A historic realignment is underway at the intersection of digital infrastructure and the power system. AI and cloud computing are driving a wave of large-load interconnection activity and siting decisions that are testing grid capacity, market design, supply chains, and public policy.

Viewed narrowly, the “data center surge” is a reliability risk and a cost pressure. Viewed strategically, it’s a catalyst to modernize the grid, accelerate energy infrastructure investment, and mobilize financing models that benefit hyperscalers, utilities, investors –and the communities that host new development.

CohnReznick’s point of view is clear: integrated planning, innovative deal structures, and credible pathways for reliability and decarbonization will establish leaders and set standards. Organizations that align power procurement, interconnection strategy, and community outcomes will secure capacity faster, de-risk execution, and build durable competitive advantage.

The surge: What’s different this time

1. Scale and speed – at “grid-moving” magnitude

• Data center load growth – especially for AI training (building models) and inference (running models in real time) – is outpacing legacy planning assumptions. Where load additions once came in single-digit megawatts, today’s campuses often seek hundreds of megawatts or even gigawatts on accelerated timelines. Interconnection queues, transmission constraints, siting, fuel considerations, and emissions realities now define pacing.

2. Concentration and clustering

• A handful of regions with political and regulatory support, abundant land, competitive rates, robust fiber, and permitting pathways are absorbing an outsized share of large-load interconnection requests. This clustering creates opportunities (coordinated infrastructure development) and risks (localized reliability, congestion, and pricing shocks).

3. Reliability as a board-level topic

• Large, relatively “flat” compute loads are reshaping seasonal peaks. Utilities are re-running resource adequacy plans and grid operators are refining queue processes. Customers are exploring on-site/near-site generation – including renewables, storage, and thermal backup – and demand flexibility to maintain schedules.

4. Policy crosswinds

• Permitting reforms, transmission planning changes, environmental standards, and shifting incentives create both acceleration and delay. Execution risk now lies as much in policy and process as in physical infrastructure.

Constraints that will shape what gets built

Even with strong demand, several constraints will determine the real buildout curve:

• AI hardware limitations: Chip shortages continue to cap near-term buildout velocity.
• Supply chain bottlenecks: Transformers, switchgear, turbines, and skilled labor remain schedule risks.
• Tariff and commodity cost pressure: Steel, copper, and switchgear costs have climbed and remain volatile.
• Resource mix volatility: Policy shifts influence the financeability and timing of new generation.

Market reality: Not every proposed project will be built

Interconnection queues may imply thousands of projects – but only a portion will materialize.

• High speculative volume: Industry experts estimate speculative requests may exceed real projects by a factor of 5-10x, with utilities increasingly filtering credible from non-credible projects.
• State guardrails emerging: More states are requiring clearer commitments on load, timing, and community benefit before allowing projects to advance.
• Nuclear interest vs. nuclear availability: Global nuclear capacity remains constrained despite renewed attention.
• OEM bottlenecks: Multi-year turbine backlogs and constrained OEM capacity limit near-term buildout regardless of ambition.
• Materials as gating items: Volatility in copper, steel, and electrical gear impacts cost and schedule feasibility.

In Texas, the volume of data center proposals has grown so quickly that the state grid operator is considering reviewing and potentially reevaluating previously approved projects as projections change. This reflects an emerging trend: regulators are not only scrutinizing future proposals, but are reassessing projects they earlier approved based on new conditions.

This is a signal that no project is guaranteed unless it maintains credibility, transparency, and demonstrated progress.

CohnReznick’s POV: From constraint to catalyst

Data centers are uniquely positioned to propel the next wave of grid modernization. Their scale, credit quality, and long-term load visibility can underwrite new generation, accelerate transmission investments, and anchor regional energy strategies – if approached with discipline.

Our core convictions

• Plan as an ecosystem, not a site. Integrated planning outperforms siloed decisions.
• Finance the grid you need. Use hybrid resources, merchant-plus structures, tolling, and capacity-backed contracts to unlock capital.
• Compete on credible decarbonization. Additionality, deliverability, and hourly matching define leadership.
• Build trust locally. Community alignment is now a strategic differentiator.

Solutions we’re building with clients

• Hybrid campus portfolios
• Upgrade-cost-sharing structures
• 24/7 time-matched clean power pilots
• Community-positive siting strategies
• Multi-decade scenario planning

Case patterns to imitate (and avoid)

What works

• Anchor-plus hybrid models
• Flex-ready PPAs
• Queue triage

What to avoid

• One-and-done procurement
• Late community engagement
• Policy-blind economics

Metrics that matter

• Time to energization
• Hourly clean-match score
• Upgrade cost per kW
• EUE and N-1/N-2 resilience
• Community outcome KPIs

Call to action

The data center surge is not a temporary blip – it is the blueprint for the next decade of grid investment. The question is whether organizations will react to constraints or lead with coordinated planning, innovative finance, and credible reliability and decarbonization pathways.

CohnReznick collaborates with utilities, investors, and communities to deliver faster energization, lower total reliability costs, and measurable progress toward a cleaner, more resilient grid.

If you’re planning a new campus, reevaluating interconnection posture, or aligning sustainability goals with operational realities, we can help you build the roadmap.

How CohnReznick helps

• Strategy and scenario planning
• Transaction and capital advisory
• Interconnection governance and program management
• Community and workforce advisory