Talen Energy mulls options to supply data centers after Amazon setback

By Laila Kearney

NEW YORK (Reuters) -Talen Energy is considering alternative arrangements to supply electricity to data centers after regulators pushed back on a plan to fuel an Amazon data center directly from Talen’s Pennsylvania nuclear power plant, executives with the U.S. power company said on Thursday.

Independent U.S. power producers like Talen have seen a surge in interest over the last year – propelling shares of the companies to record highs – largely on the prospect of striking deals to supply electricity to Big Tech’s data centers directly.

The so-called co-located arrangements, in which data centers are located at or near the power plants that fuel them, would potentially eliminate year-long wait times associated with connecting to the broader electrical grid.

Rulings against the arrangements by the Federal Energy Regulatory Commission, however, are leading some of those companies to make alternate plans.

“I think there are multiple ways to supply power to data centers,” Talen CEO Mac McFarland said on a company earnings call with investors.

Talen said it is considering other types of data center deals – including ones that connect the centers to the grid as part of traditional commercial power contracts.

Giant independent power producer, Constellation Energy, earlier this week said it was also refocusing on more conventional data center power arrangements after considering co-located data center deals at several of its nuclear plant sites.

Talen’s data center deal with Amazon, which was announced in early 2024, was a first-of-its kind co-located power arrangement. As part of the power pact, Talen would ramp up electricity supplied from its Susquehanna nuclear plant to the data center to as much as 960 megawatts over the course of several years.

In response to the deal, which diverts electricity from the grid for the use of a single customer, FERC ruled last year to cap the amount of power to Amazon’s data center at 300 megawatts, citing concerns about power reliability and costs for the broader public by redirecting nearly a gigawatt of electricity for a single customer.

Talen executives said they were still supplying electricity to the Amazon data center, with plans to reach 120 megawatts by the end of this year. Talen is currently appealing FERC’s decision and expects a court schedule on the case in the coming weeks.

(Reporting by Laila KearneyEditing by Marguerita Choy)