The unprecedented surge in artificial intelligence (AI) gives rise to data centers with an equally unprecedented appetite for electricity. A recent CBRE report shows the global data center market has grown significantly, with North American data centers growing by 24.4% year-over-year in Q1 2024 alone. Data centers consumed 4.4% of the total U.S. electricity in 2023. By 2028, data centers could guzzle as much as 12% of the nation’s electricity demand.

As data centers seek grid interconnection, many are struggling with long timelines and confirming power availability for their location. Transmission bottlenecks are common across the country, along with aging grid infrastructure that is not being replaced fast enough. The timelines for grid upgrades necessary for data centers present another significant challenge for meeting these growing energy needs. The California Independent System Operator found that new transmission projects can take 7-10 years to develop, approve, and construct. Waiting for utility-side upgrades can be a long and costly journey.

Distributed energy resources (DERs) are proving effective in getting new data centers up and running, and providing the additional power that existing locations need. There are many different types of DERs that may be considered, including an emerging DER with myriad benefits for data centers - small modular reactors (SMRs). SMRs are a low- to no-emission modular alternative to polluting thermal generation plants. SMRs can efficiently provide consistent and reliable power and can be integrated with other on-site renewable energy sources and battery storage systems (BESS).

SMRs’ use case for data centers is getting attention beyond the energy community for its use in powering data centers. New venture capital funds are earmarking capital for SMRs at off-grid sites, including data centers. Though SMRs may not be commercially viable just yet, developers and engineers can’t overlook the opportunity to integrate them into their long-term plans.

Short Term: Ahead of SMR Availability, Look to Renewables for Microgrids

Microgrids are a collection of energy resources that can act collectively as a single energy ecosystem separate from the main grid. For data centers, microgrids are an attractive option for scaling fast, as they can improve power quality, reliability and energy security. In a microgrid, utilizing renewables such as solar or wind with battery storage can provide clean energy for some of the energy demands for data centers. However, consistent power generation is still necessary for periods when renewables and batteries can’t supply demand. To close this gap, other onsite technologies can provide energy and cooling such as CHP systems and generators.

As SMRs approach market viability in coming years, it’s essential to start building data centers with microgrids to act as a bridge to the future as new generation technologies emerge, and to provide real cost savings in the meantime. Utilizing DERs in this manner provides a cost-effective, low-emissions solution in the face of increasing electricity and natural gas costs. These DERs, when installed in the short term, lay the foundation for the planned SMRs of the future.

Long Term: Integrate Commercially Viable SMRs

Small modular reactors will provide data centers with energy security and scalability of their operations while hedging against rising energy costs. SMRs, when available at commercial scale, could provide reliable, low-carbon baseload power needed by the substantial load growth of data centers. SMRs will further hedge against rising energy costs and offer additional energy security, especially when paired with renewables and BESS. The applications and potential use-cases for SMRs will be diverse, but their benefits will only materialize if they are planned for and financed properly. Advanced algorithms are supporting the multi-year planning that will create the flexibility and adaptability needed to create viable solutions now and simultaneously lay the foundation to successfully integrate SMRs and other emerging DERs in the coming years.

Conclusion

The phased approach to integrating SMRs must look at the short term and long term. Leveraging DERs at data centers not only delivers ROI on energy reliability, but also lowers OPEX costs and reduces exposure to the increasing utility rates. In recent research on the effectiveness of a phased approach to DERs and SMR investments, OPEX savings were close to 79%, and emissions reductions were as high as 23%. Nuclear is a promising solution, and with SMRs projected to become commercially available as soon as 2030, it’s a viable solution to plan for now.

Michael Stadler, Ph.D is Chief Technology & Marketing Officer, Co-Founder at Xendee, a software and engineering company that supports the design and operation of complex distributed energy systems.