A new class of batteries helps data centers play nicely with the grid

Lithium-ion batteries could do so much for AI data centers and the power grid. They’re cheaper than the fossil-gas turbines that tech giants are building at gigawatt scale for their ​“AI factories.” They can cushion the cost of building out grid infrastructure and power plants just to serve data centers’ peak energy demands. And they’re much cleaner than the diesel backup generators almost all data centers rely on.

So why haven’t on-site batteries taken off yet with the computing crowd? It comes down to costs and benefits. Data center developers and operators often see fossil fuels as more reliable for 24/7 power. And industry watchers say the companies are leery of adding batteries unless they see a clear payback — or if they simply can’t do without them.

Data centers have in fact relied for decades on a type of battery known as an uninterruptible power supply (UPS) system. It’s essentially a bank of batteries — most of them old-fashioned lead-acid chemistries — that connects to servers and other computing gear to keep them running smoothly in case utility power flickers or fails. Much like backup generators, they don’t do anything useful except during emergencies.

With the right technological fixes, however, lithium-ion batteries that sit between the grid and the data center complex could perform this task, and solve a host of other problems. Specifically, they could serve as shock absorbers to prevent the kind of power disruptions, caused by data centers dropping off the grid unexpectedly, that are emerging as a major threat to grid stability.

That’s the idea behind startup ON.Energy’s new AI UPS. According to CEO and cofounder Alan Cooper, it’s the result of roughly a half-decade of technology development, aimed at delivering what he described as ​“the new standard for connecting the data center to the grid.”

The trick has been to prove that these centralized systems are capable of performing the critical tasks they need to. Earlier this year, ON.Energy concluded trials at the nation’s premiere grid testing facility showing that its technology works.

Now, with a 5-gigawatt order from major AI data center developer Crusoe, ON.Energy is preparing to put this centralized UPS system to the test at commercial scale.

“The grid sees a battery that’s always charging, and the load sees a battery that’s always outputting perfect quality power,” Cooper said. ​“In an oversimplified way, it smashes together BESS” — the industry term of art for grid-scale battery energy storage systems — ​“and UPS into a single asset.”

ON.Energy isn’t the only company building batteries for this purpose, said Shahil Shah, chief engineer at the National Laboratory of the Rockies, formerly known as the National Renewable Energy Laboratory. Shah is in charge of the grid simulator lab that tested the AI UPS system at multi-megawatt configurations. He’s also overseeing tests of a similar battery system from Prevalon Energy, and some others he said he can’t name yet.

Besides providing UPS services, these technologies aim to solve a growing problem created by the rapid buildout of data centers, Shah said. ​“Many power system operators are coming up with requirements to make sure that the data center loads — the large loads — don’t negatively impact the reliability of the grid.”

Data centers are uniquely challenging for utilities and grid operators to manage for a couple of reasons. First, their appetite for power can rise and fall dramatically, depending on how much computing they’re doing at any moment. And those changes can happen really fast, Shah said — ​“say, from 5% to 100% in a few milliseconds. You’re hammering the grid if you do that.”

Second, data centers’ sensitivity to fluctuations in grid power quality can trigger them to disconnect from the grid and switch to UPS and backup generators at a moment’s notice, leading to massive unexpected drops in power demand that threaten to throw grid balances out of whack. Grid operator PJM Interconnection has recorded a handful of such multi-gigawatt drop-offs in recent years, including one in July where nearly 4 gigawatts of data center load in Virginia disconnected.

Utilities and grid operators like PJM need to carefully balance supply and demand to avoid voltage and frequency fluctuations that can, in the worst case, lead to region-wide grid collapses. Many grid operators require big solar and wind farms to configure their systems to avoid tripping offline in response to grid voltage disturbances. Now data centers have become large enough to represent similar trip-off risks.

The North American Electric Reliability Corp., which oversees the U.S. and Canadian electric systems, has targeted large ​“computational loads” for new requirements on this front, and Texas utility regulators instituted similar requirements this year.

ON.Energy’s AI UPS is designed to handle those kinds of power isolation services, Cooper said. ​“Our double-conversion technology, which we’ve patented, is basically the process of fully electrically decoupling the load from the power generation source,” he said. ​“We’re using the fastest-response, best-in-class inverters in the market.”

That technological sophistication adds up to a relatively simple solution for the utilities and grid operators, he said. ​“We’re basically a really predictable utility-scale battery that just sits and takes power from the grid.”

To be clear, data centers need to be designed ahead of time to use ON.Energy’s AI UPS system, Cooper said. To illustrate the point, he showed me aerial photos of a Crusoe data center campus under construction. The parts of the campus built first include a central building that will house traditional UPS systems, he said. But the most recent building under construction has set aside land to one side where the AI UPS batteries will be installed.

Once a data center commits to a centralized UPS system like ON.Energy’s, it could look to use it for other purposes, he said.

Data center operators are under a lot of pressure to find ways to reduce the costs they’re imposing on utilities — and by extension, utility customers — by bringing their own technologies to avoid the need for costly grid expansions or new power plants.

It’s a lot easier to justify a standalone battery for reducing a data center’s peak power demand, or to soak up excess solar and wind power for use later, when it’s already paid its way as a UPS and grid-stabilization tool.

“The main thing is, you have a battery on site that’s multi-hour duration, and you’re able to curtail the data center from the grid whenever you need,” Cooper said. ​“It’s kind of a natural way to get data center flexibility — and there are a bunch of ways to back into that.”