Flexible Data Centers and the Grid: Lower Costs, Higher Emissions?

Christopher Knittel, Juan Ramon L. Senga and Shen Wang

No 34065, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Data centers are among the fastest-growing electricity consumers, raising concerns about their impact on grid operations and decarbonization goals. Their temporal flexibility—the ability to shift workloads over time—offers a source of demand-side flexibility. We model power systems in three U.S. regions: Mid-Atlantic, Texas, and WECC, under varying flexibility levels. We evaluate flexibility's effects on grid operations, investment, system costs, and emissions. Across all scenarios, flexible data centers reduce costs by shifting load from peak to off-peak hours, flattening net demand, and supporting renewable and baseload resources. This load shifting facilitates renewable integration while improving the utilization of existing baseload capacity. As a result, the emissions impact depends on which effect dominates. Higher renewable penetration increases the emissions-reduction potential of data center flexibility, while lower shares favor baseload generation and may raise emissions. Our findings highlight the importance of aligning data center flexibility with renewable deployment and regional conditions.

JEL-codes: D61 L94 Q41 Q48 (search for similar items in EconPapers)
Date: 2025-07
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