Most data centers today rely on the electrical grid for power, with diesel generators as back-up. If the power goes out, generators kick in. As demand for power soars and time to connect to the grid gets longer, bring-your-own-power represents a fundamentally different data center energy model, one that combines on-site power generation, battery storage, and grid connectivity working together continuously.
This model involves data centers embracing microgrid technology that creates a system that can consider moment-to-moment power use options such as using more grid power, giving power stored in batteries to the grid, or accelerating or delaying large computation workloads.
“The microgrid here is dynamic and interactive,” said Jim Reilly, a longtime microgrid consultant, speaking at a Data Center World 2026 session called “Data Center Microgrids: A Reference Model for Controls and Energy Management of Behind-the-Meter Power.”
Reilly and Michael Stadler, CTO at Xendee, a microgrid design company, described in the session how demands for sophisticated microgrid management will grow amid pressures around data center speed to market, regulation, energy market participation, and capacity optimization.
Here are six takeaways from Reilly and Stadler’s Data Center World session on microgrid management and control.
1. Microgrids Are Increasingly Required for Speed to Market
"If you're waiting for the utility, you're going to face challenges," Stadler said. Traditional utility interconnection could take as long as seven to 10 years depending on the market, while behind-the-meter power generation can be operational in under a year. Every study Stadler's team has conducted shows that an approach combining microgrids and grid power is cheaper and more effective than relying solely on utility power — even in regions with historically low electricity costs such as Virginia and Texas.
Data centers have long had their own power such as short-term diesel generators for backup and continuity during power outages. Microgrids are very different, since they provide a percentage of a data center’s steady-state, daily operating energy, so it’s much larger capacity. The power can come from a variety of sources, including gas-fueled generators, wind and solar deployments, or fuel cells. “We're talking about hundreds of megawatts, even gigawatts, that are connected to transmission systems and working with grid operators and markets,” Reilly says.
2. New Data Center Regulations Are Coming, and Microgrids Can Help Companies Comply
The regulatory landscape is shifting quickly and dramatically. The North American Electric Reliability Corporation (NERC) is developing standards that aim to require large data centers to register with the grid in ways similar to large power generators. NERC is also planning new rules regarding how data centers take large workloads on and off the grid, including requiring them to “ride through” grid faults. As another illustration of the growing regulation, Texas Gov. Greg Abbott on June 10 sent a letter to the heads of the Public Utility Commission of Texas and ERCOT, the Texas electrical grid, directing them to codify rules that data centers pay for their electric infrastructure and use sustainable resource management, among other requirements. The governor also pledged to work with the legislature to “ensure data centers add to Texas’ electric capacity, not just its electric demand.”
"This is a whole new ball game," Reilly said. Meeting these new standards will require detailed data exchange between data centers and grid operators, covering everything from voltage ride-through to curtailment to disconnection from the grid. A microgrid control system that lets a data center manage all its behind-the-meter resources — including generation sources, storage, and flexible compute workloads — can help it meet these compliance requirements while maintaining operational control.
3. Data Centers Are Becoming More Active Energy Market Participants
The relationship between data centers and the grid is evolving from one-way consumption to dynamic, two-way participation. With proper microgrid management, data centers can sell excess power back to the grid during peak pricing periods, participate in frequency regulation markets, and otherwise engage in energy arbitrage in ways that add to grid stability.
"You can make good money by just selling at the right moment or purchasing at the right moment," Stadler said. But capturing these opportunities requires sophisticated forecasting and adaptive control systems that can make decisions at millisecond intervals.
4. Storage Is a Core Capability
Battery storage has become a fundamental component of nearly every microgrid plan Stadler's team analyzes. In some projects, his team has seen "gigawatt-hours of batteries just for market participation,” he said, allowing the data center to reduce the power it needs from the utility or contribute power back to the grid, when it makes sense for the operator and the grid.
The applications are diverse. Some batteries discharge and charge on demand for market participation, while others hold onto one to two days’ worth of power for backup and greater grid independence. The key technology planning choice is matching storage duration to the specific operational and financial objectives, in combination with natural gas engines and renewables.
5. Smart Controllers Help Operators Manage Microgrid Complexity
Traditional rule-based controllers can't handle the complexity of these kinds of microgrids, Stadler argued. Controllers need the ability to juggle multiple generation sources, storage, cooling systems, and compute technologies. They also need to consider diverse goals around operations and energy market participation.
Controllers must forecast loads, electricity prices, and generation capacity minute by minute, then optimize dispatch decisions across all assets. Reilly emphasized that this level of control is what defines an effective microgrid: "It's an energy management system that goes across the point of interconnection."
The microgrid energy management system is articulated in IEEE Std 2030.7 Standard for the Specification of Microgrid Controllers, which is currently being updated to address the unique characteristics of data centers, including load profiles. “These updates will help data center developers and operators as they meet power and regulatory challenges that are coming fast,” Reilly said.
6. A 16 MW Example That Scales to Gigawatt Facilities
Stadler presented a case study of a 16-megawatt university data center, showing how investment and optimization of new generation and cooling technology could reduce annual energy costs from $32 million to under $20 million. The proposed system would use gas generators with combined heat and power (CHP), absorption chillers, solar power, batteries, and cold storage. The microgrid management and control requirements are fairly similar at hyperscale, he said.
"We do this exact same thing for way larger facilities," Stadler said.
Microgrids clearly aren't just about backup power anymore. When run as sophisticated energy management systems, microgrids can help deliver speed to market, cost savings, regulatory compliance, and operational resilience. The microgrid management strategy and tools needed to meet all those goals also then position data centers to be active participants in evolving energy markets, contributing to the size and stability of total electricity resources.
Reilly and Stadler will present “Control Systems for Data Center Microgrids: Turning Compliance into Reliability and Revenue” at Data Center World Power 2026, September 21-23 in Dallas, addressing emerging compliance requirements and new industry standards. Visit www.dcwpower.com for registration i