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Talen Energy Weighs New Data Center Power Plans After Amazon Deal Hits Regulatory Snag

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Talen Energy is exploring alternative methods to supply electricity to data centers after U.S. energy regulators restricted a groundbreaking co-location deal with Amazon, executives said Thursday.

The move follows a Federal Energy Regulatory Commission (FERC) ruling that capped electricity delivery from Talen’s Susquehanna nuclear power plant in Pennsylvania to Amazon’s data center at 300 megawatts, down from the 960 megawatts originally proposed. FERC cited potential risks to grid reliability and public electricity costs.

Context:

  • Co-located arrangements—where data centers are built near power plants to bypass grid delays—have become attractive to Big Tech and power producers amid surging data demands.

  • Talen’s Amazon deal, announced in early 2024, was a first-of-its-kind setup that aimed to rapidly scale power delivery without waiting for traditional grid connection queues.

Key Developments:

  • Talen CEO Mac McFarland said on Thursday’s earnings call that the company is now considering traditional grid-connected contracts and other commercial agreements to power future data center partnerships.

  • Despite the FERC setback, Talen is still supplying Amazon, with expectations to deliver 120 MW by year-end.

  • The company is appealing the FERC decision and expects a court schedule to be set soon.

Broader Industry Shift:

Talen isn’t alone. Constellation Energy, another major nuclear operator, also announced this week it is shifting focus to more conventional data center energy deals after facing similar challenges with co-location concepts.

Why It Matters:

The FERC ruling marks a pivotal moment in how power for AI and cloud-driven data centers is allocated—especially when nuclear plants are seen as low-carbon, high-capacity sources suitable for tech’s skyrocketing energy needs. The outcome of Talen’s appeal may reshape how future tech-power partnerships are structured.

Constellation Shifts Focus to Grid-Connected AI Data Center Projects Amid Regulatory Scrutiny

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Constellation Energy is shifting its strategy for supplying power to AI-driven data centers, now prioritizing grid-connected projects over previously favored direct (co-located) connections to its nuclear power plants, the company said Tuesday.

This pivot comes in response to growing regulatory pressure and industry concerns about the potential grid reliability issues and rising consumer energy costs linked to large-scale co-located data center developments.

“On-grid sales are increasingly attractive to us and to our customers,” said Constellation CEO Joseph Dominguez during a call with investors. However, he added that “behind-the-meter configurations”—where data centers are directly connected to power plants—may still be viable in certain cases.

Constellation, the largest operator of nuclear plants in the U.S., had previously proposed co-located data center developments at several of its reactor sites. But the approach came under scrutiny from the Federal Energy Regulatory Commission (FERC), particularly after a proposed expansion of an Amazon data center at a Talen Energy nuclear facility faced regulatory rejection.

FERC is currently evaluating new rules regarding such off-grid, single-customer arrangements to better manage power flow and protect ratepayer interests.

As the demand for electricity to power AI infrastructure skyrockets, utility firms like Constellation are adapting to meet needs while staying aligned with evolving regulatory frameworks and grid integrity standards.