Latitude Media covers the industry end of energy transition. They recently wrote an article about one aspect of data centers and power companies relationships. It’s a little bit of a deep cut, so this may be the start of a rabbit hole for some, and just nice to know have a general understanding for others…

Data center flexibility has become the grid’s favorite compromise. Let large loads curtail during a few hours of peak demand, the argument goes, and in exchange potentially connect to the grid years sooner.

Hyperscalers have begun to broker flexibility agreements directly. In March, Google said it had signed one gigawatt of demand response into long-term contracts with Indiana Michigan Power, TVA, Entergy Arkansas, Minnesota Power, and DTE. Every one is a bilateral deal with a utility, negotiated site by site.

Now the Southwest Power Pool has written  the first version of a market policy ostensibly to encourage flexibility, but one that could instead end up complicating things. In June, federal regulators approved SPP’s conditional high impact large load service, or CHILLS. It gives data centers access to non-firm transmission — meaning SPP can cut them off whenever the transmission system is constrained or in an emergency — for up to seven years while they wait for firm service.

SPP’s conditional service won’t kill data center flexibility. Rather, it risks moving flexibility into bilateral contracts priced and dispatched out of public view, where its value isn’t discovered and its terms can’t be replicated by other loads. A CHILLS load can be cut off at any moment if needed by the grid, with no ceiling on the hours of curtailment.

So in order to avoid the unbounded risks that CHILLS present, the rational move for hyperscalers is to keep negotiating flexibility bilaterally with utilities that will write call limits into a contract — even if they have non-firm transmission.