Interconnection Strategy: Navigating Grid Access for Data Center Developments

Grid interconnection has emerged as one of the most significant bottlenecks for data center development in many markets. Interconnection queues at regional transmission organizations can extend for years, with study and upgrade costs potentially reaching hundreds of millions of dollars. Developers must approach interconnection strategically, beginning with site selection that prioritizes locations with available transmission capacity and substation proximity. Early engagement with utilities and ISOs can identify potential constraints before significant capital is committed. Creative structuring, including phased interconnection agreements that align capacity additions with queue positions, can optimize deployment timelines. For BTM projects with grid export capability, understanding interconnection economics is essential to evaluating whether revenue from excess power sales justifies the interconnection investment.