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Energy Gang
A solution to the problem of paying for data centre power? Unpacking AWS’s recent 3 gigawatt deal with NIPSCO
00:41:11
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- [00:00]
A
Sometimes I don't understand how this is so complicated. I'm in the business of buying electricity. I know I have to pay for it. Utilities are in the business of deploying capital, generating a return on that capital and then operating in a reliable manner. If there is power and no data center, then we're not serving our customers. If there's a data center without power, we're not serving our customers.
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B
If you were to think about lessons that could be learned and I guess for the industry as a whole to think about how to add data center capacity the right way and get it powered the right way, what would you say? Wood Mackenzie Solar and Energy Storage Summit is back in Denver on the 29th to 30th April 2026. It's co located with a brand new North American Power and Renewables forum featuring senior speakers from across the US power sector. Join over 450 senior leaders from US power developers, utilities and independent power producers who will be coming together to address the industry's biggest challenges from navigating life after tax credits to tackling the load growth boom. Discover how the energy mix is evolving and how the US Will meet surging demand for power. Seats are limited, so Register now@woodmac.com Foreign. Hello and welcome to the Energy Gang, a discussion show from Wood mackenzie about the fast changing world of energy. I'm Ed Crookes and on this show today we're going to be talking about data centers. Very specifically, we're going to be talking about their demand for power, the investment that's needed to meet that demand and how that investment gets paid for. And we have, I think, a unique lineup to discuss that issue. I'm joined by representatives from one of the biggest data center operators, aws, Amazon Web Services, and also from a leading utility, nipsco, the Northern Indiana public service company, which is part of the NiSource group. So it's a great pleasure to welcome to the show Brandon Oyer, who's the head of America's Power and Water at aws. Hello Brandon. Welcome to the show.
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A
Hi there Ed. Thanks for having me.
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B
So, as I'm sure you know, one of the things we always like to do with new people on the show is get them to talk to us a little bit about their careers in energy and how they got to the roles they now hold. So what's your story? What was the path that led you to that role at aws?
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A
You know, I started my time in the military. I'm a Navy nuke. So I've operated Nuclear reactors underwater. Lived in a, you know, mission critical kind of world. I stepped out of the military into the private non regulated energy space, operating some thermal energy assets on behalf of Brookfield Asset Management. Then found myself into Amazon Web Services where I've gotten the privilege of leading everything from engineering data center designs to leading hardware engineering designs and scaling out storage devices and high performance compute and then operating the fleet there before. I found myself in this role a few years ago back kind of like the bread and butter into the energy space. And that's been a nice connection to understand the data center space from the chip all the way up through the substation now allows us to really dive in and look at where we can find the most efficiency and then go and find awesome partners like Nipsco here to help power our growth that we're seeing.
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B
Absolutely. Great introduction then to Vince Parisi, who is the president and chief operating officer of nipsco. Hello Vince, welcome to the show.
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C
Hi, thanks for having us on. Brandon, good to see you.
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B
And what's your story then? How did you get to the role you now hold at nipsco?
- [03:31]
C
Yeah, I wish I had the background that Brandon has. Mine's a little different. I've actually been around the industry or in the industry for about 26 years now. Started at a law firm, actually working external counsel for a couple of different energy companies. Ultimately went in house as general counsel for the first company I worked with for about 14 years into another utility, worked there for several years and then I've been at NiSource now for just about, just about a dozen.
- [03:57]
B
So your two companies have formed a really interesting partnership and want to get into that in a moment. That's the main thing we're going to be talking about on this show. Just before we get into those details though, I wanted to talk a little bit about the backdrop. This setup, getting the two of you on the show today together reminded me of that song from the musical Oklahoma. You know, the farmer and the cowman should be friends in the sense that the relationship between utilities and their customers on one side and the data center developers and the operators on the other is, I think it's fair to say, increasingly contentious. I was looking at a story the other day. I think there are now at least six states where legislation to limit data center development has been proposed. One of those states, in fact, is actually Oklahoma. So you are seeing a lot of concerns about electricity bills and you're seeing concerns about the link between data center development and electricity bills. And people often say what we're worried about is this issue, that new investment is required to provide the power, both generation and the grid infrastructure needed to support those data centers. And the cost of that is being spread among the customer base, and it's putting up bills for everybody. So, Brandon, I wanted to talk to you about that first. Really, I mean, where do you stand on these concerns? Do you think this is a legitimate thing for people to be worried about?
- [05:18]
A
Before we dive into the impact of data centers and rates, which is a very complex topic and happy to dive in there, I think it's best to take a step back and make sure that listeners understand what data centers even do and how often you actually interact with the data center. Every time that you place an online order or bank online or go to your doctor and they pull up charts dispatching first responders from a 911 call, utilizing social media, working remotely, filming this podcast, you're interacting with a data center. And they have just become an invisible digital backbone to connect our society, to drive our economy. And we've started to take them for granted, much like we take for granted the utilities that connect us. When we turn on our light switches and our lights work or we open a tap and water comes out of it, it just works. So I'd like to remind all the listeners and the viewers that to be conscious of how often you're interacting with a data center, we're seeing a lot of growth for AI, And I think a lot of people may believe that all the growth is just AI, and that's simply not the case, especially here at Amazon Web Services. And I'd be remiss. You know, I left out one use case less than 24 hours after the super bowl where the Seahawks were victorious. AWS Next Gen stats, you know, run many stats there, so.
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B
Right. Big news, because you're talking to us from Seattle right now, aren't you?
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A
I am from Seattle, and congratulations. I've been a Seahawks fan for many years, so it was a fun night for us.
- [06:56]
B
Indeed.
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A
But anyways, so the data centers are used day in and day out, and there's a lot of growth going on. However, there's also a lot of growth in the electrical sector. And maybe Vince can talk to this a little bit later. Data centers are a big part of it, but we're, you know, on shoring, manufacturing, and we're electrifying vehicles and we're electrifying homes, so we're continuing to electrify more parts of society. And that all is leading to a lot of growth. Now that's where I'm fortunate enough to work. At a company where we want to do what's right for our customers and we put customers at the front of everything that we do. And when we go and build a data center in a community, we know that we are building around our customers, around our employees. So we want to do what's right long term. Personally, my parents and my grandparents live in Virginia. Virginia is an area with some of our biggest data center concentration. I don't want my family paying the burden from data center. So we take time to partner with the utilities to design, you know, deals and rate structures and that can power our operations while doing it responsibly. So look forward to talking a little bit more about how we worked here with Nipsco to structure this really first of a kind deal. And I don't think it'll be the last time we do something like that.
- [08:13]
B
Yeah, as you say, let's get into the details in a moment. But maybe just to talk to you, Vince, a bit about your kind of starting point on this, when you think about demand growth, potential for new data center investment, how all that gets paid for, what are the big issues that.
- [08:32]
C
You see, you know, when we step back as a utility and look at our service territory, you know, we serve the top third of Indiana and really concentrate a lot of our customers in that northwest quadrant. And for years we were not seeing a whole lot of growth. If we were, it was smaller growth. We're starting to see, as Brandon pointed out, significant new business growth in the manufacturing areas and cold storage kind of over our entire system and then also a desire for more energy on data centers. So it's really actually kind of an exciting time in the industry. You know, we have been serving customers in Indiana for over 100 years. Those communities that we serve, the customers that we serve is pretty critical to us that we were thoughtful when we approach this new segment of business, that we were doing it in a way that took that all into consideration. We live in these communities. We have over 3,100 people that work for our company and live in northern Indiana. And so we're in all the communities that we serve. To Brandon's point, you know, I live in the community and I would want to make sure that if our customers are ultimately going to pay for something that it's benefiting them, that they're seeing the value of that and where we can insulate our customers from costs.
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B
Thinking about, about your point, you use the word exciting in terms of the opportunities that have been created. And I think a lot of people would agree with that. I think certainly there is a lot of excitement in the utility industry and the power industry in general about what's happening. I also see what's the right word for it to describe the emotion that people feel? Alarm. Concern. Certainly maybe alarm's a bit too strong, but certainly some big worries that people have. It's interesting when you talk about wanting to make the most of this opportunity. I would say there are definitely utilities across the country that take different positions on this. I have spoken to some, certainly, who would say things like, we don't really want any new data centers in our territory. We don't want rapid growth in demand. We couldn't cope with it. You hear about stories. I was talking to someone connected to a data center developer recently who was saying that they can't get utilities to answer the phone when they talk about locating in their territory because they just think there'll be too many problems associated with trying to serve that new load, and they're so worried about the impact on existing customers. So what leads you to take what sounds like a broadly positive attitude, the way you're describing it?
- [11:08]
C
For us, it really starts with the partnership for us, a partner like Amazon who's really approaching this the same way that we are. A hundred years in a community is a long time to be part of a community, and we plan to be here for another a hundred years. And so it really starts with finding partners that want to understand where customers might have concerns or where there might be some questions, so we can start with the answers. Because I think part of the. Part of what you're hearing or what you're describing is just comes from this being new. This is different. This is not something that we've seen in northwest Indiana in, you know, in the recent past. And so it takes a little bit more time sometimes to be able to have those conversations with customers, with communities, to kind of help explain and understand it. For us, we saw this as an opportunity to put pretty significant investment back into our community. It's really important that we have the right kind of generation and capacity to serve our customers. You know, jobs and good jobs and growth jobs and jobs that focus on development and building the infrastructure. All those, from our perspective, are really positive.
- [12:15]
B
To your point, Vince, then, about many utilities just not being used to the kinds of change they're now being asked to contemplate. Has it made a big difference to your business? I mean, I hear stories about utilities really not having the organizational capacity to Handle potentially very rapid growth, not having a process for connecting up new large loads and so on. It seems like it's quite, quite a radical shift, not just in mentality, but in the whole of the business that might be required to accommodate this kind of change.
- [12:49]
C
It is a little different historically, I think maybe utilities are thought of as maybe moving a little bit more methodically or a little slower. You know, we. I'm blessed to work with some folks inside the company that have a broader view of the market and the ability to move rapidly, to find quick good answers to questions and then move forward with it. Maybe a little bit more of that sort of commercial mindset. And again, back to partnerships. Having a partner like Amazon that's able to come to the table and really kind of work with that healthy tension in the areas where they need answers to questions. We need to be able to move quickly. So it is different not just with respect to sort of the internal philosophy and how we move things through our processes differently and quicker, but also in a regulated construct, which this is being able to work with externals stakeholders differently than maybe we have historically, to come up with ways to be able to meet this need, but to do it in a way that's sensitive and respectful to our customers, that meets what the state needs to do, but then also meets the pace that Amazon needs to be able to meet the demand that they see.
- [13:53]
B
So let's talk about this partnership then, because what you agreed back in November of last year was that Amazon and Nipsco would work together to support data center development. The agreement includes 3 gigawatts of new generation capacity being added. And instead of pushing bills up for the rest of Nipsco's customers, it's expected to save them about a billion dollars over the next 15 years. So, Brandon, could you tell us a bit about this agreement? I mean, it sounds like everything you've been talking about in terms of getting the new power capacity, getting the data centers built, but not imposing a burden on the broader customer base. How do you do that?
- [14:34]
A
Here we saw an idea to create a separate entity, it's called the genco here, that would fund all of the generation assets. And you already called out, you know, it's 3,000 megawatts of electrical generation to support 2,400 megawatts of data center load. So there's your point right there, where we're already over building to ensure that there's the reliability and the resiliency for those in industry. You always want some sort of reserve margin. We built that in from the onset, you know, how do we ring fence that such that there's a bilateral agreement that we can get to commercially where Nipsco is incentivized or the genco rolling up through is incentivized to deliver on time and you know, put some skin in the game. So we were able to come to a commercial construct where we were okay with paying the Genco to perform. So if they meet our performance targets and dates, they'll make more than a regulated rate of return. Happy to do that. And then if they don't, conversely like if we get delayed then there's you know, a little bit of downside for them. So it's a mutually incentivized structure where they get to put their money where their mouth is. We put our money where our mouth is. And that was just the construct from the like day one when we started on this deal to say hey look we're, we're fine, let's go and do this. Now we've had to work together with a regulatory process and that's where we came up with the idea of refunding over a billion dollars over the term of this structure because we will use some existing transmission. In fact the existing transmission capacity is how we identified this as an opportunity. The deal structure is relatively simple. There's some public filings people can go look at if they want. But the short of it is they build generation. We get the capacity and we benefit the local community not only through the electoral savings but through economic development, through the jobs that we will create, through the secondary jobs that are created. So there's a lot to really like about the growth. To your earlier comment, you know, some utilities might not return a call to some developers like anything, not all data centers are created equal. We use some very good developers throughout the country to help us. Sometimes we self perform. But not all data centers are created equal. At the end of the day not of them are all running a tier one service like AWS on top of them. So I think that what I would like some listeners to take away is to you know, be selective here when you understand like what are the bigger operators that are going to come and be, you know, operate for 15, 20 years long term, be part of the community, be there for the long haul versus you know, something that's a little bit more opportunistic and only with the flavor of the day from a development perspective maybe there should be some concern there but you know, when you're dealing with somebody who's been around for nearly 20 years investing tens of billions of dollars in local communities and getting to see the real impact. I think there's a difference in that development opportunity.
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B
Is it fair to say that the cost is higher than it might have been? Because you've got to get that set of arrangements in place. But on the other hand then you are getting sort of buy in support from the utility certainty about being able to develop that capacity and you know you're going to be able to bring your data centers online. Is that the trade off?
- [17:54]
A
Ed, we always work backwards from our customers at Amazon and we know Amazon web Service customers want more services at reduced cost, faster. So we are very, very diligent when it comes to how we structure these deals from a cost perspective and it's always a balance. This wasn't a blank check. This was actually a super transparent bilateral agreement. So no, I don't think that the cost structures here are higher and there's always going to be some level of overbuild and reserve margin in any deal. This deal we just actually got to work and partner and size the components even with the GenCo to meet our risk and cost profile on behalf of our customers. So there's not a large premium, a little a higher return than a regulated rate of return for the assurance of power delivery. That's a small trade off to make to ensure that the power is available for our customers when they want them. But no, in general this is not a quote unquote premium to what we would be able to get through another regulated market. And there are regulated markets where data centers can be built and help build the grid under a tariff structure that don't cost shift as well. There's plenty of reports out there that show that. So we're open to several different methods to get to the commercial construct and this Genco I think is the most clear and transparent way for us to do it that both parties were happy with. There's everywhere else in the United States and then there's Texas. It's big, it's proud, it's got a lot going on and it takes a daily news show to keep up with it all. The Texas standpoint tackles politics, business and tech, the arts and the people and things that make Texas unique. It's smart, fast paced, relevant and sometimes even a little fun. After all, it's the news from a Texas perspective. Subscribe to the Texas Standard wherever you get your podcasts.
- [19:56]
B
Wood MacKenzie's annual solar and energy storage summit is back in Denver. From the 29th to the 30th of April 2026, over 450 industry leaders will gather for two days of crucial conversations on the future of US renewables. This year's agenda tackles the questions that matter. Can renewables be competitive? After the withdrawal of federal support, how do we capitalise on unprecedented load growth? Will permitting delays stall development? We'll cover energy storage, business models, supply chain challenges and emerging technologies such as virtual power plants. And new for 2026, a dedicated grid infrastructure stream and the launch of our North American Power and Renewables Forum, exploring how the wider energy mix is evolving to meet surging demand for power. Whether you're a developer, a utility leader or an investor, don't miss this opportunity to connect with peers and shape strategy for 2026. Learn more and register@woodmac.com it's very interesting and I'll come on in a moment to talk about sort of lessons for other parts of the country and whether this model is replicable. But first, maybe Vince, just to go to you this. From NIPSCO's perspective, why does this kind of partnership work for you?
- [21:07]
C
We have about 500,000 electric customers on our system, about 1.4 million if you think about combo. So we also serve natural gas customers across the top third of the state. It's about just under 2.4 gigawatts for our entire electric system right now. This deal doubles that size. So for us, one of the things that we wanted to make sure we were able to do was create something that takes that into consideration, right? That's a significant amount of new load with a single customer. As Brandon pointed out, we'll build 3 gigawatts to serve that 2.4. The way I look at that is that really provides that assurance that when they need the 2.4, that 2.4 is there and it's ready to be able to serve them. But 3 gigawatts for a 2.4 gigawatt system is a pretty significant increase. And so again, stepping back to think about, well, how do we do that in a way that is thoughtful about our existing customer base, but meets the needs of aws, but also is reproducible? We want to do additional load like this with the right partners, more potentially with Amazon at some point. So for us, it was something that we needed to be able to build that could really meet the need just today, but then the next load, the next load, and do it in a way that's responsible for our communities. Is it right for every utility out there? Every utility is going to have to make that decision for themselves. We do think this is unique and it's different and Brandon mentioned it multiple times. It's very identifiable. It's very simple to see how our genco ultimately is going to hold. What I think we've announced is about 6 to 7 billion dollars of new investment that is completely separated from our customer base. So that when somebody wants to look at the books and records, they can see very clearly how our customers aren't paying for that, but then benefiting to the tune of about a dollars over the 15 years of the contract. So kind of just hits on every note for us.
- [23:00]
B
You sometimes hear the claim made that it's all about energy. That energy is kind of the number one most important factor in terms of data center location now. It's availability of energy is really what matters most. Is that true?
- [23:13]
A
So I have the very distinct pleasure of leading an organization of energy and water professionals at aws. Probably some of the brightest in the industry and super humbled to work with and for them and like think day in and day out about how we're going to power a data center is never going to bring water and then help hit our water positive goals. That said, if there is power and no data center, then we're not serving our customers. If there's a data center without power, we're not serving our customers. If we, you know, can't build and find a workforce, we're not serving our customers. So there's a lot of things that need to come together from the power, the water, the land, the fiber, the workforce, the skilled labor, the supply chains then to get everything into a market. So power is definitely a focus, but it's not the only thing because again, you've got to get power substation, medium voltage distribution. You have to get a shell built, the foundations, the steel workers. Then you have to run electrical and then you actually have to start landing racks and then running cabling to build the networking and build the services. Like there's a lot that goes into building a data center. So power is definitely a focus and that's what I spend most of my life thinking about right now. It really does take a take everybody to come together and go and inform a community on what are we building here, demystify it to the maximum extent practical, engaging at the local, the state and even at the federal level. And then as we need to go and work with local jurisdictions sometimes, you know, if we need to go and build a fire station, sometimes we do that in a community. Yeah, there's a lot to IT power is important, but there's a lot more to it than just that.
- [24:55]
B
Right. So I want to talk about some of the challenges you might have faced. One of the issues that is much talked about in the industry is the potential mismatch between time horizons. Tech industry of course changing very rapidly, not least because of AI. Who knows where that's going to be in five years. But for the utilities, they're building assets that have multi decade operating lives. They want stability and to know that those assets are still going to be earning return and useful 20, 30, however many years from now in this partnership, you seem to have compromised on this commitment. It's 15 years, right? It was an initial 15 years anyway, although the relationship could last longer. How did you get to that kind of timescale? Why does 15 years work for you both?
- [25:45]
A
When we build a building, the building itself is designed for 30 plus year life. While the IT equipment will get changed out every four or five, six, seven years. The building itself like is a substantial investment in and of itself. When we make investments, we make them for the long term as well. However, you know, things will change over time. So we try to get to a point where we can ensure that there's a sufficient amortization schedule such that costs can be recouped, but also give flexibility where needed as things change, compute power has changed. What we can carry around in our pockets today has changed than what we could do five to 10 years ago. And we expect that to continue along the way. So again, really simple recipe we've got here at Amazon. Think about our customers and work backwards from that. And that, that's kind of our guiding principle every day. And you know, we were able to get to a structure that worked for commercially, for NiSource.
- [26:45]
B
Yeah. Why does 15 years work for you then, Vince?
- [26:47]
C
Like Brandon said, we invest in, in assets that have different lengths, you know, different amortization periods, some shorter, some longer. So you know, the assets can be out there for, for 40 years or 20 depending on what it is. But the agreement allows for additional time. If ultimately we get to that place and another 15 years makes sense, that's great. We can work with different time horizons. But when you start to go past that 15, 20 year, not speaking for Amazon, you start to think about different risks, different concepts and components. It changes the dynamic a bit. Not that you couldn't work through it, but it certainly creates a different set of risks and thoughts that you have to kind of go through. And so for us, 15 years made enough sense given the kind of assets we'll be developing. We continue to have sustainability goals, as does Amazon. So it gives us some time to continue to work through those components to make sure that we're getting to the right place with all of that. But at the same time, you build something that can last for 30 or 40 years. Anything shorter than 15 years also starts to look a little bit, just changes the risk profile and ultimately then the negotiation.
- [27:58]
B
So another big challenge then is something that again, a lot of people are talking about in the electricity industry at the moment, which is equipment shortages and the difficulty of procuring turbines, transformers, switchgear, whatever it might be. How is the procurement process going? Are you going to be able to get those gas turbines? Are you going to be able to get those batteries?
- [28:19]
C
One of the great things about this new structure is it lets us do things a little differently than when we do through what has historically been kind of the process where you would kind of methodically go through some things in certain phases at the commission. Because of the genco and the alternative regulatory process that we have and the negotiation with Amazon, we were able to go out and procure long lead time equipment while we were working through the process of negotiating the terms and conditions of the deal. And so it really let us be at a place where we could meet all of the time horizons that ultimately Amazon needs to meet its customers needs because of this different structure that we have in our ability to go out and lock down that long lead time equipment.
- [29:00]
B
And that's all handled on the Nipsco side. Then at aws, you don't need to worry about that. You just let them do their job.
- [29:05]
A
Not for this project. They're doing their job. You know, we worked together to make sure that they were comfortable enough, we could de risk throughout the negotiation so that they could put down deposits where needed along the way. And we have plenty of our equipment that we need to go and procure for the build out here. So we get to go focus there. However, like we will partner if something happens along the way and you know, we need to use a reservation for a breaker or a transformer or something and we can like we will, like we, we are a very. We've built a lot of trust with Vince and team throughout this discussion. So if something happens like we'll work and adapt and continue to, to move forward.
- [29:44]
B
So Vince, you mentioned regulation. That seems like it's going to be a very critical factor in this. When you think about the traditional principles of utility regulation in terms of obligation to serve, in terms of non discrimination, I guess in particular being a principle that is generally applied. This is what bending that because Amazon is going to be treated differently as a customer from other customers in your territory, Is that right? I mean, I suppose what I'm asking is was this a difficult pill for the regulators to swallow? Did you need a lot of discussions with regulators to get them comfortable with this? How did that work?
- [30:24]
C
We're fortunate to be in a state where our, you know, the governor, our iurc, that's our regulatory commission, legislature, all were in a place where they really like to see this large load growth happen and we have alternative regulatory structures in the state. So we came at it from a good place where we have the ability to think a little differently about how we approach it. This is still a very regulated approach and a regulated offering that we're making. And the pieces of it aren't really different than what historically we've been able to do. A special contract is not something new. That's something that you can do in lots of utilities across the country, including in Indiana, for lots of years. Genco itself is not new. It's different. So it's regulated a little differently. The genco approach and kind of it's holistically, we think that is new. We haven't seen all the different parts put together the way that we have. But genco continues to be a regulated utility with the state. The difference here is that genco's only customer is going to be nepsco. So genco won't serve any retail customers. All those customers will be served by nipsco. We'll take on that responsibility just like we would for any customer, and we'll treat Amazon like any customer that we would have on our system. So they get the same kind of protections from that perspective, but they're getting a special contract and negotiated approach as opposed to sort of a tariff approach, which is how we would do things a little bit more historically. So it really was kind of taking different pieces, applying them in a state where we had really good support from the governor, from the legislature, from the regulatory commissioners to think about this a little differently. So we could kind of hit on all those marks that we've talked about and do it in a way with the right partner, we could feel pretty confident that we'd be successful.
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B
Nipsco as a whole is part of miso, is that correct?
- [32:12]
C
Yeah, that's right. And so just like any assets that we have as part of Miso generation will be produced into Miso, ultimately MISO will ultimately provide us the signals and the direction when it comes to running the different units or dispatching into the market. Obviously our obligation is to have the capacity to meet Amazon's needs and that's the purpose of genco and the purpose of separating the assets, but then still having them in the MISO market. Amazon will be able to get energy from the MISO market as well. So they've got that balance that is provided by having a larger rto, you know, ISO to be able to provide not just the energy that ultimately we're producing, but broader energy that can come from the market a lot of different ways. And so I think it provides more resiliency and more stability, both for Amazon, but then for also our customer base. We talked a bit about it before. When you think about 3,000 megawatts of new dispatchable energy going into the market at really any point, that hardens the grid, it hardens our system, it makes MISO more confident with respect to the generation assets that they're going to have out there and hopefully makes Amazon more confident because not only do they have Nipsco standing behind it, but we've got this larger MISO standing behind it as well.
- [33:27]
B
Yeah. Was that important for you then, Brandon, to have that grid connection? I mean, obviously there's a lot of talk nowadays about behind the meter power, bring your own power, all those kinds of ideas being talked about a lot. But for you, the grid was the right way to go.
- [33:43]
A
I'm glad you framed it like that, Ed. Yeah, there is a lot of talk around all different ways to connect a data center. Like I said earlier, we got a really simple philosophy here. Work backwards from the customer. What does the customer want? More services, less cost. So we continue to evaluate all sorts of structures and continue to find that being connected to the grid is the most cost effective way to scale up. Now, might we do things differently, you know, in certain pockets? Sure. But again, that's going to balance cost with speed to market. So yeah, I mean putting an asset onto the grid, it can benefit other people, it can sell into the market. These are going to be new, modern, high efficient assets. And that's something else that I think like a lot gets lost in the narrative about data center growth is the electrical system is not like a commodity. Pick whatever, rage, whatever hit gift was around Christmas time that, you know, there's 500 of these units. Therefore the price of them goes up through the roof because there's limited supply and demand. A majority of the electrical infrastructure is a fixed cost. So when you Shove more units of electricity through it, you can spread that fixed cost over a greater unit base. And you know, on top of adding infrastructure that's making it more reliable now, you know, if there's transmission upgrades that need to happen, it's, you know, spread over a larger base. So there's a lot of benefit to these structures that people may not necessarily see and you won't always see in the form of a bill, but it's now preventing something like a lot of our transmission was built in the 50s and 60s. This stuff won't last forever. It's going to have to be upgraded eventually. Like reconductoring at least is happening throughout many parts of the country. And that upgrade, like if, if we trigger it and we fund it, fine, and if it benefits everybody else and doesn't require costs to go up, great, like, we're happy to support. So that's happening here with this deal and, you know, we're happy to be a part and contribute.
- [35:47]
B
Yeah, absolutely. And actually, as you say, when you look around the country at what's been driving electricity bills up until now, actually. Exactly. That issue of replacing aging infrastructure has probably been the single biggest contributor to that in recent years. One other thing that's much talked about, Brandon, just want to get your view on flexible loads. Making data centers into flexible loads talked about as part of the solution to getting loads onto the grid quickly. Because you can obviously provide services the grid. It can be a big help if the load is flexible and as you're saying, can help make more efficient use of existing infrastructure. Is that part of the package here?
- [36:29]
A
Serving AWS customers is different than say a bitcoin mining facility? A bitcoin mining facility can be turned off. You can stop and start workloads with relatively small impact. Our data center is not so much. Our customers decide when to use them. We guarantee their availability. We design them for reliability, we design them for availability. We're not an interruptable load. However, we are starting to work with different utilities around the country and we find that if we can accelerate capacity by determining that, you know, we could participate in a demand response or load flexibility, that we will do so now we do build generation or a majority of our data centers have backup emergency generation and if called upon in a true grid emergency, like yes, we will run our assets and protect our customers while protecting the grid. But at the end of the day, we don't really see data centers as a flexible load. We are continuing to evaluate on a case by case basis where possible, with certain pockets but no, this deal from day one has been a firm load. Like, we're going to go and serve 2,400 megawatts. That's why we agreed to building 3,000 megawatts of generation, so that we can have that firm load there.
- [37:48]
B
Right. And as you say, that running backup generation at a time of a grid emergency, that's what, something you can do for a few days, a few hours in a year, that's absolutely not regular practice, right?
- [38:00]
A
Exactly. I don't know about a few days. You know, that would all depend on certain circumstances. But, yeah, we focus on making sure that our customers have the capacity when they want it.
- [38:12]
B
So let's talk about lessons then, and what you've done here as a potential model for other utilities. I don't know, Brandon, if you want to be giving away trade secrets, processes, if you say too much, you know, this is helping your competitors work out how to get their own projects advanced. But if you were to think about lessons that could be learned, and I guess for the industry as a whole to think about how to add data center capacity the right way and get it powered the right way, what would you say?
- [38:47]
C
Ed?
- [38:47]
A
I don't know that there was really a right way, if I'm going to be very honest with you. And, and pretty humble here, too, because it took a lot of people to make this project successful. And this is one way. We're very happy with it. To Vince's point, if we can figure out a way to grow and do this again, like, would we do it again? Probably so. But there's still a lot left to go and build. We have lots of work ahead of us now, like signing the paper is one part of it. And now we've got a lot of steel and concrete and equipment to go build. So I think this is one way. And what I would say for, you know, anybody listening is it's. It's just honesty and transparency are the two things that helped us get through this. Sometimes I don't understand how this is so complicated. Like, I'm in the business of buying electricity. I know I have to pay for it. Utilities are in the business of deploying capital, generating a return on that capital, and then operating in a reliable manner. We just take that mindset and we go simple.
- [39:48]
B
Nothing to it. Nothing to it. So, Vince, what do you think then, in terms of what lessons you think could be learned by utilities as elsewhere in the country, maybe elsewhere in the world?
- [40:03]
C
Yeah, I think Brandon makes a good point. This is not the only way to do it, it's the right way for us to do it in this moment, to do it at this size and this level and scale and certainly for us, reproducible. Right. So we can go out, do it again. But it also let us do it in a way where we don't have the special contract approved yet, that's still in the regulated process yet. We've already taken significant steps forward to be able to meet the demand and the load when Amazon needs it. And so I think it is. It's continued conversations, right, with just continued collaboration. A lot of trust that's been built in this relationship between us and Amazon, which I think is kind of critical, because when you are taking those steps in advance of kind of pieces that traditionally you would have in place, you've got to have a lot of trust with a partner. And, you know, I think that's a good thing. These have been, they've been great negotiations, but to Brandon's point, it took time and a lot of really talented people spending a lot of long hours working through the details of this, and it's gotten us to, I think, a really good place we now need to perform. Right. To meet those expectations. Brandon and the team have a lot of work to do to do their pieces and parts of it as well. But we talk every day and our teams are communicating all the time because it was a lot of work to get to where we are and it was just the start. There's a lot more work to do from here to ultimately then meet the needs of this customer as well as continue to meet the needs of our community.
- [41:35]
B
And so, Brandon, just going back to your point then, and just to be clear about this, we should not expect dozens more examples like this, these similar partnerships with utilities, to be cropping up all over the country.
- [41:48]
A
Yeah, I loathe to speculate a number that would happen, but again, like I said, I would do this again. In this structure and where the regulatory framework works and the partnership exists, I would do it again. But there's many ways to make this happen and we're happy with this one, and we'll continue to look for other ways to do it. Here at Amazon, we tend to not rest on our laurels and think that just because we've done something one way is the only is the right way to do it. So we'll continue to try to disconfirm our belief that this was the right way and look around corners and do what's best for the customers long term.
- [42:27]
B
Very interesting. Well, I certainly hope you'll come back and talk to us again when the next deal comes up. But as you say, you're talking about some completely different model. But definitely be very interesting to hear about that. For now, though, unfortunately, we do have to leave it there. Many thanks, Brandon.
- [42:42]
A
Thanks. Go Hawks.
- [42:44]
B
Absolutely. Many thanks, Vince.
- [42:46]
C
Thank you. I really appreciate the time. Brandon, great seeing you as always.
- [42:50]
B
Yeah, it's been great talking to you both. All the best with your partnership and the projects you're going to be developing there. Many thanks to our producers, Stuart Duffy, Toby Biggins, Gilchrist and Dan Cottrell. And above all, as ever, many thanks to all of you for listening. We really value your feedback. Please do keep that comment coming and we'll be back soon with all the latest news and views on the future of energy. Until then, goodbye.