In the face of AI, Schneider is “recalibrating” its demand-side investments

Energy stakeholders have predicted that the artificial intelligence boom will accelerate the deployment of everything from long-duration energy storage to grid-enhancing technologies. With skyrocketing demand, there’s a need to make the most of the existing grid.

That goes for behind-the-meter flexibility tools as well, said Schneider Electric CTO Scott Harden. As accelerating data center electricity demand meets slow transmission build-outs and imminent decarbonization targets, scaling demand-side tech is becoming more important than ever, he told Latitude Media.

Last fall, Schneider was already predicting that the transmission capacity problem wouldn’t be solved quickly enough to meet the moment. Based on that assessment, the company doubled down on demand-side investments like its relationship with distributed energy resources software developer Autogrid and its industrial solutions like smart panels.

And, as Harden said last November, Schneider was expecting that the largest data center operators (like Microsoft, where Harden was previously CTO of worldwide energy and sustainability) would also shift their focus to demand-side options.

But in the last nine months, the energy demands of data centers has “changed our business at Schneider significantly,” Harden said. 

“We are a key supplier to all of the hyperscalers, and now that they’re really requiring an even higher density of energy consumption, the equipment we’re providing is even more important,” he said.

Demand-side investments

Harden said the “concentration” of demand-side investments, both by Schneider and by its customers, is ramping up rapidly.

When it comes to balancing AI demands with steep decarbonization targets, he added, “there aren’t many options right now.” 

There’s one ask that Schneider has started to hear repeatedly from its largest customers: “how can you help us capture more flexibility?” Harden pointed to investments in virtual power plant programs as one example. 

“They’re going to be demand response programs that move beyond just a behavioral program: something that becomes more dispatchable because you build in automation microgrid technologies,” he predicted.

Today, the kinds of investments that Schneider is anticipating haven’t changed — but the scale has gotten bigger and the timeline has accelerated. 

“We have now recalibrated all of our forecasts on the scale associated with these solutions,” Harden said. “We’re seeing our customers prepare themselves to deploy systems that provide that type of additional resource that they need for these capacity increases.”

A large chunk of that preparation is happening in the form of demand-side partnerships, and an effort to standardize interoperability between different types of resources, Harden said. AI, he added, is a “remarkable catalyst” for getting the tech challenges — of which many remain — ironed out.

The shifting customer mindset on regulation

Another shift: large Schneider customers like Microsoft are working to quickly “get up to speed” on regulations that impact their ability to access electricity, Harden said.

“They are becoming much more aware of regulations that didn’t seem front-of-mind,” he explained.

For instance, a lot of the solutions Schneider’s customers want to deploy, like VPPs and Microgrids, are cloud-based, and Harden said that the regulations governing cloud-based software are getting more attention.

Currently, there are two key regulatory issues facing movement to the cloud, he added. First, Financial Accounting Standards Board rules don’t allow utilities to treat cloud computing investments as capital expenditures. That impacts whether and how utilities are able to make investments in the software, he said.

But there’s also a security angle. Despite some changes made earlier this year, the Federal Energy Regulatory Committee doesn’t currently allow for control systems to be deployed on cloud infrastructure, Harden explained. 

That said, the desire to become more cloud-based where possible is certainly widespread. Harden pointed to a 2023 whitepaper from a North American Electric Reliability Corporation subcommittee recommending ways to remove barriers to adoption for cloud-based bulk electricity system operations.

“I don’t think we are going to see a wholesale migration from utilities to go 100% cloud, but you’re going to see a drastic reduction of the data center infrastructure that they actually own and maintain,” Harden said. ”They are going to be looking at much more hybrid models, even when it comes to control systems.”