Phantom information facilities: What they’re (or aren’t) and why they’re hampering the true promise of AI

Within the age of AI, public utilities are actually dealing with a brand new, surprising drawback: Phantom information facilities. On the floor, it might appear absurd: Why (and the way) would anybody fabricate one thing as advanced as a knowledge middle? However as AI demand skyrockets together with the necessity for extra compute energy, hypothesis round information middle improvement is creating chaos, notably in areas like Northern Virginia, the info middle capital of the world. On this evolving panorama, utilities are being bombarded with energy requests from actual property builders who could or could not truly construct the infrastructure they declare.

Faux information facilities symbolize an pressing bottleneck in scaling information infrastructure to maintain up with compute demand. This rising phenomenon is stopping capital from flowing the place it truly must. Any enterprise that may assist resolve this drawback — maybe leveraging AI to resolve an issue created by AI — could have a big edge.

The mirage of gigawatt calls for

Dominion Power, Northern Virginia’s largest utility, has obtained mixture requests for 50 gigawatts of energy from information middle tasks. That’s extra energy than Iceland consumes in a yr. 

However many of those requests are both speculative or outright false. Builders are eyeing potential websites and staking their claims to energy capability lengthy earlier than they’ve the capital or any technique round the way to break floor. In reality, estimates counsel that as a lot as 90% of those requests are solely bogus.

Within the early days of the info middle increase, utilities by no means needed to fear about faux demand. Firms like Amazon, Google and Microsoft — dubbed “hyperscalers” as a result of they function information facilities with tons of of 1000’s of servers — submitted simple energy requests, and utilities merely delivered. However now, the frenzy to safe energy capability has led to an inflow of requests from lesser-known builders or speculators with doubtful observe information. Utilities, which historically take care of solely a handful of power-hungry clients, are out of the blue swamped with orders for energy capability that might dwarf their whole grid.

Utilities wrestle to kind truth from fiction

The problem for utilities isn’t simply technical — it’s existential. They’re tasked with figuring out what’s actual and what’s not. And so they’re not well-equipped to deal with this. Traditionally, utilities have been slow-moving, risk-averse establishments. Now they’re being requested to vet speculators, a lot of whom are merely taking part in the true property sport, hoping to flip their energy allotments as soon as the market heats up.

Utilities have teams tasked with financial improvement, however these groups will not be used to coping with dozens of speculative requests without delay. It’s akin to a land rush, the place solely a fraction of these claiming stakes truly plan to construct one thing tangible. The end result? Paralysis. Utilities hesitate to allocate energy after they don’t know which tasks will materialize, slowing down the complete improvement cycle.

A wall of capital

There’s no scarcity of capital flowing into the info middle house, however that abundance is a part of the issue. When capital is straightforward to entry, it results in hypothesis. In a method, that is just like the higher mousetrap drawback: Too many gamers chasing an oversupplied market. This inflow of speculators creates indecision not simply inside utilities but additionally in native communities, which should determine whether or not to grant permits for land use and infrastructure improvement.

Including to the complexity is that information facilities aren’t only for AI. Positive, AI is driving a surge in demand, however there’s additionally a persistent want for cloud computing. Builders are constructing information facilities to accommodate each, however differentiating between the 2 is more and more troublesome, particularly when tasks mix AI hype with conventional cloud infrastructure.

What’s actual?

The professional gamers — the aforementioned Apples, Googles and Microsofts — are constructing real information facilities, and plenty of are adopting methods like “behind-the-meter” offers with renewable vitality suppliers or setting up microgrids to keep away from the bottlenecks of grid interconnection. However as actual tasks proliferate, so too do the faux ones. Builders with little expertise within the house are attempting to money in, resulting in an more and more chaotic surroundings for utilities.

The issue isn’t simply monetary danger — though the capital required to construct a single gigawatt-scale campus can simply exceed a number of billion {dollars} — it’s the sheer complexity of creating infrastructure at this scale. A 6-gigawatt campus sounds spectacular, however the monetary and engineering realities make it virtually unattainable to construct in an inexpensive timeframe. But, speculators throw these huge numbers round, hoping to safe energy capability within the hopes of flipping the venture later.

Why the grid can’t sustain with information middle calls for

As utilities wrestle to kind truth from fiction, the grid itself turns into a bottleneck. McKinsey just lately estimated that world information middle demand may attain as much as 152 gigawatts by 2030, including 250 terawatt-hours of recent electrical energy demand. Within the U.S., information facilities alone may account for 8% of whole energy demand by 2030, a staggering determine contemplating how little demand has grown within the final twenty years.

But, the grid shouldn’t be prepared for this inflow. Interconnection and transmission points are rampant, with estimates suggesting the U.S. may run out of energy capability by 2027 to 2029 if different options aren’t discovered. Builders are more and more turning to on-site technology like fuel generators or microgrids to keep away from the interconnection bottleneck, however these stopgaps solely serve to focus on the grid’s limitations.

Conclusion: Utilities as gatekeepers

The actual bottleneck isn’t a scarcity of capital (belief me, there’s loads of capital right here) and even know-how — it’s the power of utilities to behave as gatekeepers, figuring out who’s actual and who’s simply taking part in the hypothesis sport. And not using a strong course of to vet builders, the grid dangers being overwhelmed by tasks that may by no means materialize. The age of faux information facilities is right here, and till utilities adapt, the complete {industry} could wrestle to maintain tempo with the true demand.

On this chaotic surroundings, it’s not nearly energy allocation; it’s about utilities studying to navigate a brand new, speculative frontier in order that enterprises (and AI) can thrive.

Sophie Bakalar is a accomplice at Collaborative Fund.