The numbers surrounding the data center power boom are nothing short of astounding. With global data center power demand set to grow at nearly 20 percent on an annual basis and projected to account for 14 percent of power demand in the US alone by 2050, according to McKinsey, the power needs of these massive computing engines are unlike anything that the power sector has seen in modern history.

Naturally, as billions of dollars pour into data center development to meet growing computing needs, eyes have been focused on how to get these assets connected to the grid, and how to generate the power to meet their needs without any hiccups in reliability. These are, of course, incredibly challenging questions to answer as data centers are often sited in remote areas with little or no power access, and even those in traditional tech hotbeds like Santa Clara could face years on the shelf awaiting grid connectivity.

But access is only one part of the data center industry’s broader power challenge. Once facilities are connected to the grid, operators face an even more thorny question: how do we run these assets without letting energy costs spiral out of control?

It is true that technology companies have continued to roll out ambitious plans for how to meet these needs in a more cost-controlled way – headlined by the continued deployment of traditional renewables and aspirational investments in small-scale nuclear technology. However, policy shifts regarding the wind and solar industry, the reality that next-gen nuclear could be years, if not decades, away, and fluctuations in power markets over the last year have laid bare that if data center organizations do not have a firm grasp on their power procurement processes and strategies, they could be confronted with power costs that quickly spin out of control.

With that in mind, here is a look at some of the key factors that are driving price uncertainty for data center organizations and ways in which they can look to optimize their power procurement strategies.

Why size alone does not guarantee the best price

A common misconception is that a large, relatively steady, around-the-clock load will automatically command a supplier’s best price. Scale can attract interest, but suppliers also evaluate load shape, location, credit, collateral requirements, contract term, start-date certainty, market liquidity, and the risk that actual usage will differ from forecast volumes. For a developing or ramping data center, uncertainty around energization and load growth can be especially important. A fixed-price, all-in contract can provide budget certainty by transferring defined market risks to the supplier, but the supplier prices that risk into its offer. The result may be a substantial premium if the product is broader or less flexible than the buyer actually needs.

The challenge is compounded when procurement practices have not evolved with the load. Many large buyers still rely on a small set of static quotes, sometimes with limited visibility into supplier participation, embedded risk premiums, product assumptions, or the fees included in the final price. Without consistent bid specifications and a clear audit trail, buyers may struggle to determine whether price differences reflect the market, the contract structure, or supplier margin.

As energy becomes a larger and more volatile operating expense, data center organizations need a more sophisticated approach to both price discovery and product design.

Building a more disciplined procurement strategy

1. Strengthen price discovery through competition: Data centers can improve procurement outcomes by replacing sequential, static bids with a structured process that requires qualified suppliers to compete against the same load data, contract terms, and product specifications. A live reverse auction is one way to do this: suppliers can respond to active price competition in real time, while the buyer gains visibility into bid activity and a defensible record of the event. The technology is only part of the process; results also depend on accurate load forecasts, supplier qualification, standardized contract terms, and a clear award strategy established before bids are opened.
2. Match the product to the risk: An all-in fixed price is not inherently right or wrong. It is one point on a spectrum that can include block-and-index structures, layered purchases, and selective pass-through of components such as capacity or transmission. The appropriate structure depends on the facility’s tolerance for budget variability, ability to manage open positions, expected load ramp, contract flexibility, and sustainability requirements.

For very large loads, a staged or hybrid strategy may reduce the risk of making a single decision at one market point. An operator might fix selected supply components, leave defined commodity exposure open, or layer hedges over time as load and market conditions become clearer.

That flexibility creates governance requirements: decision thresholds, approved products, position reporting, and accountability for monitoring wholesale, day-ahead, and real-time exposure. Organizations without dedicated internal energy-market capabilities may benefit from an independent advisor that can model product alternatives, coordinate supplier competition, and provide an auditable basis for each recommendation.

The goal is not to predict the market perfectly; it is to build a repeatable process that balances price certainty with flexibility and prevents unmanaged exposure.

Looking ahead

For data center developers and operators, securing power remains a foremost priority—but it should not be treated as the final step in the energy strategy. Procurement decisions made before energization can influence operating budgets, flexibility, and risk for years.

Organizations that establish accurate load forecasts, competitive price discovery, disciplined product selection, and clear governance early will be better positioned to manage volatility as their facilities ramp. In a market where power is increasingly scarce and complex, a transparent, repeatable procurement process can become a durable operating advantage.