An information resource for the Commonwealth of Kentucky
Kentucky For Data Centers

Data Centers Building Their Own Power

What happens when a data center builds its own power plant?

Rather than wait years in an interconnection queue, developers increasingly arrive with generation attached — gas turbines, batteries, and in some proposals nuclear. Whether that helps or hurts existing customers depends on how the generation is connected, who funds it, and who is left with it at the end.

01 — The concern

The concern

Residents hear two contradictory things. One is reassuring: the data center brings its own power, so nobody else’s bill is touched. The other is alarming: a private gas plant is being built next to my town with emissions, noise and no obligation to serve anyone here. Both can be true of different projects, and the difference is buried in an interconnection agreement most people never see.

02 — What the data says

What the data says

  • ‘Bring your own power’ has moved from novelty to mainstream practice, driven primarily by interconnection queue delays. A developer that cannot get grid capacity for five years will pay to control its own timeline.
  • The arrangements differ in ways that matter. A resource interconnected to the transmission system and dispatched by the grid operator adds capacity the whole region can lean on. A resource wired behind the meter serves one customer and may be invisible to regional reliability planning.
  • Kentucky’s EKPC Rate DCP tariff takes an explicit position: a dedicated resource serving a data center must interconnect to the PJM transmission system and may not be interconnected behind the meter of the data center. The customer funds the resource, funds replacement capacity if rule changes reduce its output, and funds a decommissioning sinking fund.
  • Self-supply does not automatically insulate other customers. Fuel supply, emissions permitting, water for cooling the generation itself, and the eventual disposition of the asset all remain public questions even when the capital is private.
  • Nuclear proposals in Kentucky remain exploratory. Reported utility interest in small modular reactors has not produced a signed generation agreement serving a Kentucky data center.

03 — What responsible development looks like

What responsible development looks like

  • Interconnect dedicated generation to the transmission system rather than behind the meter, so the resource is visible to and usable by the regional grid.
  • Assign 100% of generation cost — construction, fuel, insurance, replacement capacity and decommissioning — to the customer whose load requires it.
  • Fund decommissioning up front through a sinking fund rather than leaving a retired plant to the community.
  • Size the resource to the contractual load plus reserve obligations, with a written finding that it does not disadvantage other customers.
  • Permit the generation on its own merits: air permits, noise study, water for cooling and fuel delivery route, reviewed publicly.
  • Write the end-of-contract disposition down. Who owns the asset, at what value, and what happens if the data center leaves early.

04 — Kentucky context

Kentucky context

EKPC’s Dedicated Resource Rider, approved in PSC Case No. 2025-00140, is the clearest Kentucky rulebook to date for customer-supplied and utility-supplied dedicated generation, including the behind-the-meter prohibition and the customer-funded decommissioning requirement.

The proposed federal ‘American Energy Hub’ at the former Paducah Gaseous Diffusion Plant is the largest example in the Commonwealth: a privately funded AI campus paired with dedicated natural gas and battery generation on a legacy federal site.

In Letcher County, an operator of an existing natural gas compressor station has been studying an off-grid generation project of roughly 100 MW to serve a data center, under a study agreement with local economic development officials.

LG&E and KU received Commission approval for two 645 MW gas units tied to anticipated data center demand — grid-connected utility generation rather than customer-owned, and conditioned on the load actually materializing.

FERC’s June 2026 show cause orders to PJM and the other regional grid operators cover co-located generation directly, so the federal rules governing these arrangements are actively being rewritten.

05 — Sources

Sources

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