For decades, on-site power systems sat dormant, only coming to life during outages. Their job was simple: keep the lights on when the grid went down. But today’s energy landscape is far more complex. From changing regulations to evolving grid demands, on-site power is no longer just about backup; it’s about flexibility, resilience, and strategy.
Texas Senate Bill 6: A new operating reality
In Texas, a major policy shift underscores this evolution. The recently passed Senate Bill 6 (SB6) authorizes the Electric Reliability Council of Texas (ERCOT), the state’s grid operator, to proactively disconnect large energy users (75 MW and up) during periods of extreme grid stress. While the Public Utility Commission is still finalizing how the rules will be implemented, this legislation signals a broader shift: facilities can no longer rely solely on utility uptime. They need to be ready to run independently, even when it’s inconvenient.
SB6 wasn’t created in a vacuum. It’s a response to mounting strain on the grid, driven by electrification, population growth, and extreme weather. The legislation should provide large users some upside though: in exchange for being first in line for temporary disconnection during emergencies, they get something incredibly valuable – faster interconnection approvals and streamlined permitting. That is a major advantage in a market where interconnection delays can stretch for years.
But what happens during those grid emergencies? The expectation is that curtailments will be rare, tied to peak demand periods or supply shortages. Still, for operators of data centers and other large facilities, the risk is too great to ignore. They must treat on-site generation not as a rarely used contingency, but as a core part of their operational plan—especially when downtime can cost businesses $275,000 per hour on average.
To do this effectively, operators should follow a readiness framework:
- Fuel Strategy: Ensure onsite storage of fuel is properly sized and maintained while also being backed up by a robust refilling strategy
- Preventive Maintenance: Establish a regular service schedule, including load testing and fuel quality checks.
- Regulatory Compliance: Stay current on Environmental Protection Agency (EPA) Tier classifications, runtime allowances, and local permitting changes.
- Scenario Planning: Run simulations for curtailment events and grid outages to ensure staff and systems are prepared to execute the plan under pressure.
With the right planning, on-site power can reliably overcome the disconnect periods allowed under SB6.
Why Diesel still matters
While renewables and battery systems are growing, they aren’t yet scalable or reliable enough to serve ultra-large loads around the clock. Utility scale natural gas turbines are also facing delays, supply chain issues, and massive backlogs. Strategies such as “bridge to grid”, or “off-grid data centers” are complex, and co-located SMR will take many years. Irrespective of prime power strategy, diesel still plays a vital role. Tier 2 diesel generators powered by engines certified under EPA emissions standards for Emergency use only are dense, reliable, and fast. Under updated EPA regulations, they can legally run in emergencies and for up to 50 hours per year for emergency demand response requests initiated by the grid operator. And with a large installed base already in place, diesel standby systems are often the fastest path to compliance with new load-shedding policies.
Looking back at lessons in resilience
The case for investing in robust on-site power became clear during Winter Storm Uri in 2021. That crisis exposed gaps not only in the electric grid, but in natural gas supply as well. Facilities without coordinated backup plans, especially those relying on a single source of fuel or external delivery, suffered the most. SB6 aims to prevent a repeat of that scenario, emphasizing the need for self-reliance when grid conditions deteriorate.
But this is more than just staying afloat during emergencies. On-site power can actively support the grid when designed as part of a flexible energy strategy. By coordinating on-site generation and demand response programs, large users help reduce strain on transmission infrastructure and avoid the need for costly grid upgrades. This type of distributed energy model is faster to implement, more resilient to disruptions, and easier to scale.
AI workloads and energy flexibility
This trend doesn’t stop with utilities and grid operators. In data centers (especially those running AI workloads), energy flexibility is becoming a competitive differentiator. AI training tasks can often be scheduled or relocated, making them ideal for demand response participation. While the AI itself doesn’t manage the power systems, its flexibility allows operators to shift computing tasks around periods of high demand. This was recently highlighted as well through NVIDIA’s investment in Emerald AI, a platform which was tested in Arizona and reduced power consumption of a 256-GPU Nvidia cluster by 25% over three hours during a grid stress event—without compromising performance. That is a win-win for the grid and for facilities aiming to fast-track their interconnection.
A blueprint for other states
This shift in mindset—from viewing on-site power as a “just in case” solution to a widely available set of power generation assets with the ability to work in unison with the grid—is happening beyond Texas. As more states face aging infrastructure and increased electrification, similar models may emerge. SB6 offers a glimpse into the future of energy policy: one where flexibility is rewarded and participation in grid stability is a shared responsibility.
That future is not about choosing between renewables and fossil fuels. It’s about making smart use of every available resource. Diesel, natural gas, solar, storage, and load management all have roles to play. What is needed is a coordinated approach that treats on-site power not as a backup plan, but as a strategic asset woven into the broader energy fabric.
As Texas leads the way, it’s time for other states to consider how to modernize their policies and incentivize faster grid integration. The energy transition isn’t just about reducing carbon; it’s about building resilience into every level of the system.
For large energy users, the message is clear: don’t wait for the next storm or blackout to rethink your strategy. Start now.
