When the Grid Can't Keep Up

U.S. data center power demand is expected to climb from 31 gigawatts in 2025 to 41 GW in 2026 and 66 GW the year after , according to Goldman Sachs Research. That's not a forecast. It's a crisis dressed up in spreadsheets. Average grid interconnection timelines exceed 2-4 years, with full transmission upgrades often taking 7-10 years , Redwood Materials notes. AI infrastructure, by contrast, needs power in months—not years. The mismatch has created a scramble that is reshaping the energy sector faster than regulators, utilities, or even the hyperscalers themselves anticipated.

Britain's National Grid said on Wednesday it will invest $1.75 billion for a 35% stake in Joulent, a U.S. energy platform developing power infrastructure for data centres , Reuters reported. The deal will fund Joulent's first project—a 2.67 GW co-located power facility in West Texas that will provide dedicated electricity to a Microsoft-operated data center under a 20-year power purchase agreement . The project, known as Kilby, targets first power delivery by 2028. It's a bet that the future of AI infrastructure isn't about waiting for the grid—it's about bypassing it entirely.

Can Batteries Replace the Grid?

Not replace. Buffer. GPU racks now consume 140 kilowatts versus traditional 2-10 kilowatt CPU systems in data centers , according to Battery Tech Online. That sevenfold jump in power density has turned data centers into something closer to industrial smelters than server farms. The problem isn't just volume—it's volatility. A facility may operate at 2 MW under normal conditions, only to spike to 3 MW when a training job initiates , notes EticaAG. Diesel generators can't spin up fast enough to catch those sub-second surges. The grid strains. Silicon waits.

Enter battery energy storage systems. Energy storage is projected to support 9.8 gigawatt-hours of gas generation at data centers through 2030 , according to BloombergNEF. The combo has become so popular that companies such as Caterpillar Inc. and GE Vernova Inc. have announced products or partnerships pairing energy storage with gas generation , Fortune reported. At xAI's Colossus facility in Memphis, rows of Tesla Inc. Megapacks are being installed next to gas turbines as part of a 1.2 gigawatt off-grid power plant .

The economics are stark. By cutting the cost of battery storage roughly in half, Redwood has made 24/7 renewable power "economic and scalable," said Crusoe cofounder Cully Cavness, speaking to Fast Company. Redwood Materials—founded by Tesla's former CTO JB Straubel—pioneered the first solar- and EV-battery-powered data center in Nevada in 2025, using second-life EV batteries to power modular AI infrastructure. The 12 MW / 63 MWh microgrid was built and commissioned in under four months .

What Happens When Meta Becomes a Utility?

Meta is building a cloud computing business — internally called Meta Compute — to sell access to its surplus AI infrastructure to outside companies , Bloomberg reported Tuesday. The announcement sent Meta shares up roughly 9%, according to CNBC. It also cratered the stocks of CoreWeave and Nebius—two AI cloud providers that had each signed multi-billion-dollar contracts to supply Meta with compute capacity. Meta is projected to spend as much as $145 billion on AI infrastructure this year , a figure that now looks less like a cost center and more like a platform play.

One potential plan includes selling access to various AI models that are hosted on Meta's existing AI infrastructure, an approach similar to AWS's Bedrock offering . Meta would run the data centers and chips that power the models, including its own Muse Spark models, and charge developers to access them. The move positions Meta alongside Amazon Web Services, Microsoft Azure, and Google Cloud in the enterprise AI infrastructure market—a space that had, until now, seemed safely beyond the social media company's ambitions.

The shift mirrors Amazon's own trajectory. AWS launched in 2006 as a way to monetize Amazon's internal e-commerce infrastructure. It became the company's most profitable business unit. Meta's cloud entry follows the same playbook: build massive internal infrastructure to support AI-driven products, then monetize excess capacity by renting to external customers. At Meta's shareholder meeting in May, Zuckerberg had said entering cloud computing was "definitely on the table," noting that firms were approaching Meta "almost every week" to buy access to its AI models or spare computing power .

Who Pays for the Buildout?

Ratepayers are watching closely. Areas with high concentrations of data centers saw electricity prices jump 267 percent over the past five years , according to a Bloomberg analysis cited by Consumer Reports. Nearly three-quarters of voters in Virginia blame data centers for rising electricity costs , a January 2026 survey found. Virginia hosts nearly 600 data centers—more than any other state—and in 2024, data centers accounted for almost 40 percent of all electricity used in the state .

Federal regulators are stepping in. On June 18, the Federal Energy Regulatory Commission issued tailored show cause orders to each of the six regional grid operators under its jurisdiction, directing them to justify or reform the rules that govern how data centers, manufacturing facilities, and other large energy users connect to the electric grid . The orders mark one of the most significant actions FERC has taken to modernize the nation's electric markets. FERC's response to the DOE's "advanced notice of proposed rulemaking" drew more than 3,500 pages of comments and was completed in roughly eight months , Utility Dive reported.

The EU, meanwhile, has blinked. The European Union has given in to pressure from Big Tech to water down its strict low-carbon energy requirements in order to pursue its AI agenda as the U.S. and China pull far ahead , OilPrice.com reported this week. The bloc had proposed requiring data center operators to only buy renewable energy certificates from wind and solar facilities built within the past ten years. That rule has been dropped.

What Changed This Week

National Grid's $1.75 billion Joulent investment signals that utilities now see AI power demand as a contracted, long-duration infrastructure play—not a speculative bet. Meta's cloud computing pivot reframes its $145 billion AI capex as a potential profit center, not just a cost. FERC's June orders to regional grid operators have compressed what was expected to be a multi-year rulemaking process into a 60-day compliance window. The power bottleneck that was theoretical in 2024 is now the primary constraint on AI infrastructure growth.

What to Watch

FERC's regional grid operators have until mid-August to justify their existing large-load interconnection tariffs or propose reforms. National Grid's Joulent partnership—Project Kilby in West Texas—targets first power delivery by 2028; any delays will test whether dedicated generation can outpace traditional utility timelines. Meta's cloud business remains unnamed and unpriced, but customer announcements could arrive before year-end. And battery demand tied to data centers will be a leading indicator: if Alsym Energy, the sodium-ion battery start-up backed by India's Tata Group, sees the surge it reported to the Financial Times continue through Q3, it will confirm that storage has become as critical to AI infrastructure as the chips themselves.