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In the age of AI, public utilities are now facing a new, unexpected problem: Phantom data centers. On the surface, it may seem absurd: Why (and how) would anyone fabricate something as complex as a data center? But as AI demand skyrockets along with the need for more compute power, speculation around data center development is creating chaos, particularly in areas like Northern Virginia, the data center capital of the world. In this evolving landscape, utilities are being bombarded with power requests from real estate developers who may or may not actually build the infrastructure they claim.
Fake data centers represent an urgent bottleneck in scaling data infrastructure to keep up with compute demand. This emerging phenomenon is preventing capital from flowing where it actually needs to. Any enterprise that can help solve this problem — perhaps leveraging AI to solve a problem created by AI — will have a significant edge.
The mirage of gigawatt demands
Dominion Energy, Northern Virginia’s largest utility, has received aggregate requests for 50 gigawatts of power from data center projects. That’s more power than Iceland consumes in a year.
But many of these requests are either speculative or outright false. Developers are eyeing potential sites and staking their claims to power capacity long before they have the capital or any strategy around how to break ground. In fact, estimates suggest that as much as 90% of these requests are entirely bogus.
In the early days of the data center boom, utilities never had to worry about fake demand. Companies like Amazon, Google and Microsoft — dubbed “hyperscalers” because they operate data centers with hundreds of thousands of servers — submitted straightforward power requests, and utilities simply delivered. But now, the frenzy to secure power capacity has led to an influx of requests from lesser-known developers or speculators with dubious track records. Utilities, which traditionally deal with only a handful of power-hungry customers, are suddenly swamped with orders for power capacity that would dwarf their entire grid.
Utilities struggle to sort fact from fiction
The challenge for utilities isn’t just technical — it’s existential. They’re tasked with determining what’s real and what’s not. And they’re not well-equipped to handle this. Historically, utilities have been slow-moving, risk-averse institutions. Now they’re being asked to vet speculators, many of whom are simply playing the real estate game, hoping to flip their power allotments once the market heats up.
Utilities have groups tasked with economic …