For AI, a Few Seconds of Power Becomes a Booming Business

The data-center building boom is underpinned by a basic requirement: Never, ever, lose power.

The race to power new artificial-intelligence models and keep internet and mobile services humming around the clock is creating a windfall for the makers of the generators and battery systems that are crucial to keeping power flowing through thunderstorms and grid failures.

Blips, sags, dips or anything else less than a smooth, continuous flow of electricity aren’t tolerated at Stream Data Centers’ two computer server sites in suburban Chicago. The converted warehouse buildings host thousands of servers, backed up by banks of batteries and diesel generators.

“We’re considered a mission-critical facility,” said Stuart Lawrence, Stream Data’s vice president for product innovation and sustainability. “The customers we’re serving are very energy-conscious.”

The company acquired more than 50 homes and businesses nearby that it has razed to make way for a new three-building data-center campus. Construction on the first building is expected to start next year.

Data-center developers are in the midst of a building boom spurred on by powerful new computer chips driving artificial intelligence-enabled products, such as ChatGPT, that sift through vast repositories of information and images to make decisions. AI servers are being layered on top of an already robust data-center market for cloud-based servers that empower consumers to remotely pay bills, purchase clothes, send emails or stream their favorite TV shows on computer screens.

U.S. data-center space expanded by 26% in 2023, according to real-estate firm CBRE, with a record amount under construction. Prices for available space continue to rise.

“I don’t see the music stopping any time soon,” said Nic Bustamante, chief technology officer for Corscale, a Houston-based developer and manager of data centers.

The usually staid market for outfitting data centers with generators, batteries, transformers and other electrical gear is being supercharged by the build-out. Companies including electric equipment makers Eaton, ABB, Schneider Electric and generator manufacturers Caterpillar and Cummins attribute rising electrical equipment sales to data centers’ expansion.

Schneider last fall received a five-year, $3 billion contract from Dallas-based Compass Datacenters to provide prefabricated rooms with power management equipment that can be dropped into data centers under construction.

Engine maker Cummins recently said it expects sales from its power-generation business to increase by 10% to 15% this year, up from its previously forecast 5% to 10% growth. The company aims to expand production of 95-liter engines used for data-center generators.

“We’re sold out on our 95-liter through 2025,” Chief Executive Officer Jennifer Rumsey said.

At rival engine maker Caterpillar, sales of diesel engines for power generation grew to $6.4 billion in 2023, a 29% increase from 2022, driven by data-center sales. Sales of power-generating engines rose by another 26% during the first quarter of 2024.

Caterpillar plans to invest $725 million in its Lafayette, Ind., plant to expand production of large engines used to generate electricity.

“We see electric power as a growth business within Caterpillar. A big driver of that is the data-center business,” said Jason Kaiser, president of energy and transportation for the construction and mining-equipment company.

Eaton reported recently that orders for data-center electrical gear have more than doubled over the past 12 months. “We are signing multiyear agreements with our customers to ensure that we have capacity in place to support the demand they need from us,” CEO Craig Arnold told analysts on a conference call.

Backup power, air cooling, power distribution gear and other building systems account for as much as half the cost of constructing data centers, which typically ranges from $500 million to $1 billion each, according to developers. Large diesel-powered generators cost as much as $1.5 million each, with waits to get them from manufacturers stretching as long as two years.

“The challenge is having power available. You cannot have downtime and you cannot have a power outage,” said Natalie Silva, critical power and sustainability leader for ABB.

Developer CloudHQ has more than 300 Caterpillar generators at seven data centers operating in Northern Virginia—the nation’s data-center hub—and two additional sites under development there.

Generators and battery backups see sparse duty in most parts of the country. At CloudHQ’s Virginia data centers, the generators typically turn on once or twice in a year in response to a full power outage and usually run for a minute or two before regular power service resumes.

CloudHQ’s data centers draw power from their own electricity substations that are connected to electrical transmission lines, lowering the likelihood of a prolonged outage from storm damage that other businesses or houses may experience, Vice President Brian O’Hara said.

At one of Stream Data’s suburban Chicago data centers, more than two dozen generators built by Cummins stand by to provide the 32 megawatts of electricity needed to maintain the center’s servers and other systems.

The data center features four separate halls packed with rows of metal racks that hold the computer servers. The higher density of newer, more powerful computer chips and servers require about twice as much power a square foot in a data center as a decade ago.

If the center loses power, the servers would draw power instantaneously from banks of lithium ion batteries dedicated to each of the building’s server halls. Short of an outright loss of power, the center’s uninterruptible power supply also smooths out the momentary dips or other irregularities that regularly occur in the power supplied by a utility company.

“The servers have become less and less tolerant to the slight sags in power or brownouts,” said Adam Compton, head of data-center strategy for Schneider Electric, the supplier of the uninterruptible power systems for Stream Data.

Write to Bob Tita at [email protected]