The Tennessee Valley Authority, a federally owned electric utility in the Southeast, has struck a deal to boost its supply of clean and reliable energy to help power the region’s booming data center industry.
TVA signed a 10-year power purchase agreement to acquire hydropower generated by four dams in Tennessee and North Carolina. The agreement with Argo Infrastructure Partners and Brookfield Asset Management will supply TVA with a total of 14,000 gigawatt hours of carbon-free power through 2035. Financial terms of the agreement were not disclosed.
The four dams produce enough electricity to power about 188,500 homes at any given time, according to TVA.
Data centers are one of the most voracious consumers of power, pushing utilities to their limits in how much electricity they can supply. The rise of artificial intelligence has exacerbated the problem, as AI applications consume substantially more power than traditional computer applications.
Some electric utilities, including TVA, have told data center developers they lack the capacity to supply their needs but are trying to improve operations to become more efficient. At the same time, data center owners are searching for sustainable sources of energy to power operations.
Boosting renewable power
The new TVA agreement is aimed at boosting the amount of renewable power the utility supplies to a wide variety of commercial customers and to help meet TVA’s goal of net-zero carbon emissions by 2050, according to an Argo statement.
“This agreement strongly supports the region's energy transition goals, where unprecedented growth in data centers, manufacturing and other industries has increased the demand for carbon reduction and renewable energy options," Brice Soucy, senior director at Argo, said in the statement.
The power TVA purchases from Argo and Brookfield will be distributed to all its customers, not just data centers and industrial users, TVA spokesman Adam May told CoStar News.
However, the rapid growth in the data center sector is one of the primary drivers behind TVA and other utilities seeking new sources of energy, including nuclear power.
Digital Realty Trust, an Austin, Texas-based real estate investment trust, has “a record $859 million backlog of favorably priced leases” for space in its data centers, according to the company’s recent earnings report. Digital Realty recently acquired property in the Dallas-Fort Worth area to expand a data center campus to meet demand.
Utilities and many of their commercial customers are trying to limit their contributions to carbon emissions by sourcing power from renewable sources, according to CDP, a London-based organization that maintains a global database for environmental disclosures by businesses and governments.
Hydropower, generated by the flow of water through a dam, is classified as a renewable form of energy because it does not produce carbon emissions. TVA already derives about 9% of its power production from hydropower through the 29 dams it owns and operates in its seven-state region. But the Knoxville, Tennessee-based agency recently said it’s looking for ways to supplement its portfolio of renewable energy sources. TVA currently generates about 39% of its power supply from nuclear, 23% from natural gas- or oil-fired plants, and 13% from coal.
“TVA seeks to obtain greater amounts of its power supply from clean resources to work towards carbon emission reductions,” TVA said in its 2024 annual report.
One method TVA is using to reach that goal is by signing new power purchase agreements like the one with Argo and Brookfield.
TVA will purchase the hydropower from four dams jointly owned by Argo and Brookfield — Cheoah and Santeetlah in Robbinsville, North Carolina; Chilhowee in Tallassee, Tennessee, and Calderwood in Vonore, Tennessee. The four dams generate about 1.4 million megawatt hours of electricity yearly, enough to replace 1.1 million tons of carbon emissions per year, according to TVA.