AI just ordered a gigawatt. The grid put it on backorder.

Hyperscale data centers are growing so fast that utility planners are reaching for espresso. AI and cloud workloads are pushing power demand to levels local grids were never designed to deliver, and interconnection queues are the new waiting room. The fix arriving first? Big batteries - not just in racks as UPS, but out in the yard as multi-hour, grid-tied BESS that act like mini power plants.

The problem: AI-era demand meets a strained grid

Data center electricity use is climbing fast. The International Energy Agency’s Electricity 2024 report highlights that global electricity demand from data centers, AI and crypto could roughly double by 2026 if current trends continue, putting fresh pressure on grids already integrating large shares of variable renewables, as noted in this report.

At the same time, interconnection backlogs have become a gating factor. PJM, the largest US grid operator, overhauled its process to a cluster-based, first-ready-first-served model and has completed Transition Cycle 1 studies, a key step toward clearing the queue faster, per PJM. A new fact sheet details progress and timelines for subsequent cycles, as shown in this update. The reforms align with FERC Order No. 2023’s push for cluster studies and standardized timelines across ISOs, discussed in Utility Dive and analyzed in this RMI piece.

The shift: beyond UPS to grid-scale BESS

For decades, data centers relied on UPS batteries to bridge milliseconds-to-minutes until diesel generators fired up. That bridge is now becoming a highway.

• UPS - great at instant ride-through and power conditioning, but typically short duration and idle most of the time.
• Grid-scale BESS - multi-hour systems that do peak shaving, capacity support, arbitrage, and ancillary services when the grid is stable, then provide backup during disturbances. They can reduce dependence on diesel and help interconnect sooner by managing on-site peaks.

As batteries get cheaper and smarter, the economics tip from pure risk mitigation to revenue and cost avoidance. NREL’s latest cost and performance update shows continued declines for lithium-ion systems through mid-decade, improving the case for 2-to-4-hour applications, as detailed in this NREL report. Market analysts expect storage to play a bigger role in flexible capacity for digital loads, as discussed in Wood Mackenzie’s 2025 outlook.

Evidence: big batteries are already showing up

• Amazon, Indiana - NIPSCO’s GenCo plans a 400 MW/1,600 MWh battery at the former Mitchell plant site to support Amazon’s $15 billion data center expansion, alongside new gas capacity. Details are in Energy-Storage.news, Utility Dive, and Amazon’s announcement here, with NIPSCO background here.
• PJM acceleration - With Transition Cycle 1 complete and new cluster rules in place, storage projects should move faster from application to interconnection, creating a clearer runway for data center-adjacent BESS, per PJM and this fact sheet.
• Europe’s C&I wave - Corporates are adopting on-site storage to cut peak charges, earn flexibility revenues, and back up high-availability loads. Analysts expect commercial and industrial storage to scale in markets with high renewables and strong flexibility markets, as noted in Wood Mackenzie.

The economics: UPS vs BESS

Why are operators investing beyond traditional UPS?

• Stacked value - Energy arbitrage, frequency regulation, reserves, and demand charge management monetize batteries when the grid is up, improving total cost of ownership compared to idle UPS assets, as markets mature per WoodMac.
• Avoided upgrades - On-site BESS can shave peaks and defer costly interconnection upgrades or standby charges while large loads ramp, complementing utility timelines highlighted by PJM’s reform materials.
• Declining costs - Continued capex reductions and better cycle life improve the economics of 2-4 hour systems for capacity and backup, per NREL.
• Cleaner resilience - Batteries cut diesel runtime and emissions, aligning with corporate net-zero goals while maintaining uptime requirements, a trend seen in hyperscaler procurements such as the Indiana project cited above.

What it means for renewable integration

Grid-scale BESS at or near data centers can soak up midday solar and off-peak wind, then discharge into evening peaks or on-request by the TSO, smoothing both the data center’s load profile and the system’s net load. That reduces curtailment and accelerates renewable PPAs turning into real, around-the-clock decarbonization - a trajectory consistent with NREL’s cost-performance pathways and WoodMac’s market outlooks here and here.

What to watch in 2025

• PJM’s next cycles - Progress on subsequent cluster cycles, plus how FERC Order 2023 timelines are implemented, will set the pace for storage interconnections, per PJM and Utility Dive.
• Campus-scale C&I BESS - Expect more European campuses and data centers to monetize flexibility while improving resilience, per WoodMac.
• UPS-BESS hybrids - Designs that blend millisecond ride-through with multi-hour capacity are becoming standard for AI-centric facilities, reducing generator reliance and unlocking grid revenues.

Bottom line

Data center battery storage is graduating from the server room to the substation. With AI data center power demand rising and interconnection windows tight, grid-scale BESS are becoming as essential as UPS - not just to keep the lights on, but to pay their way. In PJM and beyond, expect batteries to be the bridge between digital growth and a cleaner, more flexible grid.