Authors note: We are exciting to keep bringing new features along side our deeper industry, thematic, and company research. This is the first of many expert interviews we have lined up and we plan to use our extensive network to bring the most valuable conversations to clients/subscribers. Including CEO/Executive interviews with the first one coming Thursday.
We have covered the power industry challenges to scale and meet demand in numerous reports this year. Power comes up regularly in the “bottleneck” and there are deep constraints all the way down the supply chain. We recognize as much as we track constraints in the compute supply chain, the deployment of that compute is up against a much deeper set of build out challenges related to land, power, shells which is why we are also obsessed with tracking the GW buildout along side the AI compute build out.
In our Bloom Energy report, we looked at behind-the-meter power as a way to get data centers running sooner while customers wait on utility service. We wanted to take that question to Billy and get a better sense of what it actually takes to make these projects work. We’ve made the point in prior reports that customers may be willing to pay more for earlier access to power, and we still think that’s true. But the developer still needs an agreement that covers the cost of building and operating the plant.
Billy spent a good chunk of our conversation on a problem we had given less attention to. The power plant is a small share of the total investment at a compute site, but an outage can put a much larger investment at risk. So the question becomes how much of that risk the power developer can afford to take on. Adding spare generation or batteries costs money, and the customer’s contract has to run long enough for the developer to earn it back. That gives us another way to look at the BTM opportunity from the Bloom report: what reliability the customer needs, what it costs to provide, and whether the two sides can agree on who pays when something goes wrong. It also adds a piece we were missing in our TCO analysis and in our Gigawattonomics model, as we track AI capex ROI all the way down to the power shell provider.
The conversation also helped us understand another challenge with running data centers on natural gas, which is getting enough gas to the site. The US has plenty of gas, but a data center may still need a pipeline extension or more compression before it can use that supply. The companies building that infrastructure need customer commitments to justify the investment, so it becomes one more project that has to be funded and built on a schedule that lines up with when the data center needs power. It’s the same pattern we keep seeing, with the constraint moving further down the stack.
Below, we get into how these projects come together, why the contracts are hard to structure, and where Billy sees the next constraints showing up.
Our companion report develops the investment implications through project examples, gas-demand scenarios, and the economics of dedicated generation and who is best positioned. Subscribers, with Atlas access can explore our full power landscape research, and BTM / natural-gas and compute research alongside the interview.
In the conversation:
Why generation, power delivery, and the customer’s opening date are difficult to align.
What happens when a power supplier cannot buy replacement electricity during an outage.
How reliability requirements and contract length affect the price of power.
Why pipeline companies need credible customer commitments before construction begins.
