DATA Act 2026: Off-Grid Power for AI Data Centers

Five years. The average time for a data center project to navigate the U.S. grid interconnection queue has grown from under two years in 2008 to nearly five years today, with California projects stretching beyond nine years.¹ Senator Tom Cotton introduced the Decentralized Access to Technology Alternatives (DATA) Act on January 8, 2026, proposing a bypass: exempt data centers that build their own off-grid power infrastructure from Federal Energy Regulatory Commission (FERC) oversight entirely.² For infrastructure operators facing 2,600 GW of projects stuck in interconnection queues, the legislation offers a potential path to deployment that circumvents the primary bottleneck constraining AI infrastructure scaling.

TL;DR

The DATA Act creates a new utility category called "consumer-regulated electric utilities" (CREUs) that exempts facilities completely disconnected from the main grid from Federal Power Act provisions, including FERC rate regulation, reliability standards, interconnection rules, and transmission planning.³ Companies building off-grid power systems would avoid interconnection studies and upgrade requirements that currently add 4-6 years to project timelines.⁴ The exemption ends immediately upon grid connection, and environmental and zoning requirements remain in force.⁵ Similar legislation passed in New Hampshire in 2025, providing a state-level precedent for the federal approach.⁶

The Interconnection Crisis: Why Off-Grid Matters

Understanding the DATA Act requires recognizing the scale of the interconnection bottleneck constraining data center development.

Queue Backlog Statistics

Sources: Berkeley Lab¹, Wood Mackenzie⁷, ENR⁸

Only 20% of projects requesting interconnection between 2000 and 2018 ever reached commercial operation.¹ The completion rate has worsened as queue volumes have grown. Over 2,000 GW of projects remain stuck in interconnection queues across ISOs and RTOs.⁹

Regional Queue Status

Sources: Zero Emission Grid¹⁰, CTVC¹¹, CenterPoint Energy¹²

ERCOT saw a 700% spike in large load interconnection requests from 2023 to 2024, with CenterPoint Energy reporting growth from 1 GW to 8 GW in late 2023 to late 2024.¹² The Texas market's relative speed still leaves projects facing multi-year timelines.

DATA Act Provisions: What the Bill Does

The legislation creates regulatory carve-outs for fully isolated power systems serving data centers and other energy-intensive industrial loads.

Key Definitions

Source: DATA Act Text³⁵

Regulatory Exemptions

Source: Utility Dive¹³, DCD²

CREUs would also receive exemptions from the Public Utility Regulatory Policies Act and the Public Utility Holding Company Act.⁵ The exemptions end immediately if a CREU connects to the grid, preventing hybrid arrangements that might cherry-pick regulatory benefits.

Comparison to State Precedent

Sources: Reason⁶, MeriTalk¹⁴

New Hampshire's Republican Governor Kelly Ayotte signed legislation in 2025 exempting off-grid power providers from state utility laws.⁶ The American Legislative Exchange Council (ALEC) released model state legislation in January 2026 following Cotton's federal bill introduction.¹⁴

FERC's Parallel Regulatory Track

While Cotton's bill proposes bypassing FERC, the commission has pursued its own reforms to address data center interconnection.

December 2025 FERC Order

Source: FERC¹⁵, K&L Gates¹⁶

On December 19, 2025, FERC directed PJM to reform its tariff for co-located generation and load, finding the existing tariff "unjust and unreasonable" due to lack of clarity in rates and terms applying to interconnection customers.¹⁵ The commission proposed two new transmission services based on net withdrawals rather than gross load.¹⁷

DOE Directive to FERC

Source: DOE Letter, White & Case¹⁸

On October 23, 2025, DOE instructed FERC to initiate rulemaking to "rapidly accelerate the interconnection of large loads" by April 30, 2026.¹⁸ The directive would enable customers to file joint, co-located load and generation interconnection requests directly to FERC.

Current FERC Funding Model

Source: ENR⁸

FERC's 100% participant funding model requires large load customers to pay the full cost of grid network upgrades, creating significant financial barriers beyond the timeline challenges.⁸

Behind-the-Meter Alternative: Current Market

The DATA Act codifies and expands options already emerging through behind-the-meter (BTM) power arrangements.

BTM Market Scale

Source: BCG via S&P Global¹⁹, Data Center Knowledge²⁰

More than 35 GW of data center power will be self-generated by 2030, according to Boston Consulting Group analysis.¹⁹ The projection reflects developers' rational response to queue timelines that exceed typical data center construction periods of 12-18 months.²¹

BTM Technology Options

Sources: VoltaGrid²², NuScale²³, S&P Global¹⁹

VoltaGrid's Qpac modular platform uses reciprocating engine generators producing up to 20 MW each, combinable to 200 MW under minor source air permits.²² Fuel cells provide fast deployment timelines compared to traditional generation, serving as "bridge" resources during grid connection waits.¹⁹

SMR Potential Under DATA Act

Sources: Deloitte²⁴, Last Energy²⁵, EIA²⁶

SMRs represent a strong potential match for AI data center energy demands. On-site SMRs allow operators to bypass long grid interconnection queues and secure dedicated, non-stop power supply.²⁵ Because SMRs deploy in modular increments, they can scale alongside AI campuses as compute demand increases.

Political and Industry Reactions

The DATA Act has generated predictable support and opposition along utility versus developer lines.

Supporter Arguments

Sources: Cotton Press Release²⁷, Arkansas Democrat-Gazette²⁸

"Data centers suck up a huge amount of electricity, in some cases as much as small towns. If that electricity is just coming from the power generation we have on the grid that is powering our homes and our farms and our factories and our business places, then of course there's going to be a price spike," Cotton stated.²⁹

Opponent Arguments

Sources: Utility Dive¹³, Arkansas Times³⁰

Critics argue that if the legislation succeeds in luring large loads off the grid into bilateral agreements, fixed costs could shift onto residential and small business customers.¹³ Most providers and customers want grid backup, limiting the bill's practical applicability.⁶

State Actions

Source: MultiState³¹

Texas Senate Bill 6 requires new loads over 75 MW connecting to ERCOT to be flexible and participate in demand response, representing the opposite regulatory philosophy from Cotton's bill.³¹

Infrastructure Planning Implications

The DATA Act creates strategic options for operators regardless of whether it passes.

Project Timeline Comparison

Estimates based on industry analysis⁸²⁰

Power Source Economics

Industry estimates, variable by project²⁴²⁵³²

Grid connections offer highest availability but longest timelines. Natural gas BTM provides fastest deployment with proven technology. SMRs offer lowest operating costs long-term but highest capital requirements and longest deployment timelines among off-grid options.

Data Center Pipeline Exposure

Source: CTVC¹¹

Over 8.9 GW across 105 data center projects target operation by end-2026, with 47 already under construction.¹¹ Since data centers themselves only take 12-18 months to build, power availability determines whether projects come online on time.

Strategic Recommendations

Introl's 257 global locations position infrastructure teams to evaluate both traditional and alternative power approaches as regulatory frameworks evolve.

For Infrastructure Planners

Evaluate project portfolios against both FERC reform timelines (April 2026 deadline for large load rule) and DATA Act passage probability. Projects with 3+ year horizons may benefit from hybrid strategies that preserve grid backup options while pursuing BTM acceleration. Natural gas BTM provides lowest-risk bridge to grid connection or SMR availability.

For Operations Teams

Monitor state-level legislation following the ALEC model template. States with existing data center concentrations (Virginia, Texas, Ohio) face the most immediate pressure to clarify off-grid regulatory status. Operational flexibility to support both grid-connected and islanded modes increases optionality as regulations crystallize.

For Strategic Decision-Makers

The DATA Act's introduction signals bipartisan recognition that current interconnection timelines threaten U.S. AI infrastructure competitiveness. Regardless of the bill's fate, the regulatory trajectory favors operators who can deploy power independently of grid constraints. Capital allocation should prioritize projects with multiple power pathway options.

Key Takeaways

Regulatory Landscape

The DATA Act proposes the most significant change to federal utility regulation since FERC's formation. The bill's CREU category would create a parallel power system exempt from rules designed for grid-integrated utilities. Even if the legislation fails, its introduction influences FERC's ongoing reform proceedings and state-level policy development.

Timeline Implications

Current 5-year interconnection queues make traditional grid connection incompatible with AI infrastructure deployment timelines. Behind-the-meter options reduce deployment to 18-36 months currently, with potential further acceleration under DATA Act exemptions. Projects requiring 2026-2027 operation should pursue BTM strategies regardless of regulatory outcome.

Cost Structure Evolution

Off-grid approaches shift cost structures from shared upgrade contributions to self-funded capital expenditure. Operators with strong balance sheets gain competitive advantage in securing power capacity through direct generation investment. Smaller operators may face increasing cost disadvantages as large loads exit shared grid infrastructure.

References