Utility firms go nuclear over Amazon datacenter power deal

Utility firms American Electric Power (AEP) and Exelon have filed an official objection with the Federal Energy Regulatory Commission (FERC) over Talen Energy's nuclear power deal with Amazon.

Back in March, Amazon bought a nuclear-powered datacenter from Talen Energy – an operator of electricity generation and transmission facilities in the US. As part of the deal, Amazon would get 480 MW straight from the 2.7 GW Talen nuclear power plant that is sited on the banks of the Susquehanna river in Luzerne County, Pennsylvania, and may even be able to upgrade to 960 MW down the line.

However, that Susquehanna atomic plant also provides power to PJM Interconnection, the regional power grid operator for much of the eastern US. The two companies – Talen and PJM – have an interconnection service agreement (ISA) that sets the rules for how Talen should deliver power to PJM's transmission system.

To better accommodate the nuclear datacenter, Talen and PJM agreed to a new ISA, which has caught the ire of AEP and Exelon. The duo claim Talen and Amazon are basically getting a free ride that other PJM ratepayers will have to pay for, saying that even though Amazon's datacenter isn't directly connected to PJM, it still benefits from the power grid, meaning the other ratepayers are left holding the short end of the stick.

Each of the station's two reactors has 1,350 MW available, and Amazon is already able to use 480 MW, and up to 960 MW in the future. If one of the reactors experiences an outage, the ISA says the datacenter is first in line for power from the other reactor, which leaves PJM with far less electricity than normal. That in turn would mean a lower energy supply for PJM's customers, who would have to pay more, at least according to the complaint's reasoning.

The Talen-PJM ISA states that in this event, the nuclear datacenter will separate from the plant and get its power elsewhere, but AEP and Exelon are skeptical and want to know how exactly that would work.

The complaint argues Amazon's DC is essentially using the grid, saying the "premise" of the tweaked ISA "is that this datacenter co-located load is like load on a remote island – one that simply has no impact on the PJM grid and would thus be properly excluded from economic and other responsibility for maintaining the PJM grid. But that storyline does not stand up to scrutiny."

"They present their filing as no more than a replacement of older agreements with updated terms and 'clarifications' regarding the parties' roles and obligations," the two utility companies told [PDF] FERC, requesting a hearing over the matter. "The filing [new ISA] casts the submission as a mere housekeeping exercise, as if there is nothing to see here."

The protest adds:

AEP and Exelon claim the new terms of the ISA contains a key loophole that hinges on the datacenter's co-location with the nuclear power plant, which allows its power usage to not be considered "in-network," even though the power load is synced to PJM's grid and could theoretically get power from it.

One of the key arguments in counting the datacenter power load as in-network rests on the fact that nuclear power plants can't operate independently and require support from regional power grids, like PJM. According to that line of reasoning, whatever power the datacenter consumes is indirectly part of PJM's resources; the datacenter will also apparently benefit from PJM's ancillary services and capacity, even if it's technically not consuming power from the grid operator.

There are also concerns about power usage in a hypothetical power outage at one of the plant's two reactors. According to the complaint, the new ISA doesn't permit the nuclear plant to have automatically running backup power generation, which is fine for planned outages, but not so much for unexpected ones. In that case, the datacenter would apparently be able to use power from the other nuclear reactor as a form of backup.

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The end result, or so AEP and Exelon allege, is that Talen would be able to benefit from PJM's services without the associated cost. That would cost other customers between $58 million and $140 million per year overall, according to an analysis from Concentric Energy Advisors CEO Danielle Powers and chairman John Reed included with the filing.

AEP and Exelon asked FERC to either hold a hearing to answer questions it feels are unresolved or to reject the new ISA outright. For its part, Talen claims the complaint's narrative is "demonstrably false" and that "transmission is not implicated."

The wider consequences for the datacenter and energy industries

Although the complaint concerns just a single datacenter and a nuclear power plant, FERC's approval or rejection of the proposed ISA is anticipated to have significant consequences for datacenters and power firms.

"Because there is no precedent for this type of ISA, it is not unreasonable to believe the industry may take guidance from the outcome of this proceeding, which reinforces the need for the result here to be both legally and factually sound," the complaint reads.

Talen said in a statement about the Exelon/AEP objection: "Exelon and AEP's protest of the Susquehanna ISA is a misguided attempt to stifle this innovation by interfering with an ISA amendment agreed to and supported by all impacted parties – which Exelon and AEP decidedly are not ... Fundamentally, Talen has the right as a competitive generation company to contract with AWS to sell long-term, committed power. PPL, as the regulated utility that has an actual stake in this ISA, agrees that Talen has the right to sell power directly to AWS and signed an ISA amendment that gives PPL reliability assurances. PJM agrees the ISA is appropriate, and itself filed the application for FERC approval."

It added: "The rapid emergence of artificial intelligence and datacenters has fundamentally changed the demand for power and leads to an inflection point for the power industry."

Datacenter power usage is expected to grow massively in the coming years, and while analysts aren't quite sure how fast it will rise, even some of the most modest forecasts say by 2030 datacenter power consumption will double. Supporting all that extra load will require new sources of power, something someone will have to pay for.

For its part, AEP seems to think that datacenters should shoulder that burden, having asked in May for PJM to institute greater tariffs on datacenter power customers located in Ohio.

Amazon declined to make a statement on the matter. ®