event possible. What we charge for ticket prices doesn’t remotely come close to covering the cost of the events. So we’re all really, really grateful that they are able to join in and partner with us and make this possible. We also get some support from individual donors to make the conference possible.
(00:01:12):
And finally, and I’m sure there are a few of you in the room, our promotional partners help us get the word out. So thanks to all of you. Hopefully at this point of the day, you have already discovered the event leaf guide. So I’m not going to go over that except to say you can find everybody who is at this conference who’s registered, listed on that app. That’s the only place we have that information. So if you want that, that’s where you’re going to find it. And our comms team asks that if you are posting to social media, you use CAClimateSummit to do that. They would greatly appreciate that. And with that, I’m going to again, thank our wonderful panel of speakers for being here and introduce our moderator, John Binder. John is the Executive Director of the Model Climate Laws Initiative, a joint project of the Sabine Center for Climate Change Law at Columbia Law School, and also Environmental Advocates of New York.
(00:02:16):
And John, and this kind of blows my mind. My little pond is California, and that’s quite big enough to drown in. John takes on the whole country and looks at model climate laws happening everywhere. So we’re really glad he made the long trip out here to moderate this panel. Thank you so much, John. Thank you.
Jon Binder, Model Climate Laws Initiative (00:02:40):
Thanks folks. Thanks, Barry. Thanks to The Climate Center. It’s great to be here with such a great panel that, like Barry said, has a really great and varied perspectives when it comes to data centers. Like Barry said, I work for an organization called the Model Climate Laws Initiative, which is really about trying to advance state level climate policy across the country. And that means that we’re really focused on lots of topics, including what some might call the topic du jour data centers. So we’re looking at the different approaches that states are taking across the country when it comes to data centers. And by some counts, there’s over 300 bills related to data centers being introduced in states across the country. And why do we care about data centers? First of all, it’s because of the energy demand from large loads like data centers. So right now, I think it’s about three to 5% of the state’s electricity load coming from data centers here in California.
(00:03:38):
That’s forecast to grow up to 13% by the end of the decade. Obviously, that also means that emissions are growing as a result potentially of data centers. So obviously that has a huge impact on climate change. And it’s funny because most of us grew up in a time when electricity demand growth was relatively flat and only recently have we seen it start to grow largely because of the growth of data centers. So this is an issue that we have to get right now here in California and really across the country. By some projections, we’re talking about data centers being responsible for about 15% of California’s climate emissions by 2030 at current rates. These are things that have the potential to undermine all of the progress that we are making, thanks to folks like the Climate Center and all of you here in this room today.
(00:04:33):
There’s also the cost. Another topic du jour, an award on everybody’s mouth these days is affordability. We know that data centers could potentially have significant impacts on ratepayer cost, on the cost of electricity, on infrastructure. And so we want to make sure that, I think generally speaking, most of us want to make sure that the cost of data centers are borne by those developers and not by the public in general. So we have these issues of energy demand and reliability, climate, and other environmental impacts and costs and affordability. What are we going to do about all of this? Well, like I said, lots of different approaches that we’ve seen throughout the country, as well as here in California, trying to target some of these issues. We have laws that are, or bills that are being focused on trying to contain the costs of these data centers.
(00:05:26):
We have laws that are trying to focus on ensuring the reliability of the electricity grid. We have some states that have just said we don’t know what to do, so we’re going to just put a moratorium in place, trying to target the type of power that is used to power data centers, relying on clean energy, transparency related laws, water related requirements, all these different things we’re seeing in different states across the country, as well as here in California. So that’s why we care and that’s what we might be able to do about it in a policy sense. But we have lots of folks here today that are going to give some background from the perspective of utilities, from the perspective of technology, from the perspective of state policy and also affordability and ratepayer impacts. So with that, we’re going to start first. I’m going to introduce each speaker when they come up to speak for a few minutes.
(00:06:20):
I’ll speak for a few minutes. We’ll have a little bit of a question and answer amongst ourselves and then we will, don’t worry. We will save time at the end to have questions from all of you. So first up is Nico Procos. He is the electric utility director at the Silicon Valley Power. Nico.
(00:06:20):
Nico Procos, Silicon Valley Power (00:06:43):
All right. Good afternoon, everybody. It’s great to be here. Got a couple of slides. I’ll just speed through here. We want to make sure that we leave as much time as possible for Q&A with everybody. So just so as a bit of an introduction to Silicon Valley Power, since many of you may not be aware of who we are, and I’m not going to go through maybe all of these here, but I’ll just kind of touch on some main points. We’re the third largest municipal utility in retail sales in California. So we’re behind SMUD, LA DWP. It’s kind of striking when you think that we’re packed into 20 square miles, and I’ll kind of touch on that in a little bit as well in terms of our energy density. Our peak demand’s about 746 megawatts with about 130,000 residents, 61,000 electric accounts. Over 200 great employees, I’m very fortunate to have to lead an organization with such an incredible dedicated group of individuals.
(00:07:44):
I think this will kind of be emphasized when you look at … I have some slides that show where we think we’re going to be from an energy consumption five to seven years from now. And last but not least, we have 58 data centers in operation. In fact, we have so many data centers. I hear different numbers in terms of how many data centers we have within our city. Some of our elected officials say 65 plus. We’re about 58 approximately. So we’ve been in this business for a long time.
(00:08:16):
So this map just gives a little depiction, looks a little off here, but we’ll go with it. A depiction of the data center cluster map. So you can see within the city, there’s some notable features here. Up in the top there is Levi’s Stadium. And if you look really closely, you can see Bad Bunny right in the middle. No, I’m just kidding. We haven’t added that yet, but I am going to be adding that because we did enjoy that halftime show with the transformers and the poles and all that fun stuff. And then the blue ones are the … Those are the data centers. And depending on how big they are, it’s really correlated to the size of the data centers. And I should say that we’re not like some of those data centers that you hear back east, 500 to 100, to a thousand megawatts.
(00:09:04):
Our largest ones are about 100 to 150 megawatts. So still fairly sizable, but nothing gargantuan like you hear in the news in some other areas of the country.
(00:09:18):
I like this slide. I kind of talked about this a little bit earlier about our energy density, and we like to compare ourselves to some neighboring communities. Palo Alto is another municipal utility in the Bay Area, and San Jose is served by PG&E and the CCA in the area. I won’t go through all the details here, but really at the bottom, I think is what’s most striking. Palo Alto and San Jose are about six and a half, 6.8 megawatts per square mile. We’re at 37 megawatts per square mile, so approximately at least six times the size.
(00:09:56):
And it wouldn’t be a conversation about data centers without some discussion of rates. And this chart, you want to be at the bottom of this chart, because this shows us right here, the city of Santa Clara. We were at the very bottom. Unfortunately, Turlock Irrigation District recently took us over, but we’re working on that. So hopefully next year we’ll be back on bottom. And then you can kind of get a sense you’ve got PG&E and some of the IOUs and some of other electric utilities near the top there, but our rates are substantially below what PG&E charges. And this is a huge benefit, not only for our data centers, but also for our residential customers. If you can imagine that they pay 40% less or more. And with our projections, we’re seeing that that will continue to stay that way, if not actually widen as well.
(00:10:56):
So talking a little bit about the historic load growth, and again, this looks a little different than what I had before, but I’ll tell you that on the far left, it starts at 2,000, and then here it goes to 2025. So you can get a sense of where our projections or where our use has been over the past 25 years. And if you look about here, this is 2022, you see a steep rise. And so that’s when we started to see a substantial number of data centers coming on board. And we expect this trend to really continue. I’ve got a little bit more detail on that as well. We are a little bit unusual in the utility space. About 95% of our revenues come from large customers. So only about 5% from residential, even though it’s 130,000 people, we’ve got 55 plus data centers. So about 55, 60% of our revenues come from those data centers.
(00:11:52):
And we saw revenue increase 14% from FY fiscal year 2024 from the data center usage.
(00:12:04):
I’m just going to touch on this briefly.This is a map. This is the city right here. This shows some of the transmission projects and other projects that are happening in the area and largely in response to the growth that we’re seeing. And I don’t think anybody here is from the ISO or the CEC, and don’t worry, I’m not going to say bad things about them. I’m actually going to say good things. We’ve got a very strong partnership with those two organizations. The CEC works on the load forecasts, and that flows into the transmission planning process. And we’ve been participating on that for many years right now, and this is the result of that. You see there’s a line going on the top from Newark to … And NRS is our receiving station, so that’s where we interconnect onto the bulk electric system. That line, I believe, was just approved by the CPUC.
(00:12:52):
The other line we see from Metcalfe Energy Center to San Jose B, that one is in the pipeline. And then that purple line hash line in the middle, that one I believe is currently being reviewed by the ISO and to be awarded very shortly. And for those of you who have been in the business for a little while, the amount of transmission that’s showing up is something really unprecedented. I mean, it’s in response to this working with collaboratively with these state agencies and with the ISO, but I’ve never seen transmission really move this quickly through the process. And then we have a 115 KV line that we’re in the process. It’s really been permitting right now that connects two of our receiving station. That’s going to allow us to distribute flows more efficiently within our system and serve those customers.
(00:13:46):
And it mentions the 50 megawatt, 200 megawatt hour battery energy storage project. That’s approximately here. There was a battery there, but again, I don’t know what happened, but it’s gone now. But that’s the approximate location of where we have a power purchase agreement with a new battery project that’s under construction right now. So this is our resource stack, and this gets to our commitment being in California and also in the Bay Area to try to be as carbon free or renewable as possible when accommodating all this increased load. And you can see on the bottom there, we’re starting in 2025, going out to 2035, and there’s kind of this brownish, I guess, orangish line, that’s our forecasted load. So it’s a substantial increase in 10 years. And our stack, what we have right now is a significant amount of solar. You can see that yellow line at the bottom, some wind, also some geothermal, some hydro, and we do have some natural gas.
(00:14:54):
We have a combined cycle power plant within the city, and that’s what that large or that dark area is up there.
(00:15:04):
The total and pipeline, these are projects that we are currently working on. So we either have exclusivity agreements with the counterpart or we are negotiating. I will say that it looks very ambitious there. I would be surprised if about a third of those actually made it over the finish line. This is a very difficult environment right now to be out procuring energy. Not only are you in competition with everybody else, but you layer on tariffs and you layer on supply chain issues, and a lot of projects are coming back and saying, look, the price dish doesn’t work anymore. We need more. And then we have to have that discussion of whether we want to absorb that or not. In the interest of time, I’ll just touch on those green boxes up there. Those are projects that we’ve actually signed a deal with those entities and you can kind of get a sense of when those are going to be coming online.
(00:15:55):
I think one of the key takeaways here is, despite the fact that we’re seeing an almost, it’s almost a doubling of our electric load in that 10 year period, we do have a commitment to be able to fulfill those obligations with renewable or carbon-free resources. And I have a whole team that works on this. I mean, we’ve got anywhere from five to 10 contracts that we’re working on at any given time. So they do a great job kind of bringing these over the finish line.
(00:16:23):
I’m not going to go through all of these. This just kind of gives a sense of the projects that we have throughout California. And we’ve got quite a diverse resource portfolio. We’ve got geothermal. We are part of the Northern California Power Agency, which is a joint power agency here in Northern California, and they operate some power plants, a geothermal on a hydroelectric project on our behalf. We do get a western, so a federal allocation of hydroelectric power, but you can kind of get a sense we’ve got wind, we’ve got some wind coming online and that’s actually aligned that’s coming out of Mexico and certainly we’re spending a lot of time trying to get some solar and mostly solar plus battery projects over the finish line. And then I think this is my last slide, but we wanted to … My staff wanted me to show how we’re looking over time there in terms of our commitment to renewable energy.
(00:17:17):
I think this is a great slide. This is a new one, so you get the big reveal today. And you look at 2014, you can kind of get a sense, and those are the projects all down below there. We’ve got what I talked about before, the solar, the geothermal, the hydro, and then 2028. So that line, it’s similar to that previous kind of stack chart. It’s like, it’s really showing what we’re able to bring online and what we’re projecting to bring online to meet that future demand. And again, this is almost exclusively driven by data centers. And with that, I think we’ll turn it backwards.
Jon Binder, Model Climate Laws Initiative (00:17:55):
Thanks so much. It’s great to see all the progress you’re making. Normally you don’t want to win a race to the bottom, but I’m glad to hear that you are, and you’re doing it with a great haircut too, so nicely done. So next up is Jessica Hogle. Jessica is the head of government and regulatory affairs at GridCare. And I think she’s going to talk a lot about how do we unlock the latent grid capacity that exists on the system and maybe how we might be using AI to help AI.
Jessica C. Hogle, GridCARE (00:18:23):
Yep. And I’m going to stay seated so we don’t do musical chairs here, but it’s good afternoon. It’s a pleasure to be here. As John mentioned, I work for GridCare. We’re a Stanford based startup that partners with utilities and data centers to focus on accelerating power for AI through flexible interconnections. And so I want to start out by challenging us to challenge ourselves to not think about integrating new AI as this problem that we need to solve, this big demand growth problem, because it actually presents a very significant opportunity for the grid, one that we haven’t seen in a generation, right? Because AI, it’s not just load that needs to be met. It is the compute required that enables us to see dynamically all of the tools in our toolbox and how to optimally manage those onto our system to squeeze more juice out of the assets that we already have.
(00:19:26):
And so what GridCare does, as I mentioned, we partner with utilities and data centers to accelerate inner AI interconnections. And so if you think of our transmission system like the interstate system, yes, there are periods of time where the transmission or the interstate is congested. We would probably want to avoid driving during rush hour when there’s a four car pile up and only one lane is open. And right now, traditionally, that’s how our grid is being planned. It’s very conservative because we want to maintain reliability of our system because energy is basically the lifeblood of everything we do, right? But we have a lot of tools in our toolbox that can be leveraged so that we can increase the utilization of our system. So GridCare was based on the core thesis that the grid is about a third utilized at any point in time, and with flexibility, we can unlock additional utilization on the system.
(00:20:20):
So there have been independent studies that have shown if folks can be flexible for 100 hours out of the year, we can unlock 100 gigawatts. For us, if we say the grid is a third utilized, if we could double that, that’s 300 gigawatts of capacity that we could put on the existing system, right? So I’m not trying to say that the grid is never congested. It is, but it’s typically congested for a small number of hours per year, like a hundred hours per year out of 8,760 hours total in a year. And so when I say we now have the compute available to be able to see this in real time, that’s essentially what GridCare is able to do, right? So our proprietary generative AI models are able to analyze literally over 20 quadrillion scenarios to see geographically where capacity exists on the system and then temporally when you could increase that capacity, right?
(00:21:21):
So we’re looking at a hundred assets with a hundred things going wrong and some sequence with all 8,760 hours of the year with 20 different scenario strategies that you could deploy to optimize that. And so the result of this platform is identification and probabilistic analysis that provides a very granular, high resolution view on when, for how long, how often constraints are going to occur. And this provides bounded analysis to inform what the optimal flexibility strategies might be. And when we talk about flexibility, we view flexibility in a very broad sense. It’s the data center side, geographically leveraging compute where power, in a network where power exists. It’s using their non-IT systems, pre-cooling as an example, or there might be IT flexibility and there’s a whole ecosystem and network of flexibility, solution providers on the data center side that do this, but there’s also network flexibility for the utility side.
(00:22:32):
They could deploy generation redispatch, they could use RAS schemes, they could use non-wires, alternatives, grid enhancing technologies, dynamic line ratings, right? There’s a very broad solution set. And so putting all of this together into a strategy, which you can optimize for certain constraints. So if you’re a data center located in a disadvantaged community, you want to minimize diesel use, our platform can optimize for that. And ultimately you have kind of the problem identification. This is a very precise view on when these constraints are going to happen and what needs to be solved for, and then an optimized solution set that ultimately the utility and the data center will need to agree to in order for an interconnection to happen, but that’s what our platform is able to provide. And then over the lifespan of that interconnection, we can help operationalize and orchestrate the … Okay.
(00:23:30):
You know what I’m saying? I don’t think I can say operate … I can’t say it. Anybody that can say it five times fast, I’ll give you $5.
(00:23:39):
But we’re able to orchestrate that network of flexibility in a way that is fair, that works for the data centers, as well as the utility, right? So that’s the end state. And so I’m just saying this, this is not theoretical. GridCare partnered with Portland General Electric out of Oregon, and we looked at a point of interconnection in a already congested area and an area that is already kind of reaching the limits of their air standards to basically find 400 megawatts of capacity that could be unlocked five years ahead of schedule. And so the first project, there’s five total. The first will come online this year. It’s aligned data centers partnering with Calibrant battery storage. There’ll be a 31 megawatt battery there that the utility will have access to and we’re able to use as a resource. And so, again, like we have demonstrated this at scale, it is possible, and the impact is significant.
(00:24:40):
So we did some analysis on what one gigawatt of new data center interconnection on a mid-size utility could look like financially for the native customers on that system. And what our analysis found was, after you take out the non-bipassable charges, that new revenue on the system could either one, reduce rates for existing customers by 5% or support over a billion dollars of CapEx to fund new grid investments that benefit everyone, right? So essentially increasing utilization creates a bridge between the time needed to build new infrastructure and the resources to pay for it. And so I think that’s really what GridCare is trying to offer is that AI use case that allows you to dynamically manage and optimize your existing assets on the system and investments. And so we should all be leaving this room and closing with this notion of like the feeling you get when you put on a coat that you haven’t worn in a while and you find a $20 bill.That is our grid, okay?
(00:25:46):
So I’ll leave you with that.
Jon Binder, Model Climate Laws Initiative (00:25:47):
That’s great. Thank you, Jessica. We heard a lot this morning about the importance of taking advantage of existing capacity on the system, and I didn’t hear it presented quite that way, so I do like that metaphor. So I hope we can all continue to find the $20 bill in our pocket. Next is Alison Kostusak. Alison is a policy analyst with State Senator Perez’s office and formerly was with Senator Eggman. So she certainly has lots of experience with many of the previous and ongoing political battles related to climate and clean energy. So Allison.
Alison Kostusak, California State Senate (00:26:29):
Hey, hi everyone. Thank you for the introduction, John. So I guess to just start off, building off of what the other panelists have said, how I view state policy in this conversation is we read reports, we see the articles, but it’s one thing to work with other partners, such as like Nico, Jessica, and Mark, to really get an informed decision on how we’re informing the policy that we’re working on. And last year I had the pleasure of visiting Santa Clara and meeting Nico and understanding more of what they’re doing in that service area to onboard the data centers. And that majorly informed part of the bill I’m working on for Senator Sasha Renee Perez, SB 978, the Data Center Community Accountability Act. That bill was largely in part a response to our constituents in Monterey Park. They were battling with putting a data center in the city, and they had never seen one of that size, and they felt that they didn’t have clear guidance from the state in what to do.
(00:27:31):
They were like, okay, data centers, we’ve heard of them. We’re aware of them, but we haven’t seen one of the size and they have seen all the articles from our other states in the country where they are being affected. Their rates are increasing. They’re seeing negative effects. They’re not seeing these positive effects that maybe Jessica’s clients have. So how do we step in as a state? They went as far as to put a moratorium ballot initiative on building data centers in Monterey Park. So what we’re trying to do at the state level, really from my view and my boss’s view, is how do we partner to leverage data centers to make the best use case? Because top of mind is how do we protect rate payers? How do we manage our grid better? How do we partner with our existing utilities to make sure that they are strong, viable utilities to better serve all of us?
Jon Binder, Model Climate Laws Initiative (00:28:30):
Great. Thank you. You get rewards for keeping it nice and tight, so thank you. So next is Dr. Mark Tony. He’s going to come up to the podium. Mark is the executive director of the Utility Reform Network or TURN.
Dr. Mark W. Toney, The Utility Reform Network (00:28:48):
Don’t like anybody to get confused. I got to tell you how great it is to see a standing room only audience full of friendly faces. I’ve been in front of audiences that are looking like they’re going to kill me, so this is wonderful. My name is Mark Toney. I am an organizer by trade, a sociologist by discipline and a troublemaker at heart. TURN believes that in clean power, broadband and phone services should be treated as basic rights for all families. We are committed to the cleanest energy at the lowest prices, or as I like to say, we want the most green for the least green. We believe it’s important that a goal of 100% clean energy needs to be matched with a goal of 100% universal utility service, regardless of people’s ability to afford their monthly bills.
(00:30:07):
Now, I’ll tell you this, in this brave new world of artificial intelligence that we find ourselves in, I stand before you as a non-believer who refuses to worship AI at the altar of data centers, but I am also a believer that $7 trillion of investments means that we are going to get an untold number of data centers built, whether I would like them built or not. And it is in that context that TURN is sponsoring two bills along with net zero, SB 886 and SB 887 to hold data centers accountable to protect rate payers and the environment. Now, SB 886, this is Senator Steve Padilla, protects repairs against data center costs by requiring that all data centers cover 100% of their costs for new transmission upgrades to fund the procurement of new clean energy facilities, participate in load shifting efforts, and prevent cost shifting to residential, industrial, agricultural, and small business customers.
(00:31:48):
The three main ways it does it is it prohibits the shifting of interconnection costs, even if future data center loads fall short of initial projections. It requires participant in demand response load shifting programs and prefund long-term contracts for new zero carbon generation to serve at least 50% of hourly needs. And it ensures that data centers that connect directly with the transmission system contribute fairly to wildfire mitigation and liability costs, electrification costs, and other costs paid for by other rate payers.
(00:32:43):
So what SB 886 does is it sets a baseline that all data centers must meet. 887 offers incentives for model data center behavior. It allows data center projects with 50 plus megawatts of peak demand if they meet a superior environmental and labor standards that they can receive an environmental leadership development project designation from the governor, which basically expedites speeds up environmental review. This would require reliance on 100% zero carbon electricity resources of which 75% are newly developed to serve the hourly needs of data center within five years of initial operations. It would require onsite clean energy storage to meet 100% of peak demand for four hours to minimize the use of onsite diesel generation and provide demand response to the grid. It would ensure the use of project labor agreements, compliance with prevailing wage requirements, and require the negotiation of community benefit agreements with local communities.
(00:34:20):
And finally, it would direct the energy commission to establish the compliance standards for all provisions of this bill, ensure regular reporting by data centers and enforce non-compliance as needed. So that is TURN’s contribution to how to make sure that the data centers that do get built protect rate payers and protect the environment.
Jon Binder, Model Climate Laws Initiative (00:35:02):
Thank you, Mark. Much appreciated. So we’re going to go to some questions for the panel, and then like I said, we will save time at the end for questions from all of you. I want to start with some of … We’ve heard about some bills that are pending here, not too far away from here, from both Mark and Allison. And maybe Allison, I want to invite you to see if you could speak to the prospects for any of those or the status of any of those from your perspective for starters.
Alison Kostusak, California State Senate (00:35:33):
Yeah. I mean, we are in the heat of the season right now. April is a heavy committee month. I’m not sure where Mr. Padilla’s bills are at in the process right now. I hope they are faring well. People often ask, “What do you do when there’s so many bills introduced on a topic? Are you all vying for that number one spot?” And the way I view it … Well, maybe some of us. The way I view it is it creates a lot of good discussion because then you get more ideas and more involvement from other groups to decide what is the best policy to serve such a large state because the truth of the matter is my boss’s district, Senate District 25, Pasadena, Glendale area, very different than Santa Clara at the end of the day. So trying to fit a state policy often requires a lot of stakeholder engagement.
(00:36:23):
For example, our bill, SB 978, we are currently in Senate appropriations. We went through the Senate Energy Committee and then Senate Labor Committee because we were trying to tackle some of the same issues that Turn and Mr. Padilla are covering in their bills as well, which is strong rate payer protections, making sure that we have a strong labor workforce building these data centers since once they are operational, they require such little workforce to be in there. And also making sure that those costs cannot be recovered on the back of rate payers once the data centers pay those costs, because this is not a loan to the data centers. We need to make sure that we are protecting rate payers first and foremost. And as much as the viability of all these bills, I think that in the past couple years, we’ve seen a lot of interesting turns and I’m very hopeful that there will be an advancement of a couple bills to the governor’s desk.
(00:37:19):
I think that it is time and it’s a hard issue to ignore when they are such a large part of our media these days. You turn on any news station or you open your phone, you see a data center article and that’s just the
Jon Binder, Model Climate Laws Initiative (00:37:35):
Truth. It’s true. It’s the topic that I hear about the most from not just here in California, but across the country. When I tell folks I work on environmental climate policy, almost always their first question is, “What about this data center thing?” So that’s why we’re all here and we have a standing room only today. So I want to go to you next, Nico, and then Mark, and maybe specifically on, we heard a lot about how do we protect rate payers. So from your perspective, what are the things that we can do to protect rate payers from bill increases and from stranded assets as we see this build out of data centers? Yeah.
Nico Procos, Silicon Valley Power (00:38:10):
And I think, I mean, it’s an important issue. I will say that our case is somewhat unique. I talked about how roughly about 55, 60% of our revenues come from data centers, so it’s a significant contribution to us. And I should also add that includes a substantial contribution to the general fund as well. So it is funding local services. We do have some things in place already that I think some entities are struggling with. In fact, I spend a lot of time talking with folks about how do you make sure they’re paying their fair share. We have a mechanism where we, when they connect, we charge them an upfront fee. So they pay a fee for the direct connection, so the cable, and if you’re connecting on the 60 kilovolt system, you get a dedicated substation and they will pay for that. We also have what we call a load development fee, and that’s a fee that’s based on a projection of what we need to do on our system to be able to not only accommodate all the increased growth, but also replace aging infrastructure.
(00:39:18):
And then a portion of that is charged to the data centers. That fee right now is about $600 a kilowatt. So you can imagine for a 50 megawatt data center, that’s a substantial upfront payment. And then in terms of, do I … I always get this, this is a million dollar question, and in our community, we have a lot of misconceptions, and I think this is kind of fairly common elsewhere as well, but I hear a lot about, well, residential customers are subsidizing the data centers. And in our particular situation, I think most likely it’s actually the opposite is true, but to the extent that we’re, and I didn’t have any projections on financial where we think our finances are going to be, but we’re seeing some substantial growth. And that revenue coming in to us from an electric utility perspective, and I don’t want to get too much into the weeds of this because we do cost of service studies and we allocate costs to different customers, but it’s kind of an art and a science, but to the extent that you’re generating additional revenue and that’s all coming from data centers, that puts downward pressure on rates for all of our customers and allows us to be very competitive.
(00:40:34):
And we saw that kind of the race to the bottom chart. And I have folks calling me from all over the country asking me about this. And what I really … The cautionary tale is that even though this has been a successful model for us, it isn’t necessarily for everybody else. And so they need to think long and hard about this. And we’ve had lots of conversations with our elected officials. We also have a partnership with GridCare, looking at ways that we can be innovative with these customers. And I think, I won’t speak for the data centers, but
(00:41:12):
They hear what’s happening. They understand about perceptions that are coming out in the communities, and they are learning to be better at kind of responding to those. And whether that means, well, they can be more efficient and potentially there’s ways that they can optimize or shift compute load around to help during certain emergencies on the grid. They’re very open to that. And so, and we talk to them all the time and we work with grid care on Emerald AI and others as well. So maybe I’ll stop there. I think I kind of drifted off topic a little bit there, but I’ll hand it over to Mark.
Jon Binder, Model Climate Laws Initiative (00:41:51):
Mark, do you want to touch upon some of the best ways? I mean, you already did, I think, by listing some of those policies that you support, obviously, but maybe there’s other ways that you want to touch on for the best ways to protect ratepayers and maybe some of the risks related to stranded assets.
Dr. Mark W. Toney, The Utility Reform Network (00:42:07):
All right. I’m going to talk about some of the things that keep me up at night about data centers that I worry about. There are a lot of scenarios for failure. The investor gravy train runs dry because they can’t figure out how to make a profit on $7 trillion of investments. Folks, this is not charity. All right? They’re in it to make a profit. Another scenario is that the AI bubble bursts. Bubbles tend to burst, especially when the stock market runs up the valuation so far ahead of the actual delivered value. Public opposition grows to the depletion of the environment and stripping of community resources. AI might be smart enough to figure out how to use less energy and less water or deep seek might become dominant, right? Which already uses a fraction of what conventional data center use, but there’s also data center scenarios for success that worry me, that it leads to massive labor displacement and unemployment, that there’s an exponential expansion in wealth concentrated by billionaires in trillionaires and a massive increase in global poverty and the cognitive decline in the capacity of humans to exercise critical analysis, artistic creativity, and independent thought.
(00:43:49):
Those are some of the things that worry me about data centers and artificial intelligence.
Jon Binder, Model Climate Laws Initiative (00:43:56):
Thanks. Yeah, go ahead, Jennifer. Yeah.
Jessica C. Hogle, GridCARE (00:44:02):
I think to the question about protecting
(00:44:07):
Customers that are already on the system and stranded costs and all of these things, I think when we first had kind of the data center boom and the AI boom, it was very much kind of a land first approach on the data center side. And you had these developers and their remit was to build as much as you can because we are very much in an AI race, a global AI arms race, if you will. And the nation that wins will be the nation that is able to leverage that national security, economic competitiveness advantage. And on the utility side, right, it’s go slow, be conservative, maintain reliability because public safety and economic personal livelihood literally depends on the service that we provide. So that is the world we come from. And so these two worlds collided, they spoke different languages, they have different incentive structures, and there needed to be some trust built between these two parties.
(00:45:06):
And I do think this is one kind of area where GridCare can provide some value, but I think it is also true that when you’ve got AI that is talking about building data centers and space and building data centers that are completely islanded from the system, to me, what that signals is, there are a lot of resources that are being brought to bear to this challenge. And I would much rather have those resources deployed on the grid in a way that is fair, that creates a higher denominator that is paying for the grid that we already have and better using the grid that we already have. And so I think we need to deploy an approach that really looks at kind of latency first, right? Can we use existing infrastructure? Can we turn data centers into good grid citizens instead of grid risks, right? I think that is the approach that we need to take when we think about what are the policies that we want to create to kind of dictate the terms in which data centers are going to interconnect with our grid because they’re going to go somewhere, right?
(00:46:09):
So I’d rather have them somewhere where there’s the guardrails in place that is optimizing and creating a better outcome than the alternative.
Jon Binder, Model Climate Laws Initiative (00:46:19):
So sticking on that topic for a moment, Jessica, we’ve talked a lot about the underutilization of the grid, the latent capacity that is out there, and you’ve spoken very convincingly about the importance of tapping into that. What can states do to make that happen? What are the policy opportunities for states, California or otherwise, to actually maximize that? You spoke about some case studies where there’s been success. What’s the policy environment that kind of enables that to happen?
Jessica C. Hogle, GridCARE (00:46:50):
So I think the first response is that we can’t improve what we can’t see, so we need to measure it. And so Stanford recently came out with a study that is looking at grid transmission utilization in the Western interconnect and found that on average utilization was 19% at the lowest, 52% at the very highest, averaged around that 30%. And this analysis was looking at, let’s assume one thing fails on the system, so N minus one contingency analysis. I think that it could provide a rosier picture, but when you layer in actual temporal analysis, like utilization is going to be much lower. So I think we need to start with measuring it, and then I think that we should incentivize it. So we have seen Virginia, where I live, actually in this legislative session, passed a grid utilization bill, first of its kind in the country, where the utilities there, the investor owned utilities have to propose a grid utilization metric, and the commission will use that when they think about investments.
(00:48:04):
If I were writing that bill, I would have created a carrot because I just generally like carrots more than sticks. And then I think at the federal level as well, this is information that I don’t know if it’s FERC or if it’s the EIA, but again, we have a lot of data that is available to us about our energy use and our system. So I think having this view on utilization is a really, really important first step because even with that Stanford study, there are periods of congestion and there are assets that are congested and they need to be replaced, right? In the Stanford study, transformers were a big source of areas where we needed to make further investments. So if we’re looking at a great utilization lens, it not only allows you to direct traffic to interconnect in better areas, but also really understand where are the priorities?
(00:48:53):
Where do I need to go make an investment? Because this asset is impeding utilization downstream on my system, and so I’ll get the biggest return for this here.
Jon Binder, Model Climate Laws Initiative (00:49:02):
Thank you. Oh, go ahead.
Nico Procos, Silicon Valley Power (00:49:06):
This kind of ties in a little bit of the discussion and what Mark was talking about in terms of what keeps me up at night. And I don’t have as long a list as Mark does, but the main one is reliability for me. And I think GridCare is going down the right path and they have the right idea. What worries me a little bit, and you hear this from the very large investor owned utility in the vicinity of where we are right now, who talks about finding capacity on the grid and adding more, and then that’s going to result in … I don’t know what the number is, Mark probably knows, but there’s going to be to address the affordability problem. And I’ll tell you that anybody who’s worked for an electric utility and experienced operational issues, it is not as simple as like, “Oh, there’s a little bit of capacity over here.
(00:49:59):
Let’s put something over there.” I think you really need to think long and hard about that. We see operational problems all the time. Now we’re working to manage those with our data center, and I’ll give you an example. They used to, and they’re very sophisticated, their instrumentation. It’s like if they see a voltage drop on the system, and I’m talking about a tiny voltage drop. I mean, you could have a transmission line that goes out in Alberta and we’ll see a tiny voltage drop and that all of a sudden that data center just disappears from your system and they go to their backup generators. That’s a problem for my operators. We see that. We’ve worked with them. And I think that’s something that I think as we go down this path, we need to be very careful about that and make sure that we’re coordinating very closely with the data centers on that.
(00:50:44):
And again, I said, they’re getting better at it in terms of how now they don’t, with the vault, using that example, they don’t drop off right away. They’ll stay in the game because just a little voltage drop doesn’t necessarily mean you’re going to have an outage, but they’re trying to get ahead of that. So stay in. And so we’re working with them to kind of come up with different ways, but I would, and I think it’s something we have to be very careful about because in our particular area, the transmission system, and I don’t think this is unique to Santa Clara, they’re playing catch up on a system that they didn’t do maintenance for 50 years plus. And so, and now you’re putting down a 400 megawatt data center in there.
(00:51:29):
It’s not as simple as saying there’s spare capacity. It’s like you have to analyze that. And that’s what I was mentioning earlier where we go through a process with the ISO and with the CEC and there’s an iterative process and we have an engineering group that analyzes this. And you can imagine as you’re adding more data centers and San Jose and PG&E are talking about adding 2,000 megawatts of data centers next door, that’s going to impact the system. I can pretty much guarantee you that. And it’s not just like three, four hours of the year. You could lose an element on the system in the middle of winter and all of a sudden you’re going to have a problem. And so you need to make sure that you’re incorporating and having conversations with the operational folks to make sure there’s an understanding of how that exactly works because I can tell you it is challenging.
Jon Binder, Model Climate Laws Initiative (00:52:17):
Thank you. Yeah, it’s certainly complicated and reliability is always going to be, I think, top of everybody’s mind. I think that has a unique way of animating politicians too when the lights go off. So reliability is always going to be a top concern. And even a state like Texas has recently passed legislation around a kill switch so that if there is some sort of emergency on the system, they have the ability to actually turn off the power going to a data center, but then the data center might have an emergency backup generator on site for themselves that often is powered by fossil fuels and probably contributing to climate and local air pollution impacts. But in any case, I want to come to the last question here, which is for Alison, back to you. So obviously this is the Climate Policy Summit. And so we’re mostly interested, I think, in climate impacts and the ways that data centers might impact climate change.
(00:53:10):
One, there’s lots of different policies that have been proposed out there for requiring clean energy for data centers. My favorite acronym is Beyonce, bring your own new clean energy because we always have fun with acronyms. So what kind of policies do you think are the most helpful at the state level for mitigating the climate impacts of data centers?
Alison Kostusak, California State Senate (00:53:33):
Wow. You really saved the easiest question for me. That’s right. I appreciate it. I think that this is a really tough issue to tackle. We’re at the Climate Center Conference and I think it’s top of everyone’s mind as we’re experiencing … If you are in Sacramento the last couple of weeks, we had one week where it was 90 degrees, now we’re in rain. Climate center is very evidently here. So from the state perspective, we try to play this game of plug and play as issues come up, obviously, and then we have our larger programs that are discussed, it feels like every year after we pass them. And just some of the effects from data centers, if you look at just even planning out a data center and what that might look like in a region, depending on who you’re contracting with and what their CEQA review process looks like and whatnot, if they bring their own clean new energy, but I think much to Jessica’s point too, we’d rather have them connect through the utility and be able to have that managed more properly.
(00:54:55):
So I guess there’s not a great answer that is just like a one size fits all for how we’re going to see this effect and how we can curb this effect. I think that’s going to take all of us working together on the state level, in the advocacy space, in the private sector, in the utility area, and we have to stay diligent. We have to be responsible in our conversations and we also have to come with open communication about what it is in each of our sectors that we’re looking at because a lot of stuff for us on the state side is we have policy ideas and sometimes there is no political will to push it through and we rely on a lot of outside conversations as well to help us get through. And sometimes it takes years to accomplish a policy, which is not really great when we’re seeing this huge boom and we’re trying to tackle this issue.
(00:55:49):
And obviously Monterey Park is a perfect case study for that and what can happen. So I will just leave that food for thought, talk to your friends, talk to your elected official offices, get involved with organizations like Turn, and maybe we can figure this out.
Jon Binder, Model Climate Laws Initiative (00:56:09):
I think that’s a great note to end on for now, but then we’re going to turn it to all of you for questions. So yes, standing up in the green in the back? Oh, do we? Good. Yes, please. Thank you.
Speaker 3 (00:56:29):
Nico, I’m so glad you brought up backup generation for these data centers. And that’s what really scares me is, and I think you mentioned also, Allison, that it’s sometimes better to have data centers connect to the grid than bring their own generation, which may be 100% fossil fuel. So is there action on the legislative space to regulate the backup generation for data centers?
Alison Kostusak, California State Senate (00:57:08):
Yeah, great question. I think as Mark was saying, the Padilla Bill, SB … Was it 887? Yeah, SB 887 is looking to do some regulation on that. And my boss’s bill, SB 978, we were trying to tackle that issue. And unfortunately through committee amendments, we had to strike that and only focus on the energy rate payer protection side and labor agreements in our bill. And I think a lot of the issues that we see, we get a lot of pushback usually when we talk about prohibiting backup diesel because there are pushbacks around, “Oh, there’s not enough land space for solar and battery,” which maybe in some cases is true, but I think that we have to start thinking innovatively about this and how we can really tackle this issue. So one way that we’re trying to tackle it in SB 978 is instead of looking at the backup diesel generation part, we very similar to the Padilla Bill also will have the opportunity for data centers to contract through the utility to prefund a 15 year net zero clean resource.
(00:58:17):
That is a new resource that will be added to the utility for the benefit of the whole service territory, not just the data center, which will then in helps increase the reliability. I’m not utility manager expert like Nico over here, but that is the goal. That’s what I’m talking about when how can we leverage these big entities into benefiting everyone?
Jon Binder, Model Climate Laws Initiative (00:58:41):
And I’ll just add quickly, a lot of the policies across the country that are about bringing clean energy are not necessarily about citing clean energy on the site of the data center. They’re about procuring that clean energy onto the system through the utility, just in case that wasn’t clear, but maybe in the very back, standing up.
Speaker 8 (00:59:05):
Good afternoon. Danielle Hughes, Tahoe Spark, a fellow member harassing those people trying to change policies. I think one of the things that I’m not seeing at the state, and I would love to get some input from those introducing bills is addressing the interstate connections. I am in a multi-jurisdictional utility with our rates have gone up 100% and we’re the ones in Cal Matters articles saying that Nevada’s no longer going to service because they’ve chosen to serve data centers over seven rural counties of California. We’re not included in any of the policy discussions at all, whether the data centers are going to be in our community, our rates are still being affected, and our service and our reliability is still being affected. How are you going to work with the rural communities because it’s not just the urban And areas, it’s not just the three large utilities where these data centers are going to impact cost and reliability and the wildfire costs.
(01:00:09):
So how are we working together for the whole state?
Jon Binder, Model Climate Laws Initiative (01:00:14):
Well, I’ll start before somebody on the panel wants the answer, but I just want to say I definitely hear the importance of multi-state action. That’s what my project is all about as a shameless plug, right? The Model Climate Laws Initiative, we believe in the power of state level action on climate policy. And that’s why we provide model pieces of legislation that can be adopted not just by a big state like California, which has lots of great experts and resources, but other states that maybe don’t have that kind of staff capacity. So that’s what we’re all about. And likewise, with multi-state efforts, obviously state level power is even stronger when states are banding together on a policy like data centers or on other kinds of policies as well. But I just wanted to start there and see if anybody else on the panel wanted to add anything.
(01:00:14):
Dr. Mark W. Toney, The Utility Reform Network (01:01:05):
I really appreciate you bringing up the issue and you’re in Liberty Utilities District. I don’t think we do a very good job in California looking at the smaller utilities and we need to do more. And we at turn will continue to work hard to do our part. But I don’t think we are in California doing a very good job in looking at rural communities, particularly those that are served by the small investor owned utilities that are self-mentioned. Thank you for bringing that up.
Jon Binder, Model Climate Laws Initiative (01:01:43):
Another question over here.
Speaker 9 (01:01:51):
Hi. Question for Nico. Concerning generation costs for data centers, do you expect moving forward for your LSE or for other LSEs in the state, do you expect there to be unique charges for different data centers in accordance with individual PPAs or sleeved PPAs that may be procured for them? Or do you expect the generation costs for data centers within an LSE will all be uniform?
Nico Procos, Silicon Valley Power (01:02:22):
I think for our situation, we’ll probably lean more towards uniform. I mean, some of the challenge I think we’re hearing is you go out and you do a PPA for 20 years and then at the end of the customer leaves. It’s like, how are you going to recover those stranded costs? And we’ve heard from other entities about that as well. In our particular situation, and this goes for the PPA and also for any infrastructure we have to build, but I talked about that earlier within our service territory, there really isn’t that much of an impact is that we’ve been building up our reserves. And again, I got to say, we’re unique because 60% of our revenue is coming from data centers and only 5% residential. And so to the extent that we’re building up reserves to mitigate the possibility of a customer leaving or something like that happening, that revenue’s coming from those large customers.
(01:03:24):
And so we’re parking that into a reserve. So I think that in terms of, is it a good idea to charge a data center for a PPA? I think that would depend on the individual circumstance. I’m also going to add that, again, going back to what keeps me up at night, utilities routinely offload PPAs. So if I sign a PPA right now for solar plus storage and then a customer doesn’t materialize, am I worried that I’m not going to be able to offload that to a CCA or to a PG&E? Not really. We do that all the time and there’s buyers out there. So there’s definitely that opportunity there. So from our perspective, our current model works just fine for us, but again, may not for everybody.
Jon Binder, Model Climate Laws Initiative (01:04:19):
Yes, over here.
Speaker 10 (01:04:28):
So this one is also for Nico, you’re on a roll. So my understanding is that there are different types of data centers. Some are going to be base load, some are going to be more spiky like AI data centers. As you’re seeing more and more data centers connect in your service territory, what kind of load shapes are you seeing? Are they mostly AI or are you seeing base load business standard data centers promulgate? Thanks.
Nico Procos, Silicon Valley Power (01:04:54):
And I appreciate the question. When I did my presentation, I was told strictly to stay to a time limit, so I didn’t geek out too much. So for us in our service territory, they’re mostly cloud services. So we’re not really seeing a lot of AI. There is a little bit of that and more, I think coming down the pipeline, cloud tends to be more stable. AI will be more volatile. So you’re going to see more impacts potentially on your system, but from our perspective, it’s like that’s not something that we’re kind of entertaining or seeing.
Jon Binder, Model Climate Laws Initiative (01:05:31):
I think Matt had a question.
Speaker 11 (01:05:35):
Yeah. I was going to ask if anybody up here has ever heard of the Nautilus Data Center, which is a direct water cooled data center that’s more expensive and harder to scale and that maybe we should consider that we shouldn’t be doing so much to scale traditional data centers, that we’re making it a little too easy for these things and that we should be building what in my opinion is best available control technology in the Nautilus data center. It direct cools the boards instead of ruining water and it still provides the data services that we need, but they don’t want to drive out to Stockton because it’s not as prestigious as having a data center in the valley. Yeah. That’s right. It’s like submarine nuclear cooling technology. There are ways to build these without ruining the only water we have.
Nico Procos, Silicon Valley Power (01:06:18):
So I can … Novels. So in a previous role, I was in Alameda and Nautilus. Tried to be there and there were some significant concerns related to using the seawater to cool the facility and the impacts on the-
Speaker 11 (01:06:36):
Water temperature.
Nico Procos, Silicon Valley Power (01:06:37):
Yes, exactly.
Jon Binder, Model Climate Laws Initiative (01:06:43):
I’ll just say as a longtime air regulator, I appreciate the use of best available control technology and relying on an acronym that way.
Dr. Mark W. Toney, The Utility Reform Network (01:06:50):
And SB 887, part of what we want to do is to push data centers to use the recycled water and not just take up the precious resources that we have such a shortage in. So thank you for bringing that up, Matt. Really appreciate it. I
Jon Binder, Model Climate Laws Initiative (01:07:09):
Think we have time for one or maybe two questions more.
Speaker 12 (01:07:13):
That was my concern, Mark. You talked a little bit about our water, but Jessica, does your grid care do any analysis on the water that our data centers are using and has anybody done a study of the long-term care of the water that they’re using and how that’s going to affect our future?
Jessica C. Hogle, GridCARE (01:07:35):
So we’re focused on transmission electric infrastructure, so we haven’t-
Speaker 3 (01:07:40):
Not water.
Jessica C. Hogle, GridCARE (01:07:41):
Yeah. But we have a … There’s three elements of our platform, and the first does look at power availability, water, fiber. It layers in these things. So there is an element of what we do where we’re trying to direct traffic to areas where resources exist.
Nico Procos, Silicon Valley Power (01:08:01):
And just very quickly, all of ours use recycled water down in Santa Clara.
Jon Binder, Model Climate Laws Initiative (01:08:10):
Time for one more quick question in the back. Getting your steps in.
Speaker 13 (01:08:20):
Thank you, Dr. Tony, for saying the B word bubble, so I didn’t have to reach the topic first. Are you guys in the power world thinking about strategies, contingency plans, let’s call them for if there is a bubble burst or if there’s something in that realm where you’ve got all this buildup and you’re not actually going to be able to utilize all of it because the demand has dropped so significantly.
Nico Procos, Silicon Valley Power (01:08:49):
You didn’t name me, but I feel like that’s questions for me. Yeah. And I kind of touched on it earlier. One of the strategies we’re putting in place is to build up our reserves, especially because data centers pay those reserves. And so, and the bubble is one area of concern. I think the PPA one was the other one that we talked about. It’s not really the topic here, but wildfire is another one that is of concern to us. And so we’ve been actively doing that and actually in our latest, we’re going through our budgetary process right now and we’ve done some stress cases involving if there’s a 20% reduction or whatever, I can’t remember the exact number. And based on the reserves that we have in place and that we’re projecting to be around in like a year or two, it doesn’t necessarily translate into significant rate increases.
(01:09:46):
In fact, they’re very low and we’ll have to draw down some of those reserves, but it’s kind of a combination of the two, but it’s something that because of that strategy, it’s very absorbable.
Jessica C. Hogle, GridCARE (01:09:58):
I would add too that I think that cultural challenge between the two worlds I noted earlier, I think in the rush to build as much as possible, it’s really inflated load forecasts. So it’s difficult to know what’s real and what’s not real, right? And so like there’s elements of conservatism that need to be put in place. I think having the tariff mechanisms in place helps to discourage the speculative load because they know they’re going to have to put some skin in the game and then putting in the minimum demand charges. These things help to alleviate some of those constraints. So I did just want to bring up kind of the load forecasting challenge. And then obviously, having an asset on the system, it’s on the system. The risks of standing costs are material lower because that asset is on and it’s operating. Thanks
Jon Binder, Model Climate Laws Initiative (01:10:45):
Very much. Unfortunately, we are out of time. We can keep talking about this for quite a while, of course, but please join me in thanking this panel. Thank you. Thanks everybody.