As Data Centers Boost Demand for Clean, Reliable Energy, New DER Tariffs and Models Emerge

As electricity demand from data centers, electrification and clean energy manufacturing increases and the number of outages jumps, states and utilities are integrating behind-the-meter distributed energy resources (DER), microgrids and flexible loads, along with new compensation mechanisms and rate designs, according to the 2025 Power and Utilities Industry Outlook, a new report from Deloitte Consulting.

Data center electricity demand expected to soar

According to the Deloitte analysis, by 2030, electricity demand from data centers is projected to rise to about 515 terawatt-hours (TWh) to 720 TWh, up from about 180 TWh to 290 TWh in 2024 — a 15% to 17% compound annual growth rate.

Along with increased demand for electricity, the number of weather-related outages has jumped. Between 2000 and 2023, 80% of all major power outages were caused by severe storms, wildfires and extreme heat, the report said.

Utilities can address these challenges by adopting DERs to provide energy efficiency demand response, power generation, energy storage and resilience to the grid. And utilities can create tariffs that aim to accelerate investment in clean energy resources.

Utilities and tech companies propose clean energy tariffs

According to the report, some utilities, working with technology companies, have proposed clean energy tariffs, including:

• Duke Energy proposed boosting the number of clean energy tariffs to create new rate structures that enable large customers to directly support clean energy investments.
• Google partnered with NV Energy, a Nevada utility, and designed a clean transition tariff. In May, NV Energy filed an application with the Nevada Public Utilities Commission to approve a clean transition tariff that would provide Google with power from a new Fervo Energy geothermal plant. Any corporate customer with a monthly energy demand above 5 MW would be eligible for the tariff.
• Duke Energy, along with Amazon, Google, Microsoft and Nucor, has said it plans to file Accelerating Clean Energy (ACE) tariffs, which would include a clean transition tariff, for approval by North Carolina’s and South Carolina’s utility commissions. The tariffs aim to facilitate on-site generation for customer facilities, participation in load flexibility programs and investment in clean energy resources. The approaches aim to support carbon-free energy generation and help utilities meet the needs of large businesses in North Carolina and South Carolina, Duke said in a press release. The companies want to develop new rate structures designed to reduce the long-term costs of investing in clean energy technologies  through early commitments.

ACE tariffs intend to promote on-site generation at customer facilities and customer participation in load flexibility programs and investments in clean energy assets. These are features attractive to customers with large-scale energy needs, Duke said.

DERs, microgrids can help meet demand and provide resilience

“The case for DERs is part of the larger case, meeting power demand and doing it in a way that satisfies decarbonization targets,” said Christian Grant, a principal in Deloitte Consulting’s Power, Utilities and Renewables practice. Deploying DERs is also an important way to provide resilience in the face of wildfires and storms across the US.

To provide that needed resilience, some utilities are taking action. For example, in February, San Diego Gas & Electric unveiled four advanced microgrids designed to operate independently or in conjunction with the larger grid, providing a combined storage capacity of 180 MWh across four substations. The microgrids will provide backup power to police and fire stations, schools and cooling centers.

Co-locating data centers with clean power plants

To meet the need for electricity demand, data centers are looking to co-locate their facilities with power plants. For example, Amazon Web Services (AWS) proposed acquiring a 960-MW data center campus in Pennsylvania that would be directly powered with nearby nuclear energy.

Talen Energy, which owns both the Cumulus data center and the Susquehanna nuclear power plant, agreed to sell the facility to AWS for approximately $650 million, according to reports. The deal also included a provision in which Talen would receive additional revenue from AWS related to the dispatch of carbon-free power back into the grid.

But the Federal Energy Regulatory Commission rejected an amended interconnection service agreement that intended to allow for expanded power sales from the nuclear plant to the data center, Grant said. It would have increased the connection between the power plant and the data center from 300 MW to 480 MW.

American Electric Power and Exelon also challenged the interconnection agreement, claiming it could shift transmission costs onto PJM ratepayers.

Will data center owners choose islanded microgrids?

That rejection might prompt data center owners to consider deploying microgrids to meet all of their demand, with or without commitments to connect to the grid and sell power to the grid, Grant said.

“We might see some data centers consider a microgrid approach that would be islanded from the grid but might include an agreement to reconnect and get power on the grid if the utility needs it,” he said.

With innovative tariffs, increased utility involvement in DERs – including microgrids –  is becoming an important way to provide clean, reliable and resilient energy as electricity demand jumps and more weather-related storms spark outages.

“As utilities address these challenges, DERs can provide a variety of capabilities, including energy efficiency, demand response, power generation and energy storage to the grid,” said the report. “By combining these capabilities, utilities can create smart systems such as non-wire alternatives, microgrids and virtual power plants, optimizing grid operations and enhancing resilience.”