Alphabet Inc. (GOOG) is planning to invest $4.75 billion to tackle a critical challenge in the artificial intelligence race: securing sufficient power for its rapidly expanding fleet of data centers.
The company is nearing the completion of its acquisition of wind and solar developer Intersect, a move that will make it the only tech giant to own a power company. This could provide a significant competitive edge, as power regulators tend to favor technology firms that are prepared to build their own generation facilities, and the Trump administration is pressuring them to avoid passing electricity costs on to consumers.
This acquisition represents the latest step in a series of strategic moves by Google to build a comprehensive, end-to-end strategy for securing massive power resources. Among its competitors, Google was the first to strike deals for advanced nuclear and geothermal power plants designed for continuous operation; it pioneered efforts to reduce data center power consumption during grid peak loads; and through the Intersect acquisition, Alphabet will become the first company to integrate self-built power facilities into its operations to supply its data centers.
"I believe that, on a global scale, the energy system is no longer adequate to meet the demands of artificial intelligence," said Amanda Peterson Corio, Google's Global Head of Data Center Energy. "We are striving to proactively think about solutions."
As regulators and legislators grow increasingly concerned about power supply shortages, this acquisition is expected to smooth the path for Google's data center construction. Technology companies want to build data centers far more quickly than new power plants can be built to supply them.
In the PJM Interconnection market, spanning from New Jersey to Kentucky, this supply-demand imbalance has already driven up electricity prices and sparked fears that supply will be insufficient during peak usage periods. The Trump administration has proposed that PJM organize an emergency power auction this year, requiring tech companies to bear the costs of new power plant construction.
Intersect has shifted in recent years from developing standalone wind and solar farms to providing bundled power for data centers. The company currently boasts $15 billion in operational or under-construction assets and is finishing a solar farm with battery storage to supply a Google data center in West Texas.
"This is a very astute move by Google," said the Managing Director for North America at the consulting firm Aurora Energy Research. "Just as Google has brought some chip design in-house to reduce its reliance on Nvidia, I believe it is a logical strategic choice to also bring power generation under internal management."
Building power facilities is becoming a strategic advantage for tech companies. In many regions, regulators and power authorities are considering whether data centers built alongside new generation facilities should receive faster grid connection approvals, as they are less dependent on the grid. Self-powered data centers require less investment in centralized power plants and transmission lines, though most still seek grid connections for on-demand backup power.
The CEO of Intersect stated that energy has become a core element for companies developing more powerful AI models.
"In this arena, if you are not a major player in physical infrastructure, you don't even have a seat at the table," he said.
The AI race ignited by the 2022 launch of ChatGPT has created a degree of friction between agile tech companies and utility and power companies. These power companies never anticipated such massive demand growth, let alone the need to meet it rapidly. Until recently, U.S. electricity demand had been largely flat for a long time, and in some regions, the retirement of older plants was even outpacing the commissioning of new ones.
The challenge of power supply has intensified as major tech giants ramp up infrastructure investment plans to support larger data centers. Google, Microsoft, Amazon, and Meta have all secured agreements to procure power from existing plants and fund the construction of new ones.
For tech companies, nuclear power plants are often viewed as an ideal solution because they provide zero-carbon, 24/7 power. Historically, however, building such plants in the U.S. has often resulted in costs ballooning by billions of dollars and timelines stretching far beyond expectations. In recent years, many nuclear plants have been forced to close for economic reasons.
Consequently, nuclear advocates are pinning their hopes on smaller reactors known as Small Modular Reactors (SMRs), which they believe can be built faster and more cheaply.
In 2024, Google led the way by signing an agreement with nuclear startup Kairos Power to support the commercial construction of its seven Small Modular Reactors. Subsequently, Amazon and Meta have signed agreements with other companies concerning SMRs. These projects are expected to take years to come online.
Google also made an early bet on a potentially faster clean energy solution to provide stable power for data centers. In 2021, the company signed the first corporate agreement with startup Fervo Energy to jointly develop a pilot geothermal power project, which became operational in 2023.
Fervo Energy achieved a milestone last year by completing a $462 million funding round, in which Google participated. The company, which uses hydraulic fracturing techniques to tap the Earth's heat, is now advancing larger projects, including a geothermal plant in Utah scheduled to come online this year.
Meanwhile, the recent flood of data centers seeking grid connections has created potential strain on the system. Power authorities are assessing whether the grid has enough electricity to meet the needs of these data centers while also serving other customers, particularly during peak demand periods like heatwaves or cold snaps when usage surges. Wait times for connection have consequently lengthened.
Beyond offering faster grid access for self-powered data centers, regulators are also considering providing the same expedited treatment for facilities that can reduce consumption or disconnect entirely from the grid during power shortages. This idea is controversial in an industry that critically depends on 24/7 uptime.
However, Google became the first tech giant years ago to begin studying how its data centers could reduce energy use during grid stress. The company now runs pilot projects with several utilities, receiving financial incentives for reducing data center power consumption, a strategy known as "demand response."
"The demand-side domain is almost entirely underdeveloped," said Google's Head of Advanced Energy.
Google recently hired Tyler Norris, a former renewable energy developer. Norris gained significant attention in the power industry last year during his PhD studies at Duke University after his research demonstrated that grids could more easily accommodate data centers if they could reduce consumption for short periods based on demand.
Additionally, Google hired Doug Lewin, a former energy advisor in Texas, to advance the company's energy market expansion in the state. As a flood of data centers sought connections to the Texas grid, the state legislature passed a bill last year clarifying the conditions under which data centers could be disconnected from the grid when demand threatens to outstrip supply.
"There's no free lunch, and there's no magic bullet that solves everything," said Tim Latimer, CEO of Fervo Energy. "I think Google recognized this earlier than its peers because they have been deeply involved in this space for a long time and have hired people who truly understand how the power industry works."
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