Report Examines Impact of AI Growth on U.S. Power Network and Rise of Off-Grid Data Centers

A new report from law firm Troutman Pepper Locke , Off-Grid Data Centers: A Potential Power Solution for AI, examines how increasing demand for artificial intelligence (AI) compute capacity is affecting the U.S. power network. The analysis finds that developers, hyperscalers, and energy companies are increasingly turning to behind-the-meter and “island-moded” generation to secure reliable and scalable electricity while avoiding grid congestion and regulatory delays.

The report comes as global data center investment is projected to reach $6.7 trillion by 2030, including approximately $2.7 trillion in the United States. The analysis highlights Texas as a key example, citing projections from the Electric Reliability Council of Texas (ERCOT) that data center electricity demand could increase by 22 gigawatts between 2025 and 2031, reaching 78 gigawatts, or about 36% of total statewide demand.

At the same time, AI-specialized server racks are requiring between 50 kilowatts and 100 kilowatts each, compared to 5 to 10 kilowatts in traditional configurations in recent years. As computing requirements increase, the report concludes that power availability has become a primary constraint on AI expansion.

Natural Gas as a Near-Term Option

The report identifies a shift toward natural gas as a near-term solution for off-grid facilities. Developers are prioritizing dispatchable generation capable of delivering “five nines” reliability — 99.999% uptime — required for hyperscale AI operations.

While renewable energy sources remain part of long-term decarbonization strategies, the analysis states that wind and solar alone are not yet able to consistently provide 24/7 baseload power at the scale required without significant overbuild and storage. Battery storage capacity remains limited in duration for utility-scale use, and small modular nuclear reactors are not yet commercially deployable at scale.

In comparison, natural gas generation can be deployed relatively quickly and provides consistent output, contributing to its use among early off-grid adopters, particularly in Texas. The report also notes increasing competition for turbine equipment, skilled labor, and transmission infrastructure.

Interconnection Constraints and Policy Developments

The report indicates that congestion in grid interconnection queues is contributing to project delays in several markets. As a result, developers are pursuing behind-the-meter solutions either as an interim step before connecting to the grid or as a long-term approach.

Texas is identified as a focal point due to its deregulated electricity market and established framework for behind-the-meter generation. The report also references Senate Bill 6, passed in 2025, which introduced new requirements for large-load users related to backup generation and infrastructure cost allocation.

At the federal level, proposed measures such as the Decentralized Access to Technology Alternatives (DATA) Act and reforms to large-load interconnection processes aim to clarify regulatory treatment of off-grid facilities and address compliance considerations. The report states that regulatory clarity will be important for supporting investment while maintaining system reliability.

Community Considerations and Project Delays

The report highlights community concerns as another factor affecting data center development. It notes that, as of early 2025, approximately $64 billion in U.S. data center projects had experienced delays due to local opposition, often related to energy costs, water use, and property impacts.

Off-grid systems may help reduce strain on public power grids and limit cost impacts for residential customers. However, the report emphasizes the importance of community engagement and clear communication of economic benefits. It also discusses alternative approaches, such as modular data centers co-located with renewable energy sources to utilize curtailed power.

Partnerships and Project Risk

According to the report, large-scale data center projects often exceed $1 billion per facility, making partner selection and supply chain reliability important considerations. Developers and energy providers are encouraged to evaluate turbine suppliers, engineering teams, landowners, and off-takers.

The report notes that in off-grid configurations, the absence of utility backup increases the importance of financial strength, long-term commitments, and technical capabilities among project participants.

Focus on Reliability

The report concludes that reliability is the primary consideration for AI infrastructure development. Hyperscale operators prioritize continuous power availability over short-term cost considerations, shaping decisions around generation strategies.

Brandon Lobb, partner in Troutman Pepper Locke’s Energy Transactional Practice Group, said: "AI has shifted the center of gravity in the energy market. Power availability — not just price — is now the defining variable in digital infrastructure strategy. Off-grid solutions are emerging as a pragmatic response to interconnection delays, reliability demands, and community pressures. Companies that align regulatory strategy, supply chain discipline, and creditworthy partnerships will be best positioned to lead in this next phase of AI growth."

The report suggests that as regulatory frameworks continue to evolve, off-grid data centers may become a longer-term component of the U.S. energy and technology landscape.

Troutman Pepper Locke’s Energy team and Real Estate practice advise clients on energy infrastructure and development projects, including data centers, working with utilities, developers, financial institutions, and other stakeholders on project development, financing, and siting.