Catalyst with Shayle Kann
Episode: Unpacking DOE's Proposal to Transform Data Center Interconnection
Date: October 30, 2025
Episode Overview
This episode dives into the recent letter from US Secretary of Energy, Chris Wright, to the Federal Energy Regulatory Commission (FERC), which proposes a game-changing regulatory shift aimed at accelerating and standardizing how large loads—especially data centers—interconnect to the electric grid. Shayle Kann is joined by former FERC commissioner Allison Clements and Duke University PhD student Tyler Norris to unpack what this proposal means for the power sector, how it could impact data center development in the AI era, and what key policy and practical details are at stake.
Key Discussion Points and Insights
1. Background: FERC, DOE, and the Challenge of Large Load Interconnection
- FERC Order 2003 (2003) standardized generator interconnections but left load (customer) interconnections mostly unregulated and handled very differently on a state-by-state basis.
- The rapid explosion of data center and AI-driven electricity demand is colliding with a grid and a regulatory system not built for such large, fast-growing loads.
2. What Did Secretary Wright’s Letter Propose? [04:34 – 05:30]
- Secretary Wright used Section 403 of the Department of Energy Organization Act—rarely invoked—to direct FERC to consider issuing an advance notice of proposed rulemaking (ANOPR) focused on large load interconnections.
- “He sent a letter to then Chairman Rosner at FERC and all of the commissioners and said, I, the Secretary of Energy, direct you to consider issuing an advance notice of proposed rulemaking ... around large load interconnections.” (Allison Clements, 04:34)
- The letter is brief (14 pages), especially compared to typical FERC rules (which can run 1000+ pages), and leaves much to be specified.
3. Jurisdictional Power: FERC vs. States [07:57 – 12:16]
- Currently: States regulate load interconnection, even at transmission level, in vertically integrated territories.
- “If you live in a state with a vertically integrated utility, the state commission has jurisdiction ... over the transmission portion of your bill.” (Allison Clements, 07:57)
- Proposed Shift: FERC would assert jurisdiction to standardize the rules for large load (e.g., data center) transmission interconnections.
- Key impact: National-scale, standardized procedures rather than a “haphazard and piecemeal” patchwork.
4. Why Now? Positive Reception and Urgency [06:33 – 07:38]
- The data center and AI boom is creating unprecedented grid demand.
- There is significant support for the proposal across political and industry lines, in stark contrast to previous controversial DOE suggestions (e.g., subsidizing coal/nuclear).
- “I think … in terms of what this would actually do to sort of improve the interconnection process, that's where I think there's been the most positive reception.” (Tyler Norris, 06:33)
5. Key Elements of DOE’s Proposed Rule [12:30 – 14:21]
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- Assert FERC jurisdiction for large loads.
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- Require study of co-located generation and load (“hybrid facilities”) together—saving time and cost.
- “If loads are willing to be curtailed ... they should experience accelerated interconnection and that study time should last no longer than 60 days.” (Allison Clements, 12:30)
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- Short-circuit the interconnection queue for loads that are either co-located with new generation or are curtailable (willing to reduce or shift demand when asked).
6. Curtailable Loads and Storage – The Real-World Mechanics [16:37 – 24:48]
- For the first time, FERC rules could incentivize large customers (like data centers) to offer flexibility (e.g., with on-site batteries, backup generation, or flexible compute load shifting) for faster, cheaper grid connection.
- “The preferred option for flexibility ... is either on-site generation or storage.” (Tyler Norris, 17:29)
- Examples cited: Data centers providing 2-hour battery storage to cut effective load and accelerate connection by years; Iron Mountain and Calibrant/Align announced such projects recently.
- Duration and adequacy: Most grid stress events can be addressed with 2-6 hour storage, but true backup power over 24+ hours (disasters/blackouts) can't be handled by batteries—diesel or other generation will still be needed.
- “There's substantial [load carrying] value that can come from even relatively short duration batteries in a lot of cases.” (Tyler Norris, 20:41)
7. Curtailment: How Will It Be Defined and Managed? [25:17 – 29:41]
- Flexibility options: Stop load, backup gensets, reduced compute, third-party virtual power plants, etc.
- “You can decrease the intensity of your compute ... or you could have a third party curtailment on your behalf.” (Allison Clements, 25:17)
- FERC will likely set high-level “principles” rather than detailed technical rules at first, both for time and political reasons. True nationwide specifics would take longer.
- “I think there's no way they can get to that level of specificity ... And that's my biggest concern here. We don't want something rushed that ends up failing to really take advantage of the opportunity that these flexibility alternatives provide.” (Allison Clements, 29:41)
8. Precedents and International Models to Inform the Rule [29:41 – 33:17]
- US precedent: “Conditional firm” transmission service, a rarely-used, hybrid reliability product from the 2000s.
- UK model: Curtailable connections compensate customers if curtailment exceeds contract.
- “The holy grail here ... is it has to be bounded flexibility... defined maximum number of hours in a year and then something with respect to the duration of the events.” (Tyler Norris, 29:41)
- Need to contemplate “front of meter” (not just behind the meter) solutions and allow innovation in flexibility.
9. Risks and the Path Forward [34:44 – 37:50]
- There's risk that prescriptive rules could exclude virtual power plants or “bring your own” flexibility solutions; regulators must ensure a technology-neutral, non-discriminatory approach.
- “That doesn't satisfy the non discrimination requirements under the statute. To my mind, we need to make sure there are guardrails in place to protect for that purpose.” (Allison Clements, 37:13)
- New interconnection studies will require advanced, time-series-based modeling—not just point-in-time analysis—demanding new skills and training in the field.
10. Timeline and Realistic Expectations [38:46 – 39:48]
- DOE wants FERC to move at lightning speed, with a final order by April 2026—but that is likely over-ambitious by FERC standards.
- "What authority does the Secretary of Energy have in that case? The bully pulpit? Political pressure …If the commission is showing good progress, that is a satisfactory place to be.” (Allison Clements, 39:07)
- Progress is expected, even if deadlines slip, and the process will fuel important learning and reform—at FERC or state levels.
Notable Quotes and Memorable Moments
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On the urgency of change:
- “It ties together a bunch of stuff that I've been interested in that everybody in the energy world has been monitoring. And it's going to play out pretty quickly ... this is very, very important for many folks downstream of this on both the energy side and the AI side, but that I think is actually poorly understood other than the headlines.”
— Shayle Kann (01:56)
- “It ties together a bunch of stuff that I've been interested in that everybody in the energy world has been monitoring. And it's going to play out pretty quickly ... this is very, very important for many folks downstream of this on both the energy side and the AI side, but that I think is actually poorly understood other than the headlines.”
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On precedence and past failures:
- “You have an administration saying, you know, whether or not you like it, we're going to assert this jurisdiction that we're confident that FERC has and we're going to not put us on a track for the next 10 years to face similar problems.”
— Allison Clements (14:21)
- “You have an administration saying, you know, whether or not you like it, we're going to assert this jurisdiction that we're confident that FERC has and we're going to not put us on a track for the next 10 years to face similar problems.”
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On the new flexibility paradigm:
- “The preferred option for flexibility, or we could say curtailability on the part of these large loads, is either on site generation or storage...”
— Tyler Norris (17:29)
- “The preferred option for flexibility, or we could say curtailability on the part of these large loads, is either on site generation or storage...”
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Caution on regulatory speed and detail:
- “We don't want something rushed that ends up failing to really take advantage of the opportunity that these flexibility alternatives provide and incentivize them in a way that works for the providers.”
— Allison Clements (29:41)
- “We don't want something rushed that ends up failing to really take advantage of the opportunity that these flexibility alternatives provide and incentivize them in a way that works for the providers.”
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On international models and compensation for curtailment:
- “The UK has this whole curtailable connections program and they actually...if they end up curtailing either the generator or the load more than what they're guaranteed...they actually compensate the customer.”
— Tyler Norris (29:41)
- “The UK has this whole curtailable connections program and they actually...if they end up curtailing either the generator or the load more than what they're guaranteed...they actually compensate the customer.”
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On risks to innovative flexible solutions:
- “That doesn't satisfy the non discrimination requirements under the statute. To my mind, we need to make sure there are guardrails in place...”
— Allison Clements (37:13)
- “That doesn't satisfy the non discrimination requirements under the statute. To my mind, we need to make sure there are guardrails in place...”
Important Timestamps
- 03:00 – Introduction of guests
- 04:34 – What Secretary Wright’s letter (the “403 letter”) actually does
- 07:57 – Jurisdictional boundaries: FERC vs. States
- 12:30 – Key elements of the proposed rule
- 16:37 – Co-located generation and “hybrid facilities”
- 19:49 – Battery/storage duration and adequacy
- 24:48 – Distinction: interconnection flexibility vs. backup power
- 25:17 – Curtailment option mechanisms and definitions
- 29:41 – Level of specificity FERC could take and lessons from precedent
- 32:10 – International context and front-of-meter options
- 34:44 – Risks of excluding innovative flexibility solutions
- 38:46 – Timeline, urgency, and realistic expectations
Tone and Language
The conversation remains smart, technical, energetic, and accessible—balancing regulatory wonkiness with broader implications for industry, innovation, and climate solutions. The guests’ expertise shines through in both the depth of the analysis and the frank acknowledgment of practical and political hurdles ahead.
Bottom Line
This episode unpacks a potential turning point for the US electric grid at the intersection of AI/data centers and energy policy. The path Secretary Wright has set FERC on could standardize and accelerate large load grid connections—especially for flexible, decarbonized data centers—but the details and execution will determine whether the proposal unleashes needed innovation or stumbles over regulatory complexity.
Guests:
- Allison Clements, former FERC commissioner and current partner at ASG, principal at 804 Advisory
- Tyler Norris, PhD student, Duke University Nicholas School of the Environment
Host:
- Shayle Kann, Energy Impact Partners