Distributed Energy Could Be the Key to Faster Data Center Rollouts

By Haley Zaremba - Oct 14, 2025

• The rapid expansion of AI is creating significant strain on global energy grids, leading to substantial delays in bringing new data centers online due to insufficient grid capacity.
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• Distributed energy resources (DERs), such as rooftop solar and battery storage, offer a viable solution by providing localized power, reducing the burden on existing grids, and accelerating data center deployment.
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• The adoption of DERs is projected to increase sharply, offering a critical stopgap to balance energy needs, potentially lower energy costs for consumers, and incentivize tech companies to invest in faster connectivity.
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The rapid rise of artificial intelligence is placing unprecedented strain on global energy sources and grid infrastructure. In response to runaway projected growth trends, public and private investors are fast-tracking new data center projects at a massive scale. According to the International Energy Agency (IEA), global investment in data centers reached half a trillion dollars in 2024, representing a nearly two-fold increase over the course of two years. But this rate data center addition has produced a new problem, as their construction is currently outpacing grid capacity additions, leading to critical delays in bringing new data centers online. 

The IEA’s Energy and AI report, released earlier this year, estimates that as many as one in five data center projects are at risk of delay thanks to the enormous strain on global energy grids. “Grid connection queues for both supply and consumption projects, including data centres, are long and complex,” states the report. “Building new transmission lines can take four to eight years in advanced economies and wait times for critical grid components such as transformers and cables have doubled in the past three years.”

Grids in the United States were already aging and under strain even before the AI boom. Now, with the addition of data center demand growth, the scale of the updates needed would be difficult to overstate. The United States Department of Energy estimates that the country will need a whopping 47,300 gigawatt-miles of new power lines by 2035. To put this enormous increase in perspective, that’s a 57 percent expansion of current grid capacities. Meeting that lofty target will require today’s rate of construction to double.

Compounding the issue, data centers are being built in areas where other data centers have already been constructed, and therefore where grids are already strained. In the United States, half of all data centers currently under construction are additions to pre-existing clusters. In order to ease the burden on electricity grids, increase project efficiency, and avoid localized bottlenecks, it would be far more beneficial to construct new data centers in areas where grids have spare capacity.

Distributed energy resources, or DERs, present another potential solution. DERs are small-scale energy resources such as rooftop solar panels and battery storage. Unlike typical grids, which frequently transmit energy over enormous distances from power plants to end users, DERs tend to be located very close to where the energy is consumed. Creating more of these disperse energy hubs, and helping to connect them to utilities, could be a critical stopgap for bringing data centers online faster and balancing the energy needs of localized grids at peak hours by offering supplemental energy resources.

“If done right, such a solution could bring more compute capacity online faster using existing distribution equipment, transmission lines, and power plants,” argues a recent report from Utility Dive. “At the same time, it could reduce energy bills for local residents and businesses,” the article goes on to say.

The potential for DERs to lower energy rates would be critical at a time when energy poverty is creeping up in the United States and around the world. Under the current model, consumers are bearing the financial burden of near-ubiquitous AI integration, whether they benefit from it or not. DERs could shift this balance by incentivising tech companies to cough up more cash in exchange for faster connectivity. 

“The higher the amount paid, the higher the incentives could be for participating DER owners, and the faster DER capacity can be enrolled,” reports Utility Dive. “This means more money in the pockets of consumers.” 

The development of DERs is already sharply on the rise as their unique utility becomes increasingly evident for tech moguls and grid operators alike. Wood Mackenzie estimates that hundreds of gigawatts of DERs will be added to the grid by 2027, nearly as much as utility-scale resource installations expected over the same time period. 

By Haley Zaremba for Oilprice.com