Behind-the-Meter Power for AI Datacenters
What is behind-the-meter power for datacenters?
Behind-the-meter (BTM) power refers to on-site generation that bypasses the utility grid interconnection queue. For AI datacenters facing 4-7 year grid interconnection delays, BTM solutions include natural gas generators, solar+battery systems, and emerging small modular reactors (SMRs). BTM can reduce time-to-power from years to months while offering 20-40% lower power costs.
Key Data Points
- Speed to Power: 12-24 months vs 4-7 years for grid
- Cost Savings: 20-40% lower vs wholesale grid rates
- Gas Generation: $800-1,200/kW Capex, 90%+ Capacity Factor
- Solar + Storage: 30%+ ITC eligible, zero emissions
- Reliability: Islanded operation removes grid curtailment risk
Why Consider Behind-the-Meter?
Speed to Power
Grid interconnection queues are 4-7 years in ERCOT/PJM. BTM solutions can deliver power in 12-24 months for gas, faster for solar+storage.
Cost Savings
Avoid transmission charges, demand charges, and capacity payments. BTM power can be 20-40% cheaper than grid at scale.
Reliability
Control your own power supply. No exposure to grid outages or curtailment events. Critical for 99.999% uptime SLAs.
BTM Technology Options
Natural Gas Generation
Capex: $800-1,200/kW
LCOE: $0.045-0.065/kWh
Timeline: 18-24 months
Pros
- • Proven, reliable technology
- • High capacity factors (90%+)
- • Lower capex than alternatives
Cons
- • Carbon emissions (ESG concern)
- • Gas price volatility
- • Permitting challenges in some areas
Solar + Battery Storage
Capex: $1,500-2,500/kW (solar+4hr storage)
LCOE: $0.050-0.080/kWh
Timeline: 12-18 months
Pros
- • Zero emissions, ESG-friendly
- • ITC tax credits (30%+)
- • Declining costs
Cons
- • Intermittent (needs storage/backup)
- • Large land footprint
- • Capacity factor ~25-30%
Small Modular Reactors (SMR)
Capex: $5,000-8,000/kW (projected)
LCOE: $0.060-0.090/kWh (projected)
Timeline: 4-7 years (first units)
Pros
- • 24/7 carbon-free power
- • Very high capacity factor (90%+)
- • Compact footprint
Cons
- • Still in development/licensing
- • High upfront cost
- • Regulatory uncertainty
BTM vs Grid Power Comparison
| Factor | Grid Connection | BTM (Natural Gas) | BTM (Solar+Storage) |
|---|---|---|---|
| Time to Power | 4-7 years | 18-24 months | 12-18 months |
| All-in Cost | $0.06-0.10/kWh | $0.045-0.065/kWh | $0.05-0.08/kWh |
| Reliability | 99.9% | 99.99% | 99.9% (with backup) |
| Carbon Emissions | Varies by grid mix | ~400g CO2/kWh | Zero |
| Upfront Capex | Low (connection fee) | $800-1,200/kW | $1,500-2,500/kW |
Implementation Considerations
Regulatory Requirements
- •Air permits: Required for gas generation (EPA, state)
- •Utility notification: Even BTM may need utility coordination
- •Building permits: Local zoning and construction approval
- •Fire safety: Battery storage fire codes evolving
Site Requirements
- •Gas pipeline: Proximity for natural gas options
- •Land area: Solar requires ~5 acres/MW
- •Water access: Cooling for thermal generation
- •Grid backup: Connection for reliability/arbitrage
Frequently Asked Questions
Can I use BTM power for 100% of datacenter needs?
Yes, but most operators maintain grid connection for backup and arbitrage opportunities. Pure BTM (islanded) requires more redundancy. Typical configurations use BTM for 80-100% of baseload with grid for peaks/backup.
How do BTM projects affect datacenter financing?
BTM assets can be financed separately (project finance) or as part of the datacenter. Lenders like the cost certainty of owned generation. However, capex increases and technology risk must be addressed. PPAs with third-party generators can reduce balance sheet impact.
What about hydrogen for datacenter power?
Green hydrogen is emerging but currently expensive ($4-8/kg). Fuel cell datacenters are in pilot stages. Economics improve if hydrogen is co-produced with other industrial uses. Watch this space for 2027+ deployments.
Are there tax benefits for BTM power?
Yes. Solar qualifies for 30% ITC (more with domestic content/energy community bonuses). Battery storage now has standalone ITC. Some states offer additional incentives. Consult tax advisor for your specific situation.
Calculate Your BTM ROI
Compare grid vs BTM economics for your specific site and power requirements.
Open BTM ROI Calculator →More Power Infrastructure Guides
Power Purchase Agreements (PPA)
Complete guide to PPA structures, pricing, and risk management for datacenters.
Grid Interconnection 101
Understanding the step-by-step process of connecting large loads to the grid.
BTM ROI Methodology
How we calculate the ROI of behind-the-meter power vs. wholesale grid rates.
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