Cancellations and delays of new US datacenters have increased as the artificial intelligence boom brings issues including supply chain disruptions, energy shortages and tariff-induced restrictions.
Grassroots opposition from local communities has also derailed some plans, and some investors have become wary of datacenters amid fears of an AI bubble.
Dozens of datacenter plans were scrapped or delayed in December or January, the investment research firm reports. macroage and climate news outlets heatmap. MacroEdge’s research identified 26 cancellations by January, up from one in October.
The complex tangle of issues raises questions about America’s ability to quickly facilitate a datacenter boom. Don Johnson, chief economist at MacroEdge, wrote that because output increases have been powering U.S. growth over the past 18 months, a major delay could have broader economic implications.
“The (Trump) administration is struggling to find its next growth engine as the datacenter machine takes off as a tailwind,” Johnson wrote.
Dozens of proposals have been proposed for new hyper-scale datacenters across the United States that contain infrastructure for artificial intelligence. The centers can consume as much electricity as the largest U.S. cities, meaning the grid needs to rapidly expand its infrastructure by adding transformers, circuit breakers, high-voltage cables, steel poles and other pieces of equipment to connect datacenters to the grid.
Connecting to the grid is “the No. 1 challenge we’re looking at,” said Marsden Hanna, Google’s head of energy and sustainability. Said At a utility industry conference last month.
“We have utilities in many markets telling us four or five, sometimes 10 years for interconnection,” Hanna said. He said one utility told Google it would take 12 years to study the interconnection timeline.
Although reports suggest an increase in cancellations, it is difficult to track the number of offers and cancellations, said Douglas Jester, managing partner of 5 Lakes energy consulting firm in Michigan, which works on regulatory issues around datacenter construction.
No agency oversees the proposals, Jester said, and the datacenter planning process is long and complex. When a datacenter developer like Google or Oracle wants to build a facility, it contacts energy utilities in several areas to study the costs and how long it might take to connect to the grid.
Developers often propose the same plan in multiple locations across the US and move forward where costs and conditions are most favorable. This makes it difficult to determine when a project is running legitimately. Despite this, the centers are moving quickly against growing energy grid constraints, particularly energy shortages, Jester said.
Many grids simply cannot generate enough power, or cannot add it in time to meet datacenter developers’ deadlines, and the process of adding power supplies to the grid is slow.
That’s partly because it can take up to five years for regional grid operators, which coordinate local energy utilities’ power generation and transmission, to review how proposed gas plants, solar fields or other generation sources might impact the grid, Jester said.
This lengthy process was already slowing down the country’s transition to clean energy. Five or more solar installations may be needed to generate the same amount of electricity as a gas plant, meaning the review backlog will increase as the clean energy transition accelerates. The sudden demand for datacenters further exacerbates this already difficult problem.
“The interconnection process is going to be really difficult, and it’s been a problem even before datacenters,” Jester said.
The review process primarily ensures that new additions will not disrupt supply to the grid, but the Texas grid operator, the Electric Reliability Council of Texas (ERCOT), has a better view, Jester said. In short, ERCOT — which operates with less federal oversight than other operators — quickly adds new energy generation to its grid, then fixes problems if they arise.
Meanwhile, a surge in new datacenter projects has strained energy grid supply chains that are still recovering from COVID-era disruptions and that are strained by clean energy manufacturing, said Qiuhua Huang, associate professor of electrical engineering at the Colorado School of Mines, who Grid studies supply chain issues.
Demand for grid equipment such as transformers has increased, but only one plant in the US produces the steel needed for many pieces. The copper shortage is also slowing construction, Huang said.
High-voltage transformers, which used to take six months, are now being installed for four years For example, to build. Relatedly, a shortage of skilled labor represents another hurdle, industry experts say.
The U.S. utility industry is heavily dependent on imports of utility infrastructure from China and other countries, but demand has also increased overseas. Jester said Donald Trump’s tariffs have made the US a less attractive market for foreign producers as prices continue to rise. Data shows cost of transformer up to six times level before 2022.
“Tariffs are exacerbating, if not creating, problems in America,” Jester said.
Grid limitations have extended the timeline for new datacenters. MacroEdge reported that PJM, the largest grid operator in the US, is pushing back the connection time to 2030.
“Among many factors, caution should remain in the minds of investors,” Johnson wrote.
Some hedge funds and other datacenter investors are panicking. Blue Owl, an investor in the highly controversial Saline Township datacenter in Michigan, stepped back On its $10 billion investment in December. Although Oracle said it would not stop the project, Bain Capital And other investors He seems to be hesitant as well.
Some solutions are being worked on and steelmakers are increasing production. Battery storage is becoming a viable option for new power generation, Jester said. Large-scale battery storage that is added to the grid can hold energy for later use, reducing the need for new power plants and grid infrastructure.
Oracle recently proposed that this kind of battery storage could help it meet its goal of building a 1.4GW datacenter in Michigan, which would require as much electricity as Detroit, by 2027. DTE Energy, the monopoly utility that serves the area, Grid is near capacity And perhaps not enough gas plants or solar fields could be installed to meet that deadline, partly because the review process is too slow.
Big Tech, which is far more resourceful than the utility industry, is also developing new transformer technology that doesn’t demand the same pieces of steel or infrastructure, Huang said.
“It’s in the early stages of mass adoption, but datacenters have much larger budgets than utilities, so they can better handle the adoption of those technologies, and that will diversify the supply chain,” Huang said.
