From where I sit, multiple issues are increasingly intertwined: transmission feasibility, capacity procurement, and regulatory. All have to be addressed at the outset, rather than dealt with as problems arise.
To meet data center the demanding timelines of data center tenants, transmission feasibility and capacity procurement are being assessed concurrently with the development of power purchase agreements (PPAs). These PPAs can no longer be drafted assuming the appropriate interconnection approvals (for both load and supply) will be obtained in ordinary course, or that zoning or other discretionary approvals will need be obtained. Instead, to assuage the need for contracted power, PPAs are being developed with bespoke conditions precedent that identify those third party and related development approvals necessary to facilitate the development of the generation facility and/or co-located data center. The PPA should be structured in a way to reimburse the energy provider with all costs incurred in connection with the development of the project in the event those conditions precedent are not achievable. In addition to crafting detailed conditions precedent, we are building in more flexibility from the beginning – through change-in-law provisions, pricing adjustment mechanisms, and more robust conditions precedent – so agreements can adapt as permitting, interconnection and compliance requirements evolve over what is often a multi-year path to energization.
On the capacity procurement/supply chain side, the challenge is not simply equipment availability; it is also counterparty risk. Developers and suppliers are being asked to make long-term commitments in an environment where pricing, tariffs and delivery timelines remain uncertain. That uncertainty is showing up directly in negotiations through shorter commitment periods, greater conditionality and more extensive risk protections on both sides.
The result is that speed to market increasingly depends on how well those risks are anticipated and allocated at the front end. Projects that address them early are much better positioned to move efficiently when the commercial and regulatory pieces begin to align.