AI data centers force 'peaker power' plants to be brought back into service

The demand for electricity from AI data centers is reviving peaker power plants

Peakers emit more pollutants than power plants.

The majority of power plants are located in minority and low-income communities

By Laila Kearney

Dec 23, CHICAGO -

A 60s oil-fired plant rises from an industrial site behind Dvorak Park in Chicago's working class Pilsen district. In warmer weather, the park is crowded with children playing on its colorful playground or zooming down slides.

Next year, the eight-unit Fisk Power Plant owned by Houston's NRG Energy is scheduled to be retired. The next step was artificial intelligence.

As electricity demand from data centers outstripped existing supply, prices shot up on the country's largest power market – PJM Interconnection – alarming about power shortages and making Fisk & other plants like them suddenly profitable.

Matt Pistner said that NRG's senior vice president for generation, Matt Pistner, retracted the retirement notice from eight Fisk power-generating units.

Fisk is one of a growing number "peaker" units that are being used to power the U.S.'s electrical grid, with the demand for artificial intelligence from Big Tech data centers.

Peakers are designed to operate in short bursts when electricity demand spikes. They help prevent blackouts because they can provide power at a moment’s notice. These fossil-fuelled facilities, which are often decades old, emit more pollution and produce more electricity when they're running.

The analysis of the filings at the largest power grid in the country shows that 60% of them are for renewable energy sources.

PJM has postponed, or even cancelled, plans to retire oil and gas power plants. The majority of plants that avoided shutdowns were peaker units.

The Fisk Peakers were built at the site of an old coal-fired power station which operated for more than a century. The coal plant closed in more than a ten-year period after years of opposition from local residents. However, eight peaking units powered by petroleum oil still operate at the site.

"We were very disappointed when we learned that the coal station was closing, but still producing power at the site," said Jerry Mead Lucero, a lifelong advocate of the closure of Fisk coal, who lived most of his adult years in Pilsen.

Pollution dropped after the coal plant closed, but didn't disappear. According to the Environmental Protection Agency (EPA), sulfur dioxide levels at the site ranged between 2 and 25 tons of sulfur dioxide per year, when the peaker plant, which had eight units, occasionally fired up to feed the grid.

"That is not a small amount, considering the chimneys and houses nearby," said Brian Urbaszewski. He's Director of Environmental Health Programs for Respiratory Health Association in Illinois, a nonprofit organization that helps people with respiratory diseases.

DIRTY POWER

According to research by the federal and academic authorities, peakers are often not equipped with pollution controls such as mercury scrubbers that remove toxic chemicals from power plant emissions and filters for particulates.

Environmentalists say that some chimneys or smokestacks are lower, which means pollution is more localized.

The U.S. administration of Donald Trump may be more aggressive in extending the life of peakers. It has said that it is exploring all options, including peaker plants, emergency systems and other ways to meet massively increased electricity demand.

In an interview with Chris Wright in September, the U.S. Energy secretary said that there are many peaker plants which could be operated more often. He added that air quality regulations had prevented more from being run more frequently. The biggest targets today are the spare capacity in the grid.

According to a U.S. Government Accountability Office report, peaker plants produce about 3% of?country's electricity, but they are capable of producing 19%.

If we tap into this spare capacity, it could lead to more harmful emissions being released into neighborhoods which are already overburdened by environmental hazards.

According to research by the federal government and academics, the majority of the country's peaker plants are located in communities of color with low income. This means that prolonging the life of the plants could cause more pollution to be emitted into the air.

In a 2022 study, residents of "redlined" U.S. areas, who were denied financial services like mortgages because they were primarily Black or immigrants, were 53% more inclined to have a peaker built near them since 2000, compared with those in non-redlined communities.

The study was led by UCLA Professor of Environmental Health Sciences?Lara Cushing.

The Grid is being strained by the power demands

The majority of peaker plants in the United States were built in two periods of rapid growth in energy demand: at the beginning of the 20th century, when electrical appliances became commonplace in homes; and then again in the early 2000s as computers and the economy began to grow. After the energy-sucking devices and infrastructure improved, U.S. demand for power decreased and many fossil-fired plants closed.

Solar and wind farms began to provide more energy. These only work when the sun shines and the wind blows.

The U.S. Congress directed the Government Accountability Office to investigate the use of peaker plant and their impact on American communities. Environmental justice groups urged the U.S. Congress to do so.

According to the study, peaker natural gas plants emit 1.6 more sulfur dioxide per unit of electricity generated on a median base compared with non-peaker plants.

Fisk is a part of PJM Interconnection - the largest electrical grid in the United States. It spans 13 states, and has the highest concentration of data centres anywhere on the planet. The demand from AI data centres is threatening the grid's reserves and is already driving prices up.

The prices paid by PJM power suppliers to run plants during times of high demand jumped more than 800% compared to a summer ago. This made peaker power plants more profitable.

Jeff Shields, PJM spokesman, said: "It's clear that the electricity demand in this country is greater than supply –?the market reflects it, and generators respond." "We can't afford to lose our existing generation, while continuing to add new generation in order to meet the needs of the data centers and other heavy loads that power the nation's economy."

According to an analysis of the letters sent by power companies to PJM Interconnection, 23 oil, coal and gas power plants were set to retire in PJM territory in 2025.

The letters show that since January, U.S. energy companies, grid operators, and the federal governments have postponed or cancelled retirements for 13 of these power plants. The letters showed that 11 of the plants which avoided closure were peakers.

The Department of Energy ordered that the 55-year-old "Eddystone", owned by Constellation Energy and located outside of Philadelphia be kept running. PJM requested that the Wagner peaker near Baltimore be kept running while the grid operator coordinated the transmission required for the generator to be removed.

Some of the power plants that were retained were originally built to provide power around-the clock, but were later downgraded so they only run in emergencies.

Last Line of Defense

Fisk's owner NRG Energy believes peakers are vital safeguards for grids that are increasingly needed not only for data centers, but also for electrifying manufacturing and transportation and to avoid blackouts due to winter storms or summer heatwaves.

Fisk Peakers are located in Chicago, so the city does not need to import power in an emergency if outside sources of electricity go down.

Matt Pistner, NRG Energy, said: "They are the shock absorbers and last line of defense for the system." When they are needed, there's nowhere else to turn.

Pistner said that while NRG has power-generating sources ranging from wind and solar to nuclear, oil-fired peaks add an additional layer of security by ensuring fuel can be stored locally.

A NRG spokesperson said separately that "during its run time, the power station consistently operates within federal or state environmental regulations - and we are proud to its record".

Experts in energy say that there are other options to peakers. Transmission lines that are more reliable could be used to transport electricity from areas of the country where there is an excess of power, to those who have a shortage.

Rusco, from the GAO, said that "if we did that, the system could run more efficiently. You would also probably reduce the amount of dependence on peakers."

Clean energy advocates believe that batteries, which are being improved to store power longer, can also replace peaker units.

As AI power demand increases, communities such as Pilsen that have been successful in closing some sources of pollution over the past few years may find it more difficult to combat peaker plants.

John Quigley of the University of Pennsylvania Kleinman Center for Energy Policy said: "It will result in significant cost increases for consumers of electricity and local pollution, and prevent the connection of new clean energy production to the grid."

PJM has said that it will continue to connect renewable energy, nuclear power and gas-fired electricity to the grid, regardless of how long peakers remain on.

Shields stated that "we need to get every megawatt we can right now." He added that deactivating existing plants "ignores the reality."

Northern Illinois has a growing data center market. At least one data centre is already operational in Pilsen, and there are multiple energy-intensive projects being planned for the surrounding areas. T5 Data Centers announced a 20 building campus this year.

Mead Lucero is concerned that the Fisk Peaker Units will continue to exacerbate the environmental problems in his hometown. This includes industrial truck traffic emissions, metal scrappers, and a major road cutting through the area. "You combine all these factors and you have a real problem."

(source: Reuters)