American Electrical Energy (AEP) subsidiary AEP Ohio filed a settlement settlement with the Public Utilities Fee of Ohio (PUCO) and key stakeholders on Oct. 23 to deal with the prices of energy infrastructure enhancements required for Ohio’s quickly increasing information middle business.
The settlement, which is topic to overview and approval by PUCO, units a precedent in Ohio. It’s probably the primary of its type to introduce structured tariffs for brand new large-scale information facilities, requiring them to pay for as much as 85% of their projected vitality use every month—even when they use much less—to cowl the price of infrastructure. “It additionally creates a sliding scale that enables small and mid-sized information facilities extra flexibility,” AEP famous on Oct. 23. “And it requires information facilities to supply proof they’re financially viable and capable of meet these necessities, in addition to to pay an exit charge if their venture is canceled or unable to satisfy the obligations outlined within the electrical service settlement contract.”
A number of key stakeholders joined AEP Ohio within the settlement settlement, together with PUCO, the Ohio Shoppers’ Counsel (OCC), the Ohio Vitality Group (OEG), Ohio Companions for Reasonably priced Vitality, and Walmart.
“Ohio’s financial success in bringing information facilities to our state comes with immense calls for for electrical energy, and now we have to satisfy these effectively and responsibly,” defined Marc Reitter, AEP Ohio president and chief working officer. “The settlement insulates our different prospects—together with residents, small companies, producers, and different industries—from the influence of the mandatory infrastructure enhancements.”
Setting a Precedent for Information Middle Vitality Use Prices
AEP’s Joint Stipulation and Advice, filed with PUCO on Wednesday, addresses a core concern from the ability business: The way it will financially maintain the rising vitality calls for of knowledge facilities with out imposing undue prices on different prospects—residential, business, and industrial—whereas sustaining the reliability and sustainability of the grid.
Whereas projections throughout the business fluctuate, the consensus is an exponential growth of knowledge facilities to satisfy the nation’s rising digital wants will dramatically ramp up energy demand. Consulting group McKinsey in September estimated energy demand from information facilities within the U.S. may improve by 400 TWh by 2030, at a compound annual development charge (CAGR) of 23%.
McKinsey additional notes that “Information middle load could make up between 30 and 40% of all internet new demand added till 2030,” alongside development arising from home manufacturing, electrical automobiles, and electrolyzers. Offering “the greater than 50 GW of further information middle capability wanted within the U.S. by the top of the last decade would require an funding of greater than $500 billion in information middle infrastructure alone,” it underscores.
Vitality big AEP, like different energy firms, has begun to evaluate how the business may feasibly ramp up its energy era and supply buildings to assist that development.
AEP Bracing for As much as 9 GW of New Load Progress in Central Ohio
In direct testimony, AEP Ohio Vice President of Buyer Expertise Lisa Kelso recommended information middle load in central Ohio has grown from 100 MW in 2020 to round 600 MW in 2024. Whereas AEP Ohio has thus far been assembly that demand with signed agreements, the corporate tasks information middle hundreds will quickly speed up to achieve 5 GW in Central Ohio by 2030. “Central Ohio’s complete load will greater than double from roughly 4,000 MW to 9,000 MW over the course of a decade, and AEP Ohio’s High 5 prospects will all be information middle prospects by 2030,” she mentioned. Nonetheless, “AEP Ohio has obtained inquiries and preliminary requests for service from over 50 prospects at over 90 websites totaling greater than 30,000 MW,” she famous.
Kamran Ali, American Electrical Energy Service Company vp of Transmission Planning Evaluation, in testimony famous Central Ohio transmission area is already “closely depending on the transmission infrastructure” to satisfy its energy demand, given that there’s not era at the moment positioned inside central Ohio managed by organized wholesale markets. Accommodating new load development may require new strains, that are expensive and time-consuming to construct. “PJM has just lately authorised over $5 billion of tasks within the Dominion and First Vitality territories to assist serve over 7,500 MW of quickly creating load in northern Virginia and Washington, D.C. space by setting up or rebuilding lengthy 500 kV strains into the area and numerous different upgrades,” he famous.
Whereas AEP Ohio initially filed its utility with PUCO in Could 2024, following a remark interval in June and July, the case has concerned in depth discovery, with 15 events submitting testimony by September. On Oct. 17, PUCO held a prehearing convention, which led to the stakeholders’ submitting of the joint stipulation.
Introducing a New Information Middle Tariff
The settlement basically introduces a brand new tariff (the schedule information middle tariff [DCT]) that applies to information facilities that use greater than 25 MW of energy at a single location. The tariff consolidates a beforehand proposed cellular information tariff (that utilized to entities like cryptocurrency miners). Notably, present information facilities with agreements signed earlier than the tariff goes into impact are “grandfathered” except they develop their capability by greater than 25 MW. It additionally introduces a “sliding scale,” which permits extra flexibility for smaller information facilities, with the aim of accommodating various kinds of operations with out imposing overly restrictive phrases.
The settlement would require information facilities to signal contracts for a interval of as much as 12 years. That features a four-year interval to permit information facilities to ramp up their load, with progressive necessities for capability use (50% in 12 months one, growing to 90% by 12 months 4). The measure is designed to permit information facilities to scale up their operations whereas making certain energy firm infrastructure investments are aligned with precise demand development. Nonetheless, information facilities should decide to paying for 85% of their contracted capability every month—even when they use much less.
As a vital guardrail, information facilities should show that they’re financially able to assembly their energy wants earlier than signing contracts. Proof consists of, for instance, submitting ensures or different types of monetary collateral to guard AEP Ohio and its prospects from the danger of failed tasks.
If an information middle cancels or fails to satisfy its obligations, it’s required to pay an exit charge. After 5 years (plus the load ramp interval), they might exit by paying an exit charge equal to 36 months of minimal costs. And, if an information middle needs to scale back its contracted capability, it might probably assign as much as 25% of its load to a different information middle.
“As a result of the brand new tariff is targeted on the retail impacts of main transmission funding, and to keep away from any over-recovery of transmission prices by AEP Ohio, AEP Ohio will create a regulatory legal responsibility, with carrying prices at AEP Ohio’s Weighted Common Value of Capital, for any exit charge income or any income collected from buyer collateral,” the settlement notes. Underneath these circumstances, AEP Ohio will advance a proposal to PUCO for approval to movement the funds again to the good thing about retail prospects over the remaining time period of the information middle buyer’s contract.
The settlement settlement notably seeks to elevate a moratorium on new information middle agreements in Central Ohio that AEP positioned in March 2023 so it may handle the impacts associated to the huge load development. It outlines a structured course of for brand new information facilities to request load research and be part of AEP Ohio’s queue for service as soon as the moratorium is lifted. The settlement suggsts potential information facilities shall be required to supply particular particulars about their location and energy wants, and they are going to be required to pay for these research to evaluate the feasibility of including them to the grid.
AEP’s aim all through the method “has been to supply prospects with protections, whereas protecting Ohio a horny place to run and develop a enterprise,” Reitter famous on Wednesday. “This proposal supplies that steadiness and was developed with PUCO workers and client advocates. I’m grateful for the exhausting work of all of our stakeholders.”
—Sonal Patel is a POWER senior editor (@sonalcpatel, @POWERmagazine).
