Tech companies are struggling to find enough electricity for all the new data centers they need for artificial intelligence, and lately they’ve explored ideas such as restarting old nuclear plants and stringing together off-grid gas engines.
Now Google is trying a different approach: paying, at least indirectly, for homes and businesses to use less electricity at times to help free up power for data centers.
On Thursday, Google announced a deal with a company called Voltus to set up what’s known as a “virtual power plant” in the large Mid-Atlantic grid known as PJM. Voltus will provide Google with up to 1,070 megawatts of electric capacity when needed — roughly as much as the output from a large nuclear reactor.
That electricity won’t come from new power plants. Instead, Voltus will sign up homes and businesses and give them financial incentives to curb their usage when local power demand is high or the grid is strained. Many of these reductions could occur automatically, such as through smart thermostats that dial back air-conditioning during peak summer hours or batteries that can provide temporary on-site power.
Each of these tweaks frees up only a small amount of power on its own. But by aggregating them across thousands of businesses and homes, Voltus says it can reliably provide lots of extra capacity when it’s most needed, and do so within a few years.
While tech companies will likely ultimately need to build traditional power plants if they want to keep building large data centers, this approach could be a faster, cheaper and less-polluting option in the interim.
“We really see virtual power plants as a critical short-term solution,” said Ellen Zuckerman, head of energy market development for North and South America at Google. “It’s a way to invest in our communities, really double down on our clean energy ambition, but also meet capacity at speed and scale.”
New data centers are facing a backlash from voters across the country, in part because of fears that the energy-hungry facilities can overwhelm local electric grids or drive up power prices. In PJM, which covers 13 states and serves 67 million people, electricity prices have soared since 2024 as data center growth has outpaced the construction of new power plants.
While Google did not disclose the financial terms of its deal with Voltus, the company said this was one of the largest examples to date of a tech giant paying for electric capacity in this fashion. Google has also been investing in technologies like nuclear power and exploring ways to curtail electricity use from its own data centers during peak demand periods.
Interest in virtual power plants has grown in recent years, especially as demand for electricity has surged.
For a vast majority of the year, most electric grids are capable of generating more power than they need. But there are a certain number of peak hours — say, during a hot summer day or a winter storm — when power plants are running at full blast and the grid has little spare capacity.
If a company wants to connect a large new data center to that grid, the local utility or system operator has to figure out how to handle those peak hours. One option would be to build new gas-fired plants that can ramp up when demand spikes, but that can be expensive and there are now yearslong waits for turbines.
Virtual power plants instead help shift electricity demand from large numbers of homes and businesses so that power use drops during peak periods.
In theory, there are relatively painless ways to do that. Smart thermostats can turn down the air-conditioning a degree or two when the grid is strained. Electric cars can charge during off-peak hours. Some businesses might be willing to be paid to turn down some machinery or dim lights in emergency situations. Homes could store some of the electricity they generate from rooftop solar panels during the day in batteries for when it’s most needed.
Voltus, whose headquarters are in San Francisco, already manages roughly 9,500 megawatts’ worth of virtual power plants across the country, which at its peak is roughly equivalent to the electricity use of seven million homes at once.
In June, the company agreed to provide a 100-megawatt virtual power plant to Google in the Mid-Atlantic. That program has already been “oversubscribed” by customers who wanted to participate, said Dana Guernsey, the chief executive of Voltus, which led the company to expand it.
Other programs are popping up in places like Arizona, California and Texas. But experts say that there is still lots of untapped potential.
One 2024 study from the Energy Department estimated that the use of virtual power plants could triple by 2030, which would help save U.S. ratepayers roughly $13 billion each year by reducing the need to build conventional power plants.
There are barriers, however. It takes a lot of work for companies to sign up households. In some regions, regulations make it hard for virtual power plants to participate in electricity markets or for companies to gain access to customers’ electric meter data.
And some grid operators and utilities remain wary of the concept, questioning whether homes and businesses will truly curb their electricity use when needed. Many utilities also have traditionally had more of a financial incentive to build new infrastructure — on which they can earn returns — rather than use existing grids more efficiently, experts said.
“It’s a different way of doing things,” said Ryan Hledik, a principal at the Brattle Group, a consulting firm, who recently co-wrote a report on virtual power plants. “There’s a hurdle that we still need to get over in terms of operational trust in these resources to deliver.”
Ms. Guernsey of Voltus said the company runs extensive tests to determine that it can provide the electric capacity it promises and that its programs performed well during two grid emergencies in the Mid-Atlantic last week.
The idea could prove attractive in the PJM regional grid, where electricity costs have soared by tens of billions of dollars in recent years because the region doesn’t have enough reliable power plants to meet its needs — which include a large and growing array of data centers, especially in Northern Virginia.
Over the past year, the Trump administration and governors from both parties have urged tech companies to directly fund the construction of new electric generation in the region to meet the needs of data centers — and avoid imposing costs on households.
It remains to be seen whether programs that pay customers to adjust their power usage and help defray bills can improve the image of data centers.
A recent Gallup poll found that nearly half of Americans would “strongly oppose” a new data center in their neighborhood, with many citing concerns about noise, pollution and energy and water usage. In the second quarter of this year, at least 45 data center projects worth nearly $68 billion were delayed or stopped by local opposition, according to Data Center Watch, a project by the A.I. research firm 10a Labs.
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