Two regulators asked the same question about data centres today
Serguey Asael Shinder3 min readTwo items crossed the desk today from opposite sides of the planet, and underneath the different legal machinery they are the same question: when a data centre asks the grid for a gigawatt, what does it have to put on the table?
In Victoria, the answer arrived as a rule. New data centres will have to match new electricity demand with new renewable generation and storage rather than drawing on the existing system. The obligation is physical: build the supply that your demand requires.
At FERC, the answer arrived as an absence. The Commission rejected ComEd's cancellation of a transmission service agreement for a 1.8-GW, $20-billion development in Joliet, Illinois, in which the developer says it met the initial credit requirement with a $1 letter of credit — "less than the price of a cup of coffee", in Commissioner David LaCerte's phrase. Then it declined to take the contract dispute away from the district court, leaving the underlying question unanswered.
The queue is the asset, and it is being reserved for free
Interconnection queues are the scarce resource in every mature grid. A position in one is worth real money — it determines whether a project can be financed, and when. Which makes the credit requirement attached to a transmission service agreement the price of holding that position.
A dollar is not a price. It is a placeholder for the idea of a price. If an initial posting of one dollar satisfies the requirement, then reserving 1.8 GW costs nothing to hold and nothing to abandon, and every developer behind that position in the queue is waiting on something with no weight in it. Whether the agreement in Joliet is enforceable is a contract question for a court. Whether a dollar should ever have been enough is a policy question, and today it went unaddressed.
Victoria's rule attacks the same problem from the other end. It does not ask for collateral; it asks for plant. You cannot post a symbolic megawatt. The obligation to build generation and storage alongside the load is a commitment that shows up in concrete and containers, and the storage half is what makes it real — matching an around-the-clock load shape is a much harder promise than matching an annual total with certificates.
What the two approaches actually trade
Victoria's version is blunt and slow. It raises the cost of building a data centre in Victoria, and some of them will be built somewhere else — which is a policy choice a state is entitled to make, and which does nothing about demand that lands in the next jurisdiction.
FERC's version is precise and unfinished. Credit requirements can be calibrated, revisited and enforced per agreement, and they do not chase investment away wholesale. But that only works if somebody sets the number, and today's decision is notable precisely because nobody did. The Commission had the opportunity to say what credit support a load of this size must post and chose to leave it to litigation.
The comparison is not about which regulator is better. It is that the obligation is migrating from the utility to the load, and there are only two currencies in which a load can discharge it: money at risk, or plant on the ground. Victoria picked the second. FERC has not yet picked either, and the queue keeps filling in the meantime.