Grid Capacity Is Becoming the Data Center Bottleneck: Inside Digital Infrastructure

What's The Next Phase of Grid Innovation?

Josh: What needs to happen for technologies like battery storage to unlock more of their full value over the next several years?

Dirk: Two things need to happen.

First, we have to show that these projects can be built at scale. We have already helped create a market, develop a product, and build the first proof-of-concept projects. Now we need to prove they can be delivered consistently, on time, and on budget in dense urban environments and alongside existing utility infrastructure. Part of the issue is that new technologies can lose value when they are forced to conform to older grid architecture. A battery may be capable of doing much more, but if the surrounding system cannot recognize or use that flexibility, some of that value remains trapped.

The technology itself is becoming increasingly scalable. The harder part is getting the regulatory, permitting, and physical systems around it to move at the same pace.

Second, the need for these solutions must continue to grow. Demand is increasing rapidly, and I believe that within the next five years utilities will have to acknowledge that the status quo cannot meet future load growth. There will need to be a step change — not only in the amount of electricity available, but also in the reliability and power quality required by new digital loads.

The technology itself is becoming increasingly scalable. The harder part is getting the regulatory, permitting, and physical systems around it to move at the same pace. When that happens, companies like ours need to be ready to work with utilities, regulators, contractors, vendors, and communities to deliver those solutions.

Why Can’t AI Build Its Own Grid?

Josh: Many AI companies and data center operators are pursuing behind-the-meter generation and microgrid strategies. How do you view that trend?

Dirk: Data centers think they can achieve grid innovation behind the meter and that somehow it will be different from front-of-the-meter solutions. I don’t think that’s true.

A lot of data center operators believe they can build an off-grid grid. That’s not possible. You can build generators, transformers, and distribution systems, but that doesn’t build a grid.

Storage can be extremely valuable, but only when it works as an extension of the grid, not as a replacement for it. 

The electric grid is the result of more than 100 years of investment, engineering, regulation, contingency planning, and operational experience. As antiquated as some portions may appear, it remains incredibly valuable from both a reliability and power quality perspective.

You can’t replace all of that with an isolated system behind a meter.

Storage can be extremely valuable, but only when it works as an extension of the grid, not as a replacement for it. Even a sophisticated behind-the-meter system still has to coordinate with the grid. It may need to charge from it, feed back to it, communicate with it, or adjust demand in response to grid conditions.

Where Does Energy Storage Scale Next?

Josh: Where do you see the greatest opportunities for battery storage growth over the next decade?

Dirk: Right now, we are still in the early stages. I think every utility will face the same challenges within the next five to ten years. As demand continues to grow, regulators and utilities will need procurement mechanisms that allow them to deploy batteries across the distribution grid.

I think every utility will face the same challenges within the next five to ten years.

Utilities generally are not experts in real estate development or implementing new technologies. If companies like ours can demonstrate success in markets such as New York, other jurisdictions will follow.

The best markets are those where regulators and utilities are willing to support the initial cost of proving these models. New York is one example. Other states with significant renewable energy development, including California, Illinois, Massachusetts, and New Jersey, are also moving in that direction. Texas benefits from a different dynamic because its deregulated structure allows for more experimentation.

What is The Power Risk Investors May Be Missing?

Josh: When developers and investors evaluate digital infrastructure projects today, what power-related risks are receiving the most attention?

Dirk: Frankly, I think many investors are underestimating the risk. The grid is one of the most reliable systems we have, and it has to be because nothing works without it. The issue is not whether the grid works; it is whether a project can secure access to it as capacity becomes less available.

The challenge is not just whether power is available; it is whether that power is organized, integrated, and delivered correctly.

The challenge is not just whether power is available; it is whether that power is organized, integrated, and delivered correctly. If developers get those things wrong, the consequences can be significant.

The easy opportunities have largely been exhausted. Existing transmission capacity, surplus generation, and other low-hanging-fruit solutions are disappearing. Developers are increasingly consuming reserve margins, and regulators and ratepayers are taking notice.

As a result, operators will need to invest in new infrastructure. But grid expansion is unfamiliar territory for many developers, and even utilities are not accustomed to delivering that level of expansion on compressed timelines.

If you’re trying to add hundreds of megawatts in 18 months, even experienced operators are likely to make mistakes.

Why Does the Grid Matter More Than Ever?

Josh: Looking ahead, what do you think the broader market still misunderstands about the electric grid?

Dirk: I think people will begin to realize how valuable the grid really is, and also how delicate it is. If it doesn’t work, nothing works. Literally nothing.

Most people don’t think about where electricity comes from. They plug something into an outlet and that’s the end of the thought process. But the grid represents an extraordinarily complex system that supports every aspect of modern life.

The moment people understand the value of power is when it goes out.

The moment people understand the value of power is when it goes out. After 10 seconds without electricity, they understand. After a minute, they understand even more.

The impact of outages will only increase as society becomes more dependent on power. Communication and nearly every digital interaction rely on electricity. As that reliance grows, so will appreciation for the infrastructure that makes it all possible.

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