PE2 warns data center expansion could strain grid, raise power costs

(PE2 Note: PE2 seeks a DOE policy requiring new data center clusters to build their own power generation and storage systems, Power Philippines News reports.)

The rapid expansion of data centers in the Philippines could put upward pressure on electricity prices and strain local grid capacity unless policies are introduced early to manage their growing power demand, according to the Philippine Energy Efficiency Alliance (PE2).

PE2 president Alexander Ablaza said clustered data centers could require up to 30% of local grid capacity, while a single large facility may consume enough electricity to supply around two million households.

“Data centers are mushrooming almost everywhere, growing in size (especially the hyperscalers), and growing in energy intensity (instead of growing in energy efficiency),” Ablaza said.

The Philippine government has been positioning the country as a potential data center hub as demand grows for financial technology, cybersecurity, artificial intelligence (AI), and other digital services.

However, Ablaza warned that concentrating several data centers within the same industrial area could quickly require additional transmission and distribution infrastructure, creating risks for electricity affordability.

“The clustering of data centers (i.e., containing them in the same industrial park) poses a major threat to the affordability of electricity prices as they quickly demand new grid capacity upgrades,” he explained.

Ablaza said government intervention introduced early in the sector’s expansion could help reduce the impact of new data center demand on the power system.

“Government policy, if done early enough, can mitigate the impacts of DC market growth on the grid,” he added.

Among the possible measures, Ablaza said the Department of Energy (DOE) could require clustered data centers to develop or deploy their own power generation and energy storage facilities, reducing their dependence on existing grid capacity and avoiding disruptions to households and other businesses.

The issue has drawn greater attention following plans for an artificial intelligence and advanced manufacturing hub under the United States-led Pax Silica initiative.

A 1,620-hectare site in New Clark City in Capas, Tarlac has been designated as the proposed location of the hub, which has been linked to a projected electricity demand of around 3 gigawatts.

The scale of the project’s power requirement has prompted concerns over how the facility would be supplied without placing additional pressure on the country’s electricity system.

DOE officials previously said the agency was already developing guidelines for supplying the complex, which could include embedded generation or power plants built on-site rather than sourcing all of the required electricity from the wider grid.

As the Philippines seeks to attract more data center and AI investments, policymakers will face the challenge of accommodating large new electricity loads while protecting grid reliability and keeping additional infrastructure costs from weighing on consumers.

How should the government support the growth of the country’s data center industry without passing additional power system costs on to electricity consumers?

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