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Data Centers to Face New Condition to Connect to AEP’s Ohio Grid Image: Bloomberg

Data Centers to Face New Condition to Connect to AEP’s Ohio Grid

Under a new proposal, new large data centers would have to make a commitment to pay for a minimum of 90% of the electricity they request.

(Bloomberg) -- American Electric Power Company wants data center developers to promise to buy most of the energy they request before the company builds the equipment to serve them, the latest sign of how the facilities are transforming electricity markets. 

Under the proposal the utility filed with Ohio regulators Monday, new large data centers would have to make a 10-year commitment to pay for a minimum of 90% of the electricity they request, even if they use less. 

“We want to make sure the customers are going to be here before we invest billions of dollars on transmission,” AEP Ohio President Marc Reitter said in an interview. 

Electric utilities are confronting the largest increase in demand in a generation. Along with data centers to run artificial intelligence, the US grid is being stressed by new factories and the electrification of cars and home heating. Duke Energy Corporation recently started requiring a commitment similar to AEP’s, and analysts pressed Southern Company for details on its plans earlier this month.

Data centers are set to more than double the power demand in AEP’s central Ohio region by 2030, with about five gigawatts of new demand set to connect to the grid. Reitter added that the company paused hookups for new data centers in March 2023 beyond those five gigawatts and currently has a queue of 30 gigawatts of additional data center developments requesting connection. A gigawatt is roughly the output of a nuclear reactor and can power about 750,000 homes. 

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