If you work in the energy space or in an adjacent sector, the question of how the grid will meet rising demand is likely swirling around in your head at any given moment. Two recent announcements about mega energy projects showcased two very different approaches to meeting this demand – a battery system in Minnesota versus a gas plant in Ohio, both of which have unprecedented features from cost to capacity. The details of both projects and the stakeholders involved paint an emerging picture of two divergent paths to respond to data center growth and the implications for customers and large loads, grid reliability, and the impact on environmental quality.
“The largest natural gas generation facility in history”
Let’s start in Ohio and in PJM territory – the Portsmouth area near the Ohio River, to be more precise. The U.S. Department of Commerce announced in February a $33 billion (yes, you read that correctly), 9.2 gigawatt natural gas plant that would allegedly be the world’s largest. Japan will finance the plant as part of a $550 billion trade deal with the United States and SB Energy, a subsidiary of the Japanese SoftBank Group, will operate the plant.
When will this mega project be online? Good question! The project announcement did not include exact timeline and site location, but the rough estimate is at least a decade. And who needs the power from the largest gas plant in the world? Presumably, data centers since Ohio ranks fifth in the country for data center development. Yet, with the long timeline for the SB Energy plant and the approximate two-year construction cycle for most data centers, this pairing seems like a match made…nowhere?
And the impact on ratepayer bills? Ah, the $30 billion question. This is another puzzler since details on cost allocation to ratepayers were scarce in federal and state announcements. This is the latest in a series of projects by tech companies, including Amazon and Meta, embracing large gas plants for the AI surge. Yet, the economics of this approach do not reward the ratepayer. A GridLab report, with analysis from Energy Futures Group and data from Halcyon, revealed recent combined-cycle gas turbine projects report costs of $2,000/kW, significantly outpacing previously reported costs of plants scheduled for completion in 2026 and 2027 — $1,116/kW to $1,427/kW, respectively. The announced Ohio project would far surpass those high costs, clocking in at $3,586/kW. Given the rising cost and timeline of gas contrasted with the value of sources shielded from fuel price volatility, it is difficult to even comprehend the curveballs a project of this magnitude might face in the next few years.
A battery project in the “energy-storage stratosphere”
Moving northwest to Minnesota in a small town nestled just south of Minneapolis named Pine Island which will be home to a 300 megawatt iron-air battery system. This Form Energy project for Minnesota utility Xcel Energy has a signature construction detail that catapults it into the “energy-storage stratosphere” as Canary Media described it in their reporting – the project will use iron-air instead of lithium which allows for much longer storage periods. This battery solution will have a discharge of 100 hours, making the total plant output 30 gigawatt hours total when fully charged, enough to power a city for a week. More importantly, Xcel is effectively “de-risking” the fuel supply chain, providing a hedge against the very price spikes that make the Ohio project’s $3,586/kW cost so dangerous for ratepayers.
The Google-Xcel agreement details that the tech giant will pay the utility to build 1.4 gigawatts of wind and 200 megawatts of solar, when paired with the first-of-its-kind storage plant from Form will match a data center’s round-the-clock operations. As for a timeline, Canary Media reports that Form expects to deliver batteries to Xcel starting in 2028 and the utility expects all of the clean energy installations to be online by 2031.”
And who pays? Xcel’s announcement includes several details on this question including the claim that “Google will pay all costs for its new service in line” and “will cover any new grid infrastructure costs associated with the project and has planned carefully with Xcel Energy to ensure electricity in the area remains reliable and affordable for all of Xcel Energy’s customers.” That is quite the statement to put in writing and a powerful accountability artifact for Xcel’s 4 million customers. The devil is still in the details. Regulators will need to effectively scrutinize the proposed resource additions and ensure that Xcel is conducting the appropriate analyses to understand data centers impact on the grid and the related impacts to other ratepayers.
The Path Forward
The Minnesota storage project is so far looking cheaper for ratepayers, quicker for the large load customer, and better for air and environment quality. It’s not built yet, but the transparency and specificity in public announcements indicate a well considered deal that looks like a win-win for all parties involved and a potential blueprint to build from in other high load growth areas. While the Ohio gas project attracted eyeballs, it ultimately raises more questions than it answers at a time when certainty wins the day.
The reality is that data center load growth is too massive for any single technology to solve, and will take a combination of solutions including grid-enhancing technologies, demand flexibility and virtual power plants, new transmission, and new clean energy generation. Projects structured like the Form Energy battery system are a step in the right direction.