This industry was built on the idea that demand was inflexible. So, the engineers were brilliant. You know, they would sit there and say, 'We will build a system that if suddenly a million customers put their kettle on, we can deal with like these 2 gigawatt ramps.' And how did we do that? I mean, we blew up the inside of a mountain in Wales and built pump storage, which as an engineering feat is unbelievable. Dinorwig. But in this new world, both on the residential side but now on the industrial side, you're realizing well actually with software and modern technology it doesn't have to be like that. Demand could be super flexible. So this is bringing that same thinking to well actually, you know, a gigawatt data center is the size of, you know, bigger than a large city. So we need to think how do we get these companies to be able to provide the same services because otherwise the solution will be really expensive, which is to build unbelievable amounts of super flexible generation, and we know what that costs.
I've said many times that it's incredibly lucky that just at the time when our supply is becoming variable, intermittent, digitization enables us to control the demand side because if that wasn't happening, we'd really be in trouble. And of course, I think AI puts that on steroids.
Hello, I'm Michael Liebreich and this is Cleaning Up and this is an episode that I've been really looking forward to recording. We're going to be diving into how to make data centers play nicely with the grid instead of being a problem for the grid. And I'm joined by two people. One of them is an old friend of mine going back a number of years, sparring partner indeed, Varun Sivaram, and he is the CEO of something called Emerald AI. And the other is Steve Smith, and he is the president of National Grid Partners. National Grid is of course one of the Cleaning Up leadership circle members. So please welcome Varun Sivaram and Steve Smith to Cleaning Up.
Well, let's start. You've got a press release about a trial that you've been running. Emerald AI is in the business of helping data centers and grids play nicely together. But before we get on to the press release and the trial that you run and the white paper, which I've been reading as you'd expect, let's start where we always start, talking about yourselves in your own words. Varun, we'll start with you because I've known you the longest. Who are you and what is it exactly that you're doing now?
Thanks. Thanks, Michael. It's so nice to see you and you've long been an inspiration for your work in the field. I now am the CEO and founder of Emerald AI. We are a startup supported by National Grid. We're actually here today to present to National Grid Partners Day as well as Nvidia and a range of other investors. And what we do is as you said we make AI data centers grid-friendly assets, not liabilities on the power grid. Before that, Michael, as you know, I was the group chief strategy officer and chief innovation officer for Orsted, a large multinational power producer. And before that I served in the US government as a diplomat. I ran clean energy diplomacy for the government.
Working with Secretary Kerry. That's right.
Exactly. Exactly. But briefly, what does Emerald do and how do we do it?
We take these data centers and by making them flexible power users, for example, by slowing down some of the computations they're running or moving some of their computations from one location to another, we make data centers consume less when the grid is strained, providing that relief during the moment in Phoenix, Arizona, when a million air conditioners are running, so that you can fit more data centers onto that Phoenix grid. And today I'm delighted that we're working with National Grid here in the UK to bring some of that same functionality to the UK, but in a very British way, helping to offset the kettle spike at halftime of a football match.
So, thank you very much for joining us here. And we're going to dive into all of the above. Steve, you are so it is the full title. The full title is actually group chief strategy and UK external affairs officer and president National Grid Partners. So which bit do you want to sort of pull out? Which is the main bit?
Rolls off the tongue, doesn't it? So yeah, as you said, think of it as three hats. So running strategy for National Grid as a group, running UK external affairs, but the bit we're really focusing on today is National Grid Partners. So, National Grid Partners is our corporate venture capital arm founded 7 years ago in Silicon Valley. We've invested just shy of $600 million in over 50 startups. The thesis and the idea was that there was this huge revolution going on in software and hardware as it applies, you know, to really the whole value chain of electric and gas utilities. And we wanted to bring the best of Silicon Valley into National Grid and then hopefully help these companies scale globally because when we talked to the startups, they said utilities are just really hard to work with. You know, we're conservative by nature. You know, we're used to dealing with big OEMs and manufacturers and the average startup would probably have run out of cash by the time they'd got through our typical procurement processes to work. So we wanted to give them an opportunity to get live deployments on real networks, prove their products, prove their services and then help them on that path to scale and obviously as an equity investor if we put that effort in we'd see some of the benefit from the equity investment as they were successful.
But it's not an incubator. It's not kind of a building anywhere where you kind of force them and you know you've reeled Varun in to sit in desk 46. I mean these companies are out there doing what they do. But you've created the network and you invest in them.
So typically we go in at series A. So you need to have a product and something that is ready for deployment. This is not as you say skunk works and people with ideas. So I think that's really our sweet spot. And then what we're doing is if you take the sort of hardware and software, we will get them live deployment on one of our networks and that then allows them to then get that traction. And one of the other parts of the National Grid Partners ecosystem, we have something called the Next Grid Alliance, which is an organization where we've got over 500 utilities and other partners so we can then showcase what we're doing. So because at the end of the day the problems we're trying to solve like decarbonization, it's no use if National Grid does it and nobody else is doing it. So we're trying to share that best practice and learning.
You've got a good background for this because you've got both finance I think with Lloyds and also regulation. You were with Ofgem so that must be pretty useful. And we'll no doubt get into what the regulator might think of all this. Did he have a product when you and was he did he have deployment and things like these uncomfortable things for startups like revenues when you came in?
So we will always bend when something's compelling and this was compelling because look, we were sat there going data center and I know we're going to come on to this, data centers are an enormous opportunity for us as electric utilities but also they pose challenges. So the enormous opportunity is any sane business when it gets a sudden gold rush of customers coming to say I'd like to use a lot more of your product would say happy days please do where can I sign. And the problem we were seeing was that although we could sort of see how helpful data centers could be and what great customers they could be, they were presenting these challenges in terms of speed of connection. And when Varun and I first met, you know, and he pitched his product I was like if I'd sort of sat there and tried to invent my perfect product this would be it. So at that point I was like I'm really keen to get involved in this. I think there was a meeting of minds and particularly in the UK business rather than our US business. This was such a clear and present challenge for us. I just desperately wanted to see if we could get Varun to come and do some trial and do some work in the UK quickly.
So I'm being a little bit cheeky because I've known Varun a long time and I've interacted with him actually along in his different incarnations and he pops up and he has a sort of website and he has the ideas and he has a huge valuation, which of course is not disclosed but of course it's got the word AI, it is emerald.ai. And so I was wondering at what point you'd become involved but you've seen the same problem which is that these data centers are incredibly, they can be really uncompromising and difficult loads. So it was great to sell electricity, use your product as a transmission operator but they can be difficult. A bit of context from my side is I met a friend of mine. I'm not going to say which country but he was the energy and telecoms minister at different times in an EU country and about five years ago that country put a moratorium on new data centers, you know which country it is. And I met him within a day or two of that and he'd had a big argument I think with one of the hyperscalers who'd said you don't understand we need millisecond latency and we're only prepared to build data centers in town centers. And to me this seemed like a completely absurdly sort of overrigorous requirement. So we've moved on from that haven't we? And that's the journey that Varun, you know, that was sort of 5 years ago when probably you were starting to think about this stuff. What's been your journey? How did you get to the product and the company that you've got now?
Absolutely. And let me first say, Michael, in many of our interactions over the last couple decades, you and I have talked about technologies in the clean tech space that take decades to go from lab bench to commercial deployment. In fact, I think one of our first arguments was over how long perovskite solar would take to get to market. And you were right and I was wrong.
Right. I never thought I would hear Varun say that. You have to understand there's this sort of long history on when I was still, you know, on Twitter a lot and Varun's typical post would come in straight behind mine and it would start 'yes but' and then he would show how incredibly brilliant he is, physicist background.
Right. Well, I appreciate it. And for me, you know, I was always obsessed with how do we get a technology into the marketplace far faster than these normal innovation and diffusion processes take. And whether it's, you know, the next generation solar panel, the next generation nuclear reactor, these take two decades.
That's right. Because your 'yes buts' were generally I was saying this is inevitable. And you were saying yes, but it's taking too long.
Yeah, precisely. Well, so in this case, you know, why this company? Why now? I thought first of all, there is a tectonic shift happening. AI is the biggest new customer I think humanity has seen on the power grid. That's not true yet. That's bombastic. And I think you'll call me out for that. But give it 5 years, give it 10 years, and suddenly the pace of AI's power growth, I think, will be unprecedented even beyond air conditioners.
The pace, yes, the word biggest, I would raise a flag on that. I think EVs and I think electrification of heating are going to be much bigger. And that would I think that would be borne out by National Grid's scenarios. But the pace.
And the big chunkiness of it, right? Because that's really the heart of the problem is it's big chunks on a single application.
That's right. That's exactly right. So EV is distributed load distributed across the distribution system and across millions of assets and also highly flexible as we've learned, as is heating.
As is heating, you know, potentially a bit less flexible but again, you know, that's manageable. As you said, I mean some of the hyperscalers are looking at sort of ramping to gigawatt of size and to put that into context, peak demand on UK transmission system at the moment about 42 gigawatts. So 1 gigawatt of 42, I mean that single load is huge and that's the challenge. But as I said you have to flip it round. If you think about the UK's problems, we have a massive affordability challenge and put simply networks are largely fixed cost businesses so the more electrons you can throw at them the lower the unit cost. So we just inverted the problem on its head and said look it's in the UK's interest to try and attract these loads if we can use flexibility so we don't have to build lots more grid to accommodate them. It's that simple.
100% and I've been banging that drum and I'm going to be doing it actually in a few weeks. We're going to be over in Brussels recording about the electrification staircase and electrification is the answer to high electricity cost is to use more of it, bigger denominator. But come back to so plow on, ignore me and tell us the story of how you got to where you are today.
So as I said, why this company? Why now? As you and Steve agree, this is a remarkable trend first of all to see AI's power growth. Second, how do we get to compress that timeline from two decades to two years? Emerald AI sought to advance a technology, a software-based technology that we could rapidly iterate, prototype, and get out into the market. And so today, what we'll talk about later is a critical proof point. And then later this year with Nvidia, we'll launch the world's first 100 megawatt power-flexible commercial-scale data center that's gone from literally the company was incorporated 16 months ago to a full-scale commercial deployment. So the first thing is pick the moment. It's right now AI is growing. Second, pick something that we can get into the market as fast as possible. Third, pick an asset class that I believe is transformatively flexible. As you said, typically the data center industry is quite inflexible. Right? They very rightfully have said these are critical customer loads that we are stewarding. We want extremely low latency. We want to minimize the risk of any disruption. But times are changing and folks need power quickly. And it's also critical that we solve, as Steve said, this affordability problem. And I believe that inverting this problem, like Steve said, and saying data centers actually could be transformatively flexible because they're electronically controllable. They're large loads and they're connected at the speed of light from one data center to another in a way that no other load is. Those three factors suggested this was the right moment for this company.
So one of the things that I've been doing is trying to communicate that the hyperscalers and what we're going to get on to the neo-cloud, the people around the hyperscalers that are also providing infrastructure, a number of countries are trying to attract them with low electricity costs and I think this is completely wrong. I think we should be saying no, you're going to pay a lot, but what you're going to get by coming to country X is speed because what they care about is speed, right? They want to build quickly. They're under immense competitive pressure themselves.
Completely, Michael. Look, I'll speak more about the United States where we're headquartered and where I have, you know, a great deal of experience. The cost sensitivity right now, it's relatively inelastic demand, right? Many data centers are just looking for power as soon as they can get it. And so that bottleneck is the critical one that Emerald AI is helping to solve today. I think these statistics, United States there's demand for 50 gigawatts of data centers in the next 3 years and 25 gigawatts will be able to be plugged in by 2028. Right? So we're clearly not meeting the demand that there is in the private sector and we're leaving as a result hundreds of billions if not trillions of dollars of investment on the table as a result of not being able to get that investment onto the grid. So to your point the service United States that we are helping our utility partners, our data center partners with is let's get you both a faster interconnection and a larger interconnection across the country where there is excess capacity to be used almost all of the year.
But I think to that point, I mean watch what people do rather than what they say. You're absolutely right. I mean sadly the UK is not blessed with very competitive, you know, internationally competitive electricity prices. But if you look at the interest in this country now, that's partly to do with the university sector we have, you know, there are various other reasons but the single thing that comes through is the thing that will enable us to unlock this is speed to power. That's what they care about is how quickly can you get me onto the grid? How quickly can you get me energized? So that's an enormous opportunity for us as a country to say, well, let's embrace that. Let's lean into some of the strengths we have and the fact they want to come here and let's get them connected quickly and Emerald and other sort of innovative solutions can help us do that.
And I hate to sort of, I don't want to cast a pall on anybody's business, but you know, we are recording this as there is, you know, the Gulf is I don't want to say in flames, but you know, we've got this incredibly fluid situation with the US attacking Iran and then Iran attacking the countries around it and of course some of those countries have been extremely ambitious in their plans for AI data centers. So you've got particularly the UAE and also Saudi Arabia and both have been attacked and I wonder whether that also kind of puts the focus back on maybe the UK doesn't have the cheapest power but maybe we kind of want to have more of our data centers there. I don't know.
Obviously it's a tragic situation. My overarching sense is that when you do some basic dimensioning of this, the potential demand for these things is just extraordinary at a global scale. So there's more than enough for everyone. I mean, one of the things that doesn't really get focused on and EPRI have done some good work on this, agentic. I mean, agentic as a workload, you know, the numbers you can get to there in terms of data center load is huge because if you've got enterprises that are running agentic processes 24/7 to run their businesses, that's very different from what we're doing today with large language models and inference.
We have a rule on Cleaning Up, the no acronym. So, EPRI is the Electric Power Research Institute. I don't want.
The Power Research Institute.
Electric Power Research Institute. Arshad Mansur, a good friend who runs it and that's actually a partner on your trial which I want to get to. But you're right I have a whole list of countries, I have a whole list of so and it's countries interestingly enough, you know, it is places also like Malaysia and India that have got ambitious plans as well. And you know I do hope that after the current events die down I do hope the Gulf is able to pursue its plans. But just before we get on to what you've done in the detail, what is can you characterize the nature of the challenge that is placed on the grid by these data centers because you know you've got different sorts, you've got training, you've got inference, and it's not just oh dear they're big, it's also they behave in certain ways. So what are the if you can you list the sort of top challenges that they pose to a transmission or distribution or whatever grid?
I'm happy to do that. So I should declare at the outset, I'm not a physicist and I'm certainly not an electrical engineer. But so to grossly oversimplify, you've got two problems. First is the physical connection to the grid. As I said, if you are coming in at hundreds of megawatts and want to ramp to a gigawatt, that is a transmission level connection that will require a bay at a substation, potentially if it's a new location, a new substation. And it's no different the challenge to connecting that to the challenge to connecting everyone else who wants to connect, whether that's renewable generation, battery storage, etc., etc. And we know at the moment that we've got huge pressure on, you know, the transformers, you need to build new substations, you know, so that's the supply chain, the workforce, consenting, all of that. So that's challenge number one. How do we actually physically hook them up? Now one of the things we've done there and this comes back to thinking creatively is we've said to them if you've got any flexibility over location there are various parts of our grid where we have lots of spare bays where we used to have large industrial clients or we used to have coal-fired power stations. So last year we made the announcement about a major data center at Blyth in Northumberland, that's where we've got existing infrastructure. And so if you can go into those areas then actually we're saying that problem's solved. Energy folks will know Blyth because it plays this huge oversized role, right?
So that's problem number one. So two things. If we can get you into existing substations where we've got spare capacity, great. The second thing is thinking how could we build new substations really fast? So, how could we engineer them in a way that we could build them in 18 months, 2 years. So that's the first thing, physically hooking you up to the grid. But then once we've hooked you up to the grid, you are potentially going to be drawing a gigawatt of power and that power's got to move from where it's produced to where it's consumed. So this is where flexibility comes in. The basic maths of a transmission system is it's only stressed for a few hundred hours, probably less than 100 hours a year. The average utilization of the transmission system over the course of the year is probably sort of 30-35%. So most of the time there's lots and lots of spare capacity.
And that's because you have to build it for the peak.
Yes. So at the moment and we talked a bit that this will change with the transition, but at the moment it's a very peaky system. So those 100 hours will typically be in the winter between 4:00 and 7:00 p.m. when everything's on and you've got heating load etc etc. So that's.
And of course the point at which the UK is booted out of the World Cup in a penalty shootout.
Indeed. Indeed. So what Varun's solution helps with is that if we can be confident during those peak hours that actually the data center can modulate then when we run our power flow studies saying do we need to put new more pylons in, do we need to build more capacity for that period it's going to say no we don't because actually for most of the year the capacity is there on the system and just through those small number of hours when we're stressed we know we can get the response. So that's the big unlock. It just enables us to say actually we can accommodate this load without the need for massive infrastructure upgrades to move the power from where it's produced to where it will be consumed. Now I may have to bring in our physicist, our resident physicist in our room because it's more than just that as well because there are these things called ramp rates and there are harmonics. There's all sorts of, you know, sort of in the detail.
Well, the ramp rate is just how quickly you can go from 100 megawatts to a gigawatt because, you know, I have this picture of a training data center sort of crunching away for a month, getting to the end of its training run, and then just switching off in 10 milliseconds, suddenly just a gigawatt of demand just falling off the grid. And that also has to be a worry, right?
Yeah. So you're right. So I've talked about the problems for us as the transmission company. So basically I'm saying is my transmission system good to accommodate this load? Then you're thinking about the system operator who's like okay well I've got a transmission system but I got to keep the lights on second by second and that's where you get into issues like falling out the World Cup and TV pickup as everyone flicks the kettle on. So they are worried about voltage stability. They're trying to balance second by second. That's where again you get the second string to Varun's bow because then you've got data centers as actually supporting that. So at the moment typically if there's a shock on the system then we're typically getting a gas-fired power station to ramp up. If the wind stops blowing suddenly, if the clouds come across and solar drops off. If these data centers can ramp up and down, then suddenly the NESO, the national electricity system operator has got another set in its toolkit in terms of an ability to just deal with those variations on the system and something that's ultra reliable because as Varun said it's software, you just know this thing's going to respond.
