In the modern-day gold-rush to identify and procure the best sites to support the AI infrastructure boom, the most valuable data center asset is not land — it’s land with power or grid interconnect already attached. Recent research shows that obtaining power is the key obstacle to successful data center development that developers face during site selection, cited by roughly two-thirds of respondents who were surveyed for the Foley 2026 Data Center Report.
Most data centers are connected to the grid as a steady and dependable source of power. However, the immense amount of electricity required by data centers running HPC loads supporting AI training or inference systems has quickly placed strain on current grid infrastructure.
U.S. data centers consumed roughly 176 terawatt-hours of electricity in 2023 — about 4.4% of the nation's total — after more than doubling their draw since 2017. The Department of Energy's Lawrence Berkeley National Laboratory projects, in its 2024 U.S. Data Center Energy Usage Report, that figure could reach 325 to 580 TWh by 2028, or as much as 12% of all U.S. electricity, translating to a power demand of 74 to 132 GW.
While developers are pushing to quickly construct and deliver data centers to answer the sky-rocketing demand for compute power, the build-out of the grid necessary to match that expansion cannot keep up. Because of this, developers must be more judicious in the site selection process to confirm that grid capacity is available, or alternatively, to seek out multiple alternative energy sources such as microgrids, gas turbines, fuel cells, or renewables, which can come on-line more quickly, and in some cases, can provide cheaper electricity.
As power has become the gating factor for development timelines, developers are increasingly inverting the traditional site selection process. Historically, location decisions prioritized proximity to network infrastructure, favorable tax regimes, climate conditions and land cost, with utility service treated as a necessary but largely solvable step that followed land acquisition. Today, that sequence is often reversed. Developers are starting with available megawatts and working backward to determine whether a site can support the balance of technical, regulatory, and commercial requirements for a data center campus.
This shift has given rise to the growing premium placed on “powered land” — sites that already benefit from existing substations, meaningful load capacity, or advanced positioning in a utility’s interconnection queue. In many markets, these attributes matter more than raw acreage or even real estate pricing. A smaller or less than perfect parcel with confirmed power can be substantially more valuable than a larger, greener site that faces uncertainty around timing or feasibility of grid upgrades.
Power availability is now a front end strategic consideration. Developers that secure early interconnection agreements gain a significant competitive advantage, not only by shortening development timelines but also by improving project finance certainty. Being further along in the interconnection queue can mean the difference between moving forward with construction or shelving a project for years.
Utilities, for their part, are increasingly inundated with interconnection requests from data center developers whose projected loads dwarf historical demand. As a result, queue delays have become common, and utilities are scrutinizing applications more closely, often requiring detailed project information and financial commitments earlier in the process. This heightened scrutiny has reinforced a “first mover” dynamic: developers that move quickly to lock up power rights can effectively control future growth in a given region.
That urgency has pushed many developers to pursue land options or purchase agreements that are expressly conditioned on securing power, rather than closing on land and hoping for the best. Power centric site control structures — including long term options, phased closings, or joint development arrangements with landowners or utilities — are becoming increasingly common as a way to manage risk while maintaining flexibility.
Where grid power is constrained or timelines are uncertain, developers are increasingly turning to colocated generation as a bridge or long term solution. Onsite or adjacent power generation — whether gas fired turbines, renewable facilities paired with storage, or hybrid energy systems — allows developers to bring capacity online faster while reducing dependence on large scale grid upgrades.
These “behind the meter” solutions can offer additional benefits beyond speed. Colocated generation may provide cost stability, redundancy, and resilience, particularly in regions with congestion or vulnerability to extreme weather events. For AI driven facilities operating high density workloads, reliability and uptime are paramount, making self generation an attractive option even where grid power is technically available.
At the same time, colocated power raises a host of legal, regulatory, and commercial considerations. Developers must navigate permitting regimes, environmental compliance, fuel supply contracts, and long term power management strategies — all while ensuring that any onsite generation aligns with sustainability commitments and customer expectations. As these structures become more prevalent, early coordination between real estate, energy, and regulatory teams is increasingly essential.
The scramble for power is also accelerating geographic diversification. Established data center markets often face the most acute grid constraints due to saturation and limited expansion capacity. In response, developers are looking beyond traditional hubs to secondary and emerging markets where utilities may have greater flexibility to serve large loads.
These new markets frequently offer a combination of available land, receptive local governments, and underutilized transmission or generation assets. For some municipalities, large‑scale data center development represents an opportunity to attract investment and expand the tax base — provided that infrastructure impacts can be managed responsibly. This dynamic has opened doors in regions that historically saw little hyperscale development but can now support it with the right planning.
However, moving into less‑proven markets also carries risk. Developers must assess not only power availability but also long‑term regulatory stability, community support, workforce access, and network connectivity. While power may be easier to secure initially, projects can face delays if local permitting frameworks are unprepared for the scale and complexity of modern data centers. As power‑driven site selection expands the map, thoughtful engagement with state and local stakeholders becomes even more critical.
As AI adoption accelerates and compute demands continue to rise, the pressure on the grid shows no signs of easing. While long‑term grid modernization and expansion are underway, those efforts will take years to materialize at scale. In the interim, power availability will remain the dominant constraint shaping where, how, and how fast data centers are built.
For developers, this reality underscores the importance of integrating power strategy into the earliest stages of site selection and project planning. Securing land without power is increasingly a speculative exercise. By contrast, controlling powered land — or having a clear, credible path to power — can unlock development opportunities even in otherwise challenging markets.
In this new paradigm, successful data center development hinges on seeing sites not just as parcels of land, but as nodes in an evolving energy ecosystem. As the industry adapts, power will continue to redefine value, drive innovation, and redraw the data center map.
Daniel Farris is a partner at Foley & Lardner LLP and a leader in digital infrastructure, privacy, and technology transactions. A former software engineer and network administrator, he counsels technology, energy, and healthcare companies on data center development, AI compliance, and IP strategy. Prior to Foley, Daniel founded and chaired the technology and privacy practices at several major law firms.
Rachel Conrad is a corporate attorney at Foley & Lardner LLP in the firm's Energy & Infrastructure Sector. Co-leading the Data Centers & Digital Infrastructure team, she specializes in financing renewable energy projects, solar and wind developments, tax equity investments, and M&A. She earned her J.D. from University of Wisconsin Law School.
