Exelon’s Data Center Pipeline Cut as AI Plans Face Pushback
(Bloomberg) -- Exelon Corp. slashed its forecast for new data center projects amid mounting opposition across the US to AI facilities.
The utility giant, which operates in the Mid-Atlantic and Midwest, lowered its pipeline of high probability data centers to 11 gigawatts, down from 18 gigawatts, according to the company’s second-quarter earnings presentation. The firm also cut its overall future pipeline through 2027 to 25 gigawatts, down from 43 gigawatts in the first quarter.
“What this update reflects is we have now weeded out speculative projects, and it gives us proactive insight into what is real,” Chief Financial Officer Jeanne Jones said on the company’s earnings call.
The revision comes at a time when investor skepticism over the artificial intelligence spending spree is whipsawing markets and public outcry against data center projects is growing. Utilities, which once touted robust pipelines of hosting facilities, are now making efforts to prioritize the connection requests that are likely to come to fruition, while winnowing out projects at risk of floundering.
The company describes its high probability pipeline as projects in advanced phases of design or backed by Federal Energy Regulatory Commission-approved transmission security agreements. Those pacts as well as Exelon’s cluster study process are aimed at removing data center projects unlikely to be realized or that fall short of the required collateral.
RBC Capital Markets analyst Stephen D’Ambrisi blames regional opposition to new data centers and consumers’ fear of higher utility bills.
“Making the bar much higher in order to connect to the grid is part and parcel of all of these ways in which utilities are trying to protect regular rate payers,” D’Ambrisi said in an interview. “You’re seeing pushback to data center development across the US, and so there are some level of projects that were probably high probability that may be falling out of the queue as well.”
An Exelon spokesperson declined to detail the reasons some of the projects might be unfeasible, but said via email that “if a project chooses not to proceed because of those customer protections, this is evidence the framework is working as intended.”
Exelon’s shares fell 3.1% on Thursday in the biggest one-day slump since March 20. Ryan Levine, an analyst at Citi, attributed the drop to the reduced data-center pipeline. He still rates the stock a buy and said the update improves the quality of the pipeline.
The lowered forecast contrasts with California utility, PG&E Corp., which raised its outlook during its second-quarter report. PG&E’s pipeline of proposed data center projects, which more than doubled from March to June, signals that the data-center boom is moving beyond the Mid-Atlantic and Texas, states that have dominated AI infrastructure so far.
Meanwhile, the Electricity Reliability Council of Texas, the state’s grid operator, has begun to study interconnection requests in batches in order to get serious projects connected to power as quickly as possible. Under the plan, batch studies will take place every six months. To start, Ercot has dubbed the most advanced projects as Batch Zero, a pool of around 220 gigawatts looking for connection.
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