Is Public Power a Better Model for Meeting Data Center Demand?
LPPC Sets Policy Priorities for Trump and Republican Congress
Dec 12, 2024 | K Kaufmann
WASHINGTON ― Northern Virginia isn’t the only place scrambling to find enough electricity to keep its data centers powered 24/7, said Javier Fernandez, president and CEO of Omaha Public Power District.
Why This Matters
With power demand exploding and utilities racing to keep up, public power utilities could have an edge over their investor-owned counterparts. They are not-for-profit, often don't have to go through state regulators and are focused on meeting local needs — which is why hyperscalers are interested in working with utilities like the Omaha Public Power District.
Omaha is a central hub in Nebraska and Iowa’s “Silicon Prairie,” which is attracting new hyperscale projects with the region’s low-priced, reliable electricity, open land and digital fiber backbone network. A recent S&P Global analysis placed the city second, behind Northern Virginia, in the amount of power it was dedicating to data centers in 2023. Meta has one of the largest enterprise data center campuses in the country in the region, and Google has invested $4.4 billion in three data centers in the state, two in operation in OPPD’s service territory and a third under construction in Lincoln.
In the past year, the utility has received 19 requests for power from developers considering locating data centers in the region. To meet the growth, Fernandez said OPPD will have to almost double its generation capacity in the next five years, adding an additional 3.2 GW to the 3.6 GW it has online.
“It is time for the industry as a whole to step up and continue to build what this country deserves,” he said. “This is one place where we really cannot afford to fail. We cannot afford to delay infrastructure.”
Fernandez, also vice chair of the Large Public Power Council, was in D.C. on Dec. 11 for a meeting of LPPC members to discuss their policy priorities for the administration of President-elect Donald Trump and the Republican-led Congress.
In an exclusive interview with NetZero Insider, he and Tom Falcone, who will become president of LPPC on Jan. 1, 2025, made a case for the public power business model as one that possibly is better suited to meet the imperatives of demand growth than regulated, investor-owned utilities.
“We’re not for profit,” Falcone said. “We’re just here to serve our customers. We’re community governed, so we meet the priorities of our local communities,” which now include massive load growth for economic development, he said.
Utilities like OPPD also have closer ties to their communities, which can make permitting new generation or transmission projects easier, Fernandez said. Working through local permitting and zoning rules still can be difficult, he said, “but it helps tremendously when you have the community saying, ‘Oh, it’s my local utility who’s building. I’m willing to play ball with them more than someone we don’t know from out of state.’”
Fernandez also noted that hyperscalers like Google don’t come in only with new load, “they’re coming in with solutions. How do we make this work better for the community? How do we make this work and help the utility serve us and serve the community?”
One example: Google and OPPD negotiated a contract allowing the utility to use power from a wind farm Google owns in Kansas, Fernandez said.
Finally, public power, both LPPC members and the country’s more than 2,000 municipal utilities typically do not face the same hurdles in obtaining approvals from state regulators to launch new programs or pilots. OPPD has put 1 GW of new power online in 2024, Fernandez said.
“We’re not just talking and wringing hands,” he said. “We’re actually doing, delivering, putting steel in the ground, panels on the ground.”
Both Fernandez and Falcone recognize the challenges ahead will be considerable and complicated. Over the next five years, LPPC’s 29 members ― all large public power utilities in 22 states, serving more than 30 million customers ― must add 9 GW of power capacity at a cost of almost $70 billion.
If It Ain’t Broke
Falcone commutes between his home in New York, where he previously was CEO of the Long Island Power Authority, and D.C., where he talks with lawmakers about specific policies LPPC’s members would and would not like to see.
No. 1 on the no-change list is tax-exempt financing, which, Falcone said, will be critical for public power utilities to build out the generation and transmission they’ll need to meet demand growth.
GOP lawmakers will be beating the bushes for dollars to pay for extending Trump’s 2017 tax cuts, Falcone said. “Whenever you have big tax bills, and this was certainly the case in 2017, you need revenue raisers, and when you have revenue raisers, then people look at everything.”
But, he said, public power utilities “have good access to the tax-exempt bond market. It’s a liquid market. It finances our costs and helps us keep these investments affordable. We’re just looking for things to stay as they are.”
Similarly, LPPC members want to maintain the direct pay provisions of the Inflation Reduction Act, which allow nonprofits that do not pay taxes to monetize the law’s clean energy tax credits.
Prior to passage of the IRA, public power utilities had to work with third-party developers to take advantage of the tax credits, which often required complex transactions in which the third party took part of the tax credit, Falcone said.
“We just want to be on a level playing field with our tax-paying counterparts,” he said. “We own nuclear; we own batteries; we do offshore wind; we do solar. We do all these things that are subsidized, and so we just want to have the same access [so] our customers are not disadvantaged.”
Another thing that doesn’t need fixing is the regional planning policies for public power utilities that are not within an RTO or ISO service territory, which could be changed under the Energy Permitting Reform Act of 2024, introduced by Sens. Joe Manchin (I-W.Va.) and John Barrasso (R-Wyo.).
Falcone says that, as currently written, EPRA would give FERC jurisdiction over regional planning for non-RTO/ISO public power utilities, which neither the utilities nor FERC want.
Public power utilities that are not in the organized markets overseen by FERC traditionally have had the choice of opting out of regional or interregional planning and building their own generation and transmission, he said. “There’s nothing [broken] with that construct,” he said. “It works fine. I’ve been asking everybody, ‘Why are we changing this?’”
EPRA was passed in August by the Senate Energy and Natural Resources Committee, where Manchin is chair and Barrasso ranking member. But the bill is languishing in the final days of the lame duck Congress. While it may be unlikely to pass, permitting reform remains a high priority for Republicans. Barrasso will be GOP Senate Whip when the new Congress convenes in January, so parts of EPRA could be incorporated into new legislation.
‘We’re in a Different World’
Falcone and Fernandez also agree with the conventional wisdom that IRA tax credits that largely have benefited Republican states and districts will have sufficient bipartisan support to survive rollback efforts.
OPPD sees new bioenergy projects in its region, for example, production of ethanol and sustainable aviation fuels, Fernandez said. “A lot of these tax credits are spurring more investment in new technologies that ultimately result in load for us. … If those are taken away, we could see a missed opportunity on the electrification of the economy that’s already starting to happen.”
But, like other utility trade groups, LPPC does want changes to EPA’s final rule on carbon emissions from existing and new power plants powered by fossil fuels. Released in April, the rules require existing coal-fired plants to use carbon capture and sequestration to reduce their emissions 90% by 2032 or close by 2039.
Falcone argues that LPPC members include “some of the greenest utilities in the country,” and their concerns with EPA’s emissions rules are not “about carbon policy or anything else. It’s simply a statement of supply.
“There’s not a robust supply chain, knowledge [or] engineering to get these things done. So, it goes to reliability. … When you’re looking at the problem of demand for electricity outstripping supply, to take further supply offline is a real challenge.”
The rule is being challenged in court, but utilities still will have to comply with it in the interim, he said.
Falcone cited the still-emerging supply chains for new clean, firm technologies — including small modular nuclear reactors, green hydrogen and long-duration storage — as the reason new natural gas-fired plants may be needed to meet growing demand now.
“We would love to see further development of carbon capture, of SMRs, of all these things, but SMRs aren’t permitted or licensed today. Carbon capture isn’t available at scale today. There are no long-duration storage solutions today, other than perhaps pumped hydro,” he said. “So, at some point, you just have to go with what you’ve got.”
And even new natural gas plants may not be an immediate solution due to the challenges of permitting and building new plants and natural gas pipelines, he said.
“We’re in a different world, and the world is one of growth,” Falcone said. “We face constraints in meeting that growth. … What we’re here to do in D.C. … is to help educate policymakers about what the tradeoffs are so they can make the decisions that we will implement, and we’ll be happy to do, but just know what the tradeoffs are.”
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