Onsite Generation – Part of the Power Stack

Facing years-long delays and cost increases for utility interconnection, data centers are partnering with microgrid developers to rapidly and inexpensively construct the energy generation essential to their operations. Most developers, operators, and end users now see onsite generation as a critical component of their power stack, especially as a bridging power until utility interconnection is available. But the question remains: what should be done with these microgrids after interconnection occurs?

To maximize the long-term utilization of these microgrids and create additional capacity beyond utility load, data center developers have four options:

1. Provide additional capacity, supplementing or overriding utility interconnection
2. Allocate microgrid power for mechanical load
3. Provide back-up power supply during prolonged outages
4. Export excess power to the electric grid

The options that best suit a given data center can be chosen based on the center’s power demands, as well as the reliability and pricing of available utilities.

Background: Why data centers struggle to interconnect

After decades of stagnant electricity demand in the United States, grid operators have been caught off guard by explosive data center growth. Electricity market prices have spiked from these tight supply and demand conditions. To minimize ratepayer risk, utilities are proposing new rate classes and tariffs for data centers that will escalate their electricity costs.

Even assuming that data centers endure higher costs and market volatility for access to utility power, the timelines for data center and power development are mismatched. Data centers can be built in about a year, but transmission projects can take over a decade to complete, and large baseload power plants, including natural gas and small modular reactors, can take three to five years to commence operations.

Microgrid development is much faster, bridging the gap between data center operation and grid interconnection: a 1 GW microgrid powered by natural gas begins operations within 24 months. Utilities may even accelerate or subsidize interconnection for data centers powered by microgrids, since microgrids can cover planned utility interruptions and outages that would otherwise be the utility’s responsibility.

Long-term Utilization: Four viable uses for microgrids

Most data center users and builders have become comfortable with on-site power generation (microgrids). They have decided to use the microgrid as a replacement for, or alongside, utility power. Below are four examples of this:

Additional Capacity to Supplement or Override Interconnection

Given the many limitations of utility interconnection, data centers may choose to supplement utility power, or forego interconnection altogether, with additional microgrid capacity. 

Before any utility interconnection, a microgrid can provide power because it operates independently of any other grid. After interconnection, data center developers may thus choose to dedicate load towards their microgrids regardless, because the power supply is already built, cheaper, and more reliable.

Microgrids can also stay in island mode indefinitely, never connecting to utility power. These microgrids manage their own generation and balance supply with demand for the data center. Today, data centers face elevated transmission and distribution costs if pursuing grid interconnection, which can be eliminated by operating only on microgrid power. As state and local legislation across the United States continue complicating grid power access for data centers – thus increasing the costs, wait times, and risk of curtailment – it becomes increasingly favorable to avoid grid interconnection entirely.

Support for Mechanical Load

Microgrids are uniquely suited to support the mechanical needs of data centers, such as energy-intensive cooling, even after utility power has been installed.

Because microgrids are on-site, less power is lost to transmission costs. Additionally, using combined heat and power (CHP) enables microgrids to provide both electricity and useable heat, which can be repurposed for cooling data centers. Since CHP systems often run continuously and are better maintained than standby generators, they also contribute to data center resiliency and minimize chances of a blackout.

Unison Energy’s CHP systems use waste heat to provide heating and cooling and have high efficiency: cogeneration is 60-80% efficient, which is more than twice the efficiency of a typical power plant. These systems are cost-effective, too. Unison Energy microgrids provide power at a rate 5-20% cheaper than gas and electric utilities, particularly when leveraging financial incentives, including tax credits for microgrids.

Back-up Power Supply During Prolonged Outages

In June of 2025, the Texas legislature passed Senate Bill 6, which will require data centers to cover transmission and distribution grid costs, disclose back-up power supply, and prepare for curtailment in cases of peak demand. 

SB 6 signals how states will manage pressure on electric grids going forward. Motivated by recollections of demand-induced grid outages during Winter Storm Uri in 2021, Texas is the first mover on requiring back-up power at data centers. As other states encounter grid risks caused by sluggish energy development and soaring demand, they are likely to follow suit.

For data centers preparing to safeguard against these incoming policy measures, CHP microgrids offer reliable baseload power, reducing dependence on utilities in case of power outages. This is critical for maintaining desired data center uptimes, which are tiered on the scale of 99% to 99.999%.

Export to the Electric Grid

On expensive electric grids, or during periods of peak demand where utility power is costly, activating on-site microgrid power is highly advantageous. Data centers can save money with cheaper microgrid power and can even sell excess power to the electric grid, offsetting their electricity costs and enhancing grid-wide resiliency. Given the current elevated demand for power, coupled with delayed and paused energy development nationwide, speedily deployed microgrids at data centers can minimize the increasing gap between electricity supply and demand. 

While providing resiliency to the utility, data centers can additionally generate substantial revenue streams from selling microgrid power on the wholesale market. Wholesale electricity prices ranged from $25/MWh to $212/MWh in PJM, NYISO, and ISO-NE in June 2025, according to electricity updates from the U.S. Energy Information Administration. Since microgrids can provide power during congestion events, they stand to profit significantly. Beyond energy sales, data centers could also participate in ancillary services markets to provide additional value or incorporate cleaner energy (renewable natural gas or biogas) to qualify for renewable energy credits (RECs) or carbon offset credits.

Conclusion: Why choose microgrids for data centers

It is a common misconception that when data centers are connected to utility power, any microgrid established to bridge load becomes a stranded asset. Even when there is interconnection available, microgrids offer many benefits over utility grid power. Data center developers could use microgrids concurrently with utility power as mechanical power load, back-up power supply during outages, and excess power exports. Alternatively, developers could employ microgrids that replace utility power entirely.

As such a versatile and resilient power source, microgrids are a perfect match for this data center moment. Unison Energy is ready to partner with developers to determine optimal microgrid configurations for their data center needs by addressing policy compliance, technical execution, and continuous monitoring upon operation.