AI Data Center Boom Spurs Power-Delivery Litigation Risk
The massive capital investment in AI data centers is creating new, high-stakes disputes over delays or cost overruns in securing necessary electrical power, demanding careful contractual risk allocation.
The rapid expansion of power-hungry AI data centers is creating significant new litigation risks for developers, financiers, and utilities. A new analysis warns that the trillions of dollars being invested in data centers could be jeopardized by delays or unexpected costs in securing the massive amounts of electricity required for their operation. Because a large data center cannot simply plug into the existing grid, projects often depend on substantial and time-consuming upgrades to transmission lines, substations, and generation capacity.
This creates a high-stakes contracting challenge: who bears the financial risk if the power is not available on schedule, if infrastructure costs soar, or if regulatory frameworks change mid-project? The U.S. Federal Energy Regulatory Commission (FERC) is already scrutinizing how grid upgrade costs are allocated for these large new loads, adding to the uncertainty.
Counsel for any party involved in a data center project—from development and finance to power supply and construction—should now proactively address these risks by negotiating explicit contract terms covering power delivery timelines, cost responsibility for infrastructure, liability for delays, and the potential impact of regulatory changes.