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Co-Located Generation
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Co-Located Generation

A power plant built beside its load, supplying electricity directly behind the meter without grid transit.

Last refreshed: 28 June 2026 · Appears in 1 active topic

Key Question

Can behind-the-meter generation remain a viable escape from US grid queues if both federal and state regulators keep narrowing the route?

Common Questions
What is behind-the-meter generation and why do data centres use it?
behind-the-meter (BTM) generation means a power plant is built on the customer's side of the electricity meter, feeding the facility directly without crossing the public grid. Data centres use it to bypass US interconnection queues that now take three or more years to clear.
Can the US government switch off a data centre's private power plant?
The Department of Energy has twice in 2026 used emergency authority to curtail behind-the-meter backup generators in the PJM region. Whether that authority reaches fully owned co-located plants like Project Kilby is unresolved in law; operators believe owner-built plants are not covered, but courts have not ruled on the distinction.Source: DOE
Does Virginia tax data centres on electricity they generate themselves?
Yes. Virginia's June 2026 budget imposes a $0.011 per kilowatt-hour consumption tax on data centres, including power they generate on site. It is the first US state levy to reach past the electricity meter to self-generated power and sunsets in July 2028.Source: Cardinal News

Background

co-located generation moved from the margins to the centre of US energy policy in 2026 as data-centre operators built or contracted captive plants to bypass an interconnection queue now running three or more years. The year's defining example is Project Kilby, Chevron's 2.67 GW gas plant beside a West Texas Microsoft data centre, the largest single co-located generation deal struck for a data centre in 2026. The plant feeds the data centre directly without crossing the public grid: a configuration called behind-the-meter (BTM), which exempts it from interconnection queues and regional operator curtailment orders.

co-located generation is not new: aluminium smelters, steel mills, and paper manufacturers built captive plants through the 20th century whenever grid supply was too slow or too costly. What changed in 2026 is the scale, the speed, and the regulatory response. The Department of Energy twice ordered curtailment of behind-the-meter backup generators in PJM territory this year, raising the question of whether the same authority reaches fully owned co-located plants. Virginia passed the first US state levy covering self-generated BTM power in June. Both actions narrow the economic advantage of co-location even as the strategy grows. Fuel types in 2026 BTM builds span natural gas (Kilby; xAI Colossus 1.2 GW) and solar-plus-storage (Meta's 365 MW Wyoming campus), reflecting operators' varying timelines and carbon commitments.