BPU President Ben Hertz-Shargel acknowledges what everyone knows: Data centers are using a lot of energy. But during a recent fireside chat, Hertz-Shargel offered a take that many haven’t heard: The way data centers use power can actually improve how efficiently the grid runs — a factor that, on its own, would ease pressure on ratepayers’ bills.
Hertz-Shargel, president of the New Jersey Board of Public Utilities, made the case last week in a chat with BINJE Editor Tom Bergeron that closed the first day of the Hermann Sustainability Summit at the New Brunswick Performing Arts Center.
The $1M fine
Please note, this conversation took place before the N.J. Department of Environmental Protection — a separate agency from Hertz-Shargel’s BPU — announced a record $1.07 million fine against the DataOne data center in Vineland.
The potential savings, he said, come from the way data centers use power. Homes and businesses use it in spikes — the summer and winter peaks that determine how much money must go into the grid. The rest of the time, the grid is underused. Data centers run around the clock, so a good share of their power use falls in those off-peak hours.
“Basically, data centers consume, roughly speaking, power all the time,” he said. “That means that they are very heavily leveraging the fixed infrastructure that already exists.”
The result, he said, is that data centers cover a disproportionate share of the grid’s fixed costs, which leaves less for everyone else — a dynamic he said credible research organizations have studied and backed up.
But Hertz-Shargel was careful to note that better system utilization is only one piece of the cost picture, and not necessarily the deciding one. Other factors — from the cost of new infrastructure a data center might require, to the effect data center demand has had on capacity prices in the regional PJM Interconnection market — can push costs up, and could offset or even overwhelm any savings from more efficient grid use. New Jersey’s own Data Center Fair Share Act is designed to make sure customers don’t see cost increases tied to factors the state can control, he said. But factors controlled by PJM sit outside the state’s reach, and could still outweigh the benefit.
That is where the new law and the BPU’s new rules come in, he said, when it comes to the costs New Jersey can control.
“We are requiring data centers to pay for all that new stuff,” he said.
Hertz-Shargel, who began in the role in June, said data centers have been a key issue since Day One — and an issue with many levels of intricacy.
For starters, he distinguished between two kinds of data centers: the ones that mostly exist in New Jersey, which he said are largely the financial backbone of the world, and the controversial new hyperscale facilities.
He said the law requires transparency on how much power and water the facilities use. It also is meant to push them to bring their own clean generation. Under rules PJM Interconnection, the regional electricity market, is setting up, a data center without its own supply faces being curtailed.
“You’re going to get cut off from power when things get tight, and no data center wants that,” he said.
Whether to host one is a local decision, he said, and he said he was speaking personally. Asked about towns that reject data centers outright, he said there is no right answer.
“If a town doesn’t want it, they shouldn’t have to have it,” he said.
Towns that do want one can bargain, he said. Data centers are capital-intensive facilities that pay a lot in taxes, and communities can negotiate a community benefit agreement using guidance the state recently issued. If they can’t reach terms, a town can walk away and doesn’t have to issue zoning or permits. He said the projects create plenty of construction jobs but few full-time ones, though studies show they can lift local trades such as security and maintenance.
Data centers are neither good nor bad, he said. They are a choice to be made.
“People want AI. AI is going to happen,” he said.
Hertz-Shargel said any promise of lower bills depends on follow-through — and on forces beyond New Jersey’s control.
“Obviously, we need to execute on it,” he said.
