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Data Centers Are Creating a New Kind of Battery Monster

Rob checks in with Near Horizon Group’s Peter Freed about the AI boom’s power needs.

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A Meta data center.
Heatmap Illustration/Getty Images

Just a handful of tech companies plan to spend nearly $700 billion combined this year investing in artificial intelligence — and much of that money will go to data centers and the energy used to keep them on. How is this boom transforming the American energy system, and what does it mean for clean energy?

On this episode of Shift Key, Rob is joined by Peter Freed, a founding partner at the Near Horizon Group and the former director of energy strategy at Meta from 2014 to 2024. They discuss why data center developers opt for certain energy sources over others, why AI is driving an unprecedented off-grid natural gas boom, and why batteries now pair especially well with gas. Yikes!

This conversation was originally recorded for a webinar hosted by Heatmap Pro. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap News.

Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.

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Here is an excerpt from their conversation:

Robinson Meyer: We know there’s this giant capex surge coming from the hyperscalers. I mean, it’s reached the point now where tech companies’ stocks suffer when they announce investment because they seem to be in an arms race of spending on data centers. We were just talking about the behind the meter gas boom. There’s a lot of renewable energy developers in this audience, or battery developers. How should they be thinking about this moment and what do they need to be doing to make their projects or to work with data center developers in the most attractive way?

Peter Freed: I’ll bring us back a couple of minutes to when I said, look, if you’re a data center developer and you’re building gas plus storage and you’re thinking of that as a pretty complicated thing, someone is really going to have to work out on explaining why the introduction of a variable renewable resource into that configuration is worthwhile.

And obviously there are people that believe that that’s true. Intersect believed that that was true and it worked out really, really well for them. There are ways to tell that story. And I think that the renewable energy development community probably still has some work to do to help explain that. So that’s sort of thing number one — like, the closer you get to the operations of the data center facility, the more work you’re going to have to do to explain why you believe that the integration of renewables into that makes sense.

Now, you can remove yourself somewhat from the actual operations of the facility. And this is where we get into bring your own capacity conversations. And you know, there’s been some really interesting stuff sort of talking about, okay, maybe there is a utility which has sufficient wires capacity as — and like, there’s enough room on the transmission lines to plug a data center in and turn the lights on, but they don’t have enough market capacity. Like, they don’t have enough of the financial products required by the RTO that they operate in to serve that facility. And so that can become an interesting opportunity for renewables in particular, storage in particular, trying to figure out how to put together these bring your own capacity products to serve data centers.

And I’ll say, you know, when I first heard about these bring your own capacity opportunities, I thought that they were pretty niche. I was like, okay, well, you know, a utility has sufficient wires capacity to serve a giant data center, but they don’t have capacity in the market. Like, that feels like something that’s not going to happen that often. But apparently, I mean, I was incorrect.

You can find a full transcript of the episode here.

Mentioned:

Breaking Down the Doomsday AI Memo That Spooked Markets

Inside Form Energy’s Big Google Data Center Deal

The New York Times on AI’s polling problems

Previously on Shift Key: What’s Really Holding Back New Data Centers

This episode of Shift Key is sponsored by …

Heatmap Pro brings all of our research, reporting, and insights down to the local level. The software platform tracks all local opposition to clean energy and data centers, forecasts community sentiment, and guides data-driven engagement campaigns. today to see the premier intelligence platform for project permitting and community engagement. Book a demo today to see the premier intelligence platform for project permitting and community engagement.

Music for Shift Key is by Adam Kromelow.

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