Data Center Moratoriums And The Rise Of Private Grids

The Rapid Emergence Of Large-Scale Private Grids

Until recently, virtually all large-scale power projects were designed to connect to the public grid. Construction of islanded power plants with 100 megawatts or more of capacity, for the sole use of a single industrial facility, was never attempted, presumably due to the inherent complexity of grid operations as well as the enormous cost and reliability benefits of connecting to the public grid.

Roughly two years ago, seeking to bypass the regulatory reviews that accompany grid interconnection requests, the tech industry began planning a huge array of private grids, virtually all powered by climate-disrupting fossil gas. In a July 2026 analysis, the tracking firm Cleanview found that 90 gigawatts of BTM gas generation capacity for data centers is now in various planning and development stages, with three gigawatts due to come online this year. In a May 2026 analysis, RBC Capital called this shift to BTM gas “a structural recalibration of how data centers source power.”

The rise of private grids with BTM gas generation is part of a larger tech industry shift away from helping to modernize and decarbonize the public’s electricity grid and toward building onsite gas power. In a July 2026 report, the Environmental Integrity Project (EIP) found that 143 gigawatts of gas plant capacity is now being planned at the sites of data centers.

From the Cleanview and EIP research, one can infer that up to one-third of planned onsite gas-fired capacity is not clearly slated for private grids. But the private grid option remains open to these project developers. Whether these projects join the shift to private grids will depend in part on whether operators and regulators of the public grids address problems with grid interconnection queues. It also will depend on whether policy makers eliminate the regulatory gaps that make private grids with gas-fired power an attractive alternative to grids offering power from cleaner sources.

Public Health Consequences of Private Grids

xAI set the precedent for the tech industry’s shift toward BTM gas–and highlighted the problem of regulatory gaps–when it brought 35 mobile gas turbines to its Colossus I data center facility in Memphis in June 2024. The NAACP successfully challenged the action in court, demonstrating that xAI had violated the Clean Air Act, but xAI, capitalizing on lax federal and state enforcement of environmental laws, ultimately obtained permits for 15 turbines at this facility and announced its intention to “copy and paste” this approach at its massive Colossus II facility nearby.

Not long after this announcement, the EPA released a slew of proposals and guidance that would reduce regulatory scrutiny of gas-fired power projects at data center sites, including guidance that would eliminate all regulation of private grids’ emissions of sulfur dioxide and nitrogen oxides, the main precursors of acid rain.

As the xAI case in Memphis shows, so long as regulators show greater concern for deep-pocketed tech companies than protecting communities, gas-fired power plants proposed for data centers will pose a significant threat. This is especially true in historically marginalized communities such as greater Memphis’s Black communities, where data center impacts are just the latest in the disproportionate burdens they have experienced from industrial pollution.

The tech industry claims that its shift to private grids is a win for communities because ratepayers on public grids are insulated from the costs. But ratepayers, like everyone else, suffer sickness and death when forced to breathe dirty air. Developers of gas-fired power plants for data centers must be held accountable for the heart disease, asthma, and other health problems they cause.

A February study by Empower Analytics showed that these impacts can easily be quantified. It found that, when operating at the maximum permitted emissions, the private grid for the Vantage VA2 data center in Loudoun County, Virginia, could result in $265 million to $495 million in health-related damages and up to 33 additional premature deaths over the next five years across the impacted region.

Additional measurable public health damage from these gas-powered private grids includes:

• Loss of freshwater availability: Unlike renewable energy, gas-fired power production uses large amounts of freshwater. Data centers reliant on gas therefore impose enormous costs on farmers, ranchers and others whose livelihoods depend on freshwater availability, especially at times of water stress.
• Water pollution: Production and transport of oil and gas is responsible for the release of radioactive and toxic wastes into water supplies.
• Climate damage: Greenhouse gases are responsible for a wide array of harms to public health, including death and suffering from the increasingly extreme heat waves, wildfires, droughts, and floods currently being experienced across the globe.

Impacts of Private Grids on Electricity, Gas and Water Bills

Even those focused solely on data centers’ impacts on utility bills should question tech industry claims that private grids are an effective ratepayer protection strategy. Building 90 gigawatts of gas generation capacity for private grids, as the industry has proposed, would require tapping into the same supply chains as those relied upon by public grids. These supply chains are already facing backlogs on transformers and other critical grid components. Additional demand for grid components from an industry willing to pay top dollar will assuredly impose delays and drive up costs for utilities and companies working to accelerate the transition to more affordable clean energy–costs ultimately borne by electricity ratepayers.

To date, the Public Utility Commissions that oversee utilities’ operations of the public grids have provided no oversight of private grid impacts to electricity ratepayers. Such oversight, with the encouragement and involvement of state legislators, is very much needed. Regulatory agencies overseeing the gas and water utilities providing critical pipeline and other infrastructure for private grids must also get involved to stop cost-shifting from the tech industry to their ratepayers.

Some industry analysts have suggested that the tech industry will soon come to grips with the cost and complexity of building private grids to meet the 24/7 power needs of data centers and will abandon the projects currently underway. This may be true, but it is hardly a reason for regulators to look the other way. In fact, some hyperscalers are proceeding quickly to power up their private grids while beginning the process of interconnecting to public grids.

For example, Microsoft has made clear that Project Kilby, a 20-year agreement with Chevron to build a 2.7 gigawatt gas-powered data center campus in the heart of Texas’s Permian Basin, will begin as a private grid but ultimately seek interconnection to the public grid.

Just last week, Cleanview discovered that, with no public announcement, Amazon had invested in what is likely to be the largest gas-fired power plant in U.S. history, to be built as a private grid for a data center complex in Texas’s Permian Basin called GW Ranch. Construction permits authorize up to 7.65 gigawatts of gas-fired power, enough to cover the peak demand of eight mid-sized U.S. cities. When contacted by the New York Times about its previously-undisclosed private grid, Amazon made clear that a public grid interconnection after powering up was under consideration.

Private grids will not magically disappear once their operators begin struggling with cost and reliability challenges. Once established as “facts on the ground,” private grids seeking public grid interconnections will put utilities, charged by law with serving all customers seeking electric power, in the difficult position of integrating their operations. Regulators and legislators must craft strategies to ensure they are prepared for this scenario and are protecting ratepayers from the tech industry’s cost-shifting.

Impacts of Private Grids on Taxpayers and Investors

Taxpayers and investors have an enormous stake in the tech industry’s private grid development. The generative AI applications trained and deployed at data centers have not yet secured a revenue base anywhere close to covering the capital expenditures underway for the data center buildout. Large-scale asset strandings, with the costs shifted to taxpayers and investors, are increasingly plausible. This risk is particularly prominent at the private grids, where data center developers, unable to secure modern combined-cycle gas turbines, are deploying a host of inefficient technologies not suited for 24/7 power generation, such as aeroderivative turbines designed for aircraft and warships.

Taxpayers and investors are likewise exposed to the systemic financial risks of rising greenhouse gas emissions.

Economic development officials, public pensions, and others involved in financing the energy technologies and grid infrastructure of the future must insist upon more sustainable approaches, including both regulatory guardrails and investments in clean energy technologies and grid modernization.

Pausing Private Grids and Enacting New Guardrails

The emergence of private grids for data centers has caught policy makers and regulators off guard and. the tech industry would like to move fast and capitalize on the regulatory gaps. Goldman Sachs estimates that more than half of AI spending in world history, roughly $1 trillion, will happen this year. But this assumes the tech industry will be allowed to proceed with its largely unregulated data center buildout strategy. The only appropriate response to the industry’s rush to build costly, polluting gas plants at the sites of data centers is a pause in development and enactment of new policy guardrails, designed in close consultation with affected communities.