A data center can be planned and built in two to three years, but powering it requires transmission lines, substations, and generating capacity. That infrastructure can take a decade or more to build. Those delays threaten to hold back services Americans rely on every day, from banking and health care to cloud computing and artificial intelligence.
A new report from the Goldwater Institute, The Electricity Race: Power Purchase Agreements, Co-Location, and the Future of Electricity Infrastructure, explains how America can close the gap between building its digital future and generating the electricity to power it. Domenico Ferraro, PhD, associate professor at Arizona State University, examines how long-term agreements between electricity producers and large technology companies can help finance and coordinate the infrastructure a growing digital economy requires.
“The central problem is simple: adding servers is much easier than adding megawatts,” Ferraro writes. The technologies to expand electricity supply already exist, and major companies are committing billions to secure the power they need, but government is too often standing in the way. Permitting delays and fragmented regulation slow construction, while interconnection backlogs and equipment shortages leave projects waiting long after developers have secured land, customers, and financing.
The backlog is substantial. According to Ferraro’s research, more than 2,060 gigawatts of proposed generation and storage capacity were seeking transmission interconnection at the end of 2025. Projects completed that year had spent a median of more than five years moving from an interconnection request to commercial operation.
Those delays create uncertainty on both sides of the electricity market. Data center developers need assurance that power will be available when their facilities open, while electricity producers need confidence that the projected demand will materialize before committing billions to new infrastructure.
Power purchase agreements (PPAs) offer a way to coordinate those investments. These long-term contracts give generators a revenue commitment that can support financing while helping large customers secure more predictable electricity arrangements. Co-location, in which generation sits alongside the customer’s operations, offers another way to connect electricity supply with demand.
These arrangements give technology companies a direct stake in sustaining and expanding electricity infrastructure, but contracts alone cannot overcome the obstacles to construction. “A PPA cannot clear an interconnection queue, obtain a permit, or manufacture a transformer,” Ferraro explains. “It can, however, make a project’s future revenues more credible and give both sides a stronger basis for planning.”
Policymakers must address the remaining barriers through more predictable permitting and efficient interconnection procedures. America’s technological leadership depends on its ability to build the electricity infrastructure needed to power it.
As Ferraro notes, “The AI race is part of a larger electricity race. Countries that cannot deliver megawatts at the pace they deploy computing capacity risk becoming followers rather than leaders, regardless of their technological capabilities.” Winning it will require the freedom to invest and the ability to build.
Read the full report here and read more about data centers here.
