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Rising data center power demand is straining grids, sparking interest in microgrids as a resilient, low-carbon on-site energy alternative
Data center energy demands are rising sharply, pushing microgrids to the forefront as a more resilient and sustainable power solution.
A looming energy crisis
An explosion of data centers across the U.S. has caused an outpouring of concern over grid capacity. According to the Lawrence Berkeley National Laboratory, the U.S. annual data center energy usage in 2023 was roughly 176 terawatt-hours (TWh), not accounting for crypto. (Note that information about data center energy usage is not usually made public, but efforts are underway to make the data more accessible.)
This was estimated to be approximately 4.4% of the national electricity consumption that year. New projections say that this consumption may double — even triple — by 2028, rising to up to 12% of the national usage.
A lot of the demand stems from the data centers’ cooling needs that have grown exponentially as rack densities have increased.
The new demand is overwhelming traditional energy grids, causing companies to delay projects, work directly with private producers, and adopt inefficient means of power generation on site using natural gas.
“Traditional power grids were designed for distributed loads and cannot meet the exponential power demands of modern hyperscale data centers, particularly those powering AI applications,” said Sébastien Surply, head of critical power at ABB, a Zurich-based engineering and technology company in the energy space. “With AI data centers now requiring 100+ MW of continuous power, centralized grid infrastructure creates bottlenecks, voltage instability, and necessitates costly infrastructure upgrades that legacy systems cannot efficiently deliver,” he noted.
Energy cost is another worry for operators. Although data centers benefit from discounted energy tariffs and tax incentives, regulatory and policy shifts are expected to erode some of those early incentives.
The conflict in the Middle East further adds to the problem. At the CERAWeek energy conference in March, oil executives warned that oil price increases are likely to intensify and cascade globally, as supply chain disruptions continue. Adding to the fact is the countries’ inability to arrive at a mutual agreement, which is further inflaming energy cost concerns among operators.
Microgrid as an alternative
Amid these concerns, microgrids have emerged as a viable — even possibly clean — energy alternative. Recently, at the Data Center World, as well as at Metro Connect earlier, these grids took the centerstage.
A subset of smart grids, microgrids are small, localized grids that can operate autonomously when disconnected from the main grids. They can use local sources of energy which often include renewable energies like wind and solar, and batteries for storage, making them relatively more sustainable. According to certain sources, their reduced dependence on non-renewable energies reduces carbon footprints by 65 to 75% over the project lifetime.
Microgrids mostly address local loads — like a handful of houses and buildings — and that model of delivery reduces transmission losses and enables efficient distribution, making them a great fit for remote and isolated communities facing weather-related energy outages. But lately, companies are recognizing their potential to shore up energy supplies in data centers.
The Department of Energy (DOE) estimated microgrid capacity to hit 10 GW in 2025, calling them “essential building blocks” of the future energy grid. They are deemed critical for strengthening grid resilience and mitigating grid disturbances, and especially, integrating renewable energies. Squeezed by rising energy costs and long waits for grid connections, many data center operators are now turning to microgrids as a viable option to generate energy on-site to support cloud and AI operations.
Surply said, “due to actual demand trends and regulations from grid operators, digital infrastructures need to shift from passive consumption to grid supportive.”
Federal funding is helping the push. The Trump administration allocated $8 million in 2025 to support 14 microgrid projects designed to serve 35 towns and rural areas. States like California, Colorado, and Texas are also giving out grants to utility companies encouraging adoption.
ABB has developed a new microgrid-ready USP, HiPerGuard, unveiled at the Data Center World earlier this month, which it says simplifies data center power infrastructure. Combined with microgrids, Surply said, the architecture can support scalable capacity expansion “up to 25 MW with minimal infrastructure complexity.”
“This approach eliminates stranded capacity and allows data centers to grow incrementally while maintaining 98% efficiency and reducing conversion losses worth approximately $880,000 annually per 1% efficiency gain in 100 MW facilities,” he said.
The solution is gaining strong momentum across North America, Europe, and Asia-Pacific, Surply said, with flagship deployments at Applied Digital’s 400 MW and 300 MW AI data center campuses, indicating interest in new energy infrastructure.
Currently, there are several ongoing industry-academia collaborations, including one between Lehigh University and Siemens focused on test and development of data center microgrids.
