Why AI Data Centers Are Building Private Grids | Travis Fisher

Travis Fisher (0:00)

They're basically building generation assets on top of a gas pipeline that they already own, but that is an islanded 200 megawatt facility that serves an affiliate of Metta. And that's the first in-service example of a large data center being fed completely off grid. So all the people who said that was impossible, it can never happen, it's already happening.

SPEAKER_2 (0:17)

All right, we're back with Travis Fisher. Travis is Director of Energy and Environmental Policy Studies at the Cato Institute. He's spent nearly 20 years in the energy policy world across the Federal Energy Regulatory Commission, the Institute for Energy Research, the Department of Energy, the Electricity Consumers Resource Council, and the Heritage Foundation. Travis, welcome.

Travis Fisher (0:35)

Thank you. I need to update that. It's, I just passed 20 year mark. I'm getting old.

SPEAKER_2 (0:39)

Wow.

SPEAKER_4 (0:39)

So more than 20 years in the energy world.

SPEAKER_2 (0:41)

Congrats on 20 years.

Travis Fisher (0:42)

Thank you.

SPEAKER_2 (0:43)

Tell us about what you're working on in energy right now at Cato.

Travis Fisher (0:47)

I think the most pressing issue is what customers value. And right now at speed and the idea that the grid is basically the rate limiter on economic growth right now.

We're hearing it most often in the context of data centers. But it applies to any industrial activity you want to do. So in Wyoming, it's mining. If you want to get new service at large industrial scale, the answer that a lot of customers are getting back is, well, you have to wait five, seven years, sometimes a decade. And that is obviously, in the context of the reindustrialized forum, that's not the way to reindustrialize an economy, is to ask your large customers, your industrial base to just hit pause for a decade.

SPEAKER_3 (1:25)

I'm curious, so I'm sure it's been like a wild ride, seeing all the focus shift to data centers in the past couple of years. So walk us through sort of like the different priorities for energy and like how those have changed over time, during your time.

Travis Fisher (1:41)

So in my 20 years, for most of it, it was boring. It was, how do we get more efficient? How do we decouple the economy from the electricity grid? Do we get more GDP out of a flat load growth? We didn't really grow electricity consumption for 20 years. And I think we got used to that. And that was the context for, now we have immense new load growth, a lot coming from data centers, but a lot coming from reshoring industry or just expanding the economy in general.

And so that is the difference now and that's new. And I think we were caught flat footed. Policy wise, I think there was historically a lot of focus on decarbonization. That seems to have taken a little bit of a backseat. If you see like objectively, we can zoom out and say, what are data centers building for their energy source? In a lot of cases, it's gas.

So that focus has shifted quite a bit. It's not how do we get clean service as quickly as we can decarbonize. Now it's how do we get service? Just period, we just need electricity. We need a lot of it. So we're seeing gigawatt scale data centers building in some cases, their own behind the meter generation. And in a few cases, this is the new thing that I'm personally very focused on, this idea of a private network. You're building networks that are independent of the public power grid. And that is a fascinating new thing that was not really on the table for most of my 20 years in this world. Now it's over the last year or so it's become, it's shifted from a theoretical possibility that we could write papers about to these are actually happening now.

SPEAKER_3 (3:13)

Yeah, tell us about private networks. What do they do?

Travis Fisher (3:17)

The first question I get is, like, why can't you just do this? And in a lot of cases, if it's pure self-supply, you can. So you'll see examples of like Google acquired intersect power and now that's a vertically integrated data plus power company. You can always self-supply.

The interesting thing now is if you wanted to make it a transaction, so a supplier selling to, let's say a tech company or a mining company or whoever, that transaction almost always in almost every state, that transaction is a regulated transaction because it's a retail sale of electricity. And of course, when the laws were written 100 years ago, that concept was, of course, you're on the public grid if you're selling electricity. Now, we have this new phenomenon, the laws haven't kept up. So I'm going state by state and trying to get the law changed. But a great example in Ohio actually, it's called the Socrates South Project. The Williams company has a power arm that they're basically building generation assets on top of a gas pipeline that they already own.