Powerstack: Flexibility by force

Hi there,

It’s 95F here in London right now and us no-AC Londoners are melting. The US East Coast got a taste of summer last week, and PJM’s grid is feeling it already. It tried to get data centers disconnected and require them to move to their backup gen – it didn’t quite happen, but it’s a peek into the future. Read-on for details.

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What happened

Data centers in PJM were nearly disconnected from the grid last week as the last line of defense against widespread outages. Just over 20% of PJM’s generation assets (40.4GW) were in scheduled maintenance ahead of the summer peak, but unseasonably hot weather pushed PJM’s daily peak forecasts past 135GW with expected reserves of just 5.8GW (4%). Cutting it awfully close. 😬

In the end, peak load came in 2GW under forecast and the data centers stayed online. This time.

PJM has eyed data centers as a source of last-ditch flexibility before. In January it requested, and received, an emergency order from the DOE allowing it to ask data center operators to disconnect from the grid due to winter weather. But this time, PJM asked to “disconnect data centers from utility source power to automatically transfer data centers to back up generation.” The DOE pushed back and only allowed PJM to request voluntary switchover to backup by data centers.

But the trend is unmistakable: when the grid is at its breaking point, data centers will be the first to lose service. SB 6 made this law in Texas last summer, and it looks like a matter of time before its de facto policy in PJM. If this happens, interruptible service becomes a fact of life for developers in the two largest data center markets (half of the US data center pipeline).

Mark's take

Data center flexibility is about to take off.

Not because of a tech breakthrough or anything, but because the writing is on the wall for utilities.

The existing generation fleet can support way more data centers if they are flexible enough to go off-grid a few hours per year. We’ve all seen the 100GW number.

That flexibility is actually fast and easy for data center operators to implement. For all the attention going to workload orchestration to reduce facility power usage, on-site backup power or energy storage can make data centers flexible at the POC with zero changes at the chip level. Data centers already have gensets they can use if their air permits allow, or a few hours of lithium-ion backup costs less than $2m/MW and can ship in months. Very doable. 

But data centers haven’t had a reason to become flexible, so they haven’t. Until recently, it looked like they could get firm connections if they were willing to shop around with enough utilities. And offering to be flexible didn’t really improve their interconnection times. At the same time, utilities had headroom to interconnect data centers and were happy to rate-base follow-on generation and transmission investments.

That status quo is now breaking down. Interconnection is drying up, large load tariffs are putting the clamps on speculative requests, and developers are canceling projects that can’t get an IA. It also turns out that BTM generation, previously the easy way out, is difficult to finance and operate.

So utilities have a choice. They can drag their feet on flexibility in favor of firm connections, and then have to curtail their data center customers anyway. Or they can embrace flexibility as BAU and get something in return: more data center load that boosts short-term revenues, better reliability, and a happy PUC.

And if utilities can offer fast, predictable interconnection for projects that are flexible, developers will have every reason to make flexibility their default.

No one has to start from scratch here. For example, SPPs CHILL framework shows how grid operators can offer speed-to-power in exchange for flexibility. And the software layer is coming into place: PGE is energizing 80MW of flexible data centers this year through a demonstration with GridCARE, with another 320MW on the way.

Who this helps:

Who should be nervous:

A quick read on the numbers shaping the market. The capex, the contracts, the regs, all anchored in the so-what.

$1.1bn // DigitalBridge’s acquisition of energy asset manager ArcLight. The deal would bring ArcLight under SoftBank via DigitalBridge, which it is buying. SoftBank could channel investment through generation projects originated by ArcLight’s in-house development team (15GW pipeline), with data center build financed by DigitalBridge. ArcLight and DigitalBridge started this play last year when they invested in a powered land developer, and are now bringing development in-house. This is the continuation of a thesis we’ve been seeing for a bit, where developers or infra investors take matters into their own hands by buying a power-gen asset pipeline, i.e. Google buying Intersect and GIP/EQT buying AES.

12 // Reconductoring projects approved in CAISO’s 2025-2026 Plan, up from two projects last year. The $6.7bn, 38-project plan is not just your typical capex wish-list. For example, CAISO dropped the 500kV Serrano-Del Amo-Mesa line after finding that several smaller upgrades and storage buildout would be enough. And CAISO is bullish on advanced conductors, which are planned for up to five of the 12 reconductoring projects. But, it didn’t consider dynamic line rating because its production cost model can’t simulate them yet.

5GWh // Capacity of Antora’s operational thermal energy storage project. The project is located at a POET Biofuels facility in South Dakota and came online under a custom tariff with Otter Tail Power Company that allows POET to buy electricity from the day-ahead market, where nearby wind generation drives nodal prices low to negative. Access to wholesale power prices was likely a must-have for the project’s viability.

53% // Solar and storage’s share of new on-peak capacity in the NERC 2026 Summer Reliability Assessment. Available capacity is up 58.5GW YoY (5.2%). In addition to 16.4GW of solar and 14.7GW of storage, changes to maintenance plans and completion of nuclear generator outages contribute 19GW, natural gas 6.7GW, and wind 1.6GW. Declining costs, IRA tax credits, and short lead times continue to support a solar and storage boom. It could be a very different story next year, but the OBBBA’s looming 4 July safe-harbor end-date has rushed many renewables projects, accidentally boosting deployment numbers.

Explore more Signals on Sightline here.

The policies, rulings, and company moves worth watching.

PJM’s accelerated emergency auction, now planned for September 2026. The auction has been pulled forward from March 2027 as PJM rushes to solve its capacity crunch amid heavy criticism. It will now cover capacity shortfall from PJM’s June base capacity auction, estimated at 9GW. This completely replaces a six-week-old plan for a standalone procurement of 14.9GW running in parallel to PJM’s base capacity auctions, which the grid operator took four months to develop.

Liberty Energy’s scramble for new power supply by May 2027 once its energy services agreement with NV Energy expires on short notice. Liberty Energy has bought capacity from NV Energy since 2009, but it appears that NV Energy might now be dropping its service to free up power for its data center customers, leaving Tahoe-area Liberty Energy to compete with hyperscalers for capacity contracts.

An Ohio bill that would allow wires-only utilities to own nuclear power plants like the SMRs that AEP is considering. The draft legislation requires utilities to contract with individual customers, who would pay for the electricity from the power plants. This would let utilities earn a regulated rate of return while keeping the projects’ costs out of the broader rate base. But if customers default on contracts, utilities could lobby the Ohio PUC to recover costs from all customers.

The latest research, features, and data drops on the Sightline Climate platform.

We just published our 1H26 Solid State Transformer (SST) Benchmarks, a market snapshot of the data center power-delivery tech that could simplify the hardware stack to unlock stranded power. No vendor has shipped a medium voltage (10kV+) SST to the US market yet, so we’re keeping tabs on DG Matrix, RockeTruck, Amperesand, Heron Power, Delta Electronics, and Eaton Corporation with vendor-supplied performance and deployment data to know when the tech hits its commercial inflection point.

Where the market is meeting, and where to find us

📅 The Fastest MW: Join Sightline Climate’s webinar on the Fastest MW report on May 29 at 11 AM ET to hear how data centers can find speed to power. Register here.

📅 EEI 2026 // Las Vegas, NV, 2-4 June, 2026 // The flagship conference of Edison Electric Institute. Join utilities, regulators, and value chain players for discussions about the swiftly evolving US power sector. Join us on site, and we’ll be hosting a dinner for Sightline clients and friends on 2 June.

📅 SightLive London // London, 23 June, 2026 // Held during LCAW, join us for our flagship London event. This year we’ll focus the discussion on the data center buildout (what else?!) and the pathways to the fastest MW. Mark your calendars! Register here.

📅 Trellis Impact 26: From Jun 23-25 in San Francisco, Trellis Impact brings together 3,500+ leaders powering the future of sustainable business, from AI-enabled solutions to emerging technologies reshaping decarbonization, energy, circularity, and beyond. Get practical insights and hard-won examples of the technologies and strategies that are influencing sustainable business transformation. Register and you can get 20% off with our partner code: TI26SCP

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