Data Center Builders Pivot to Onsite Power as Obstacles Mount

Data Center Builders Pivot to Onsite Power as Obstacles Mount

Data center developers are increasingly looking beyond the grid, and field contractors are the ones who will feel the shift first. Construction Dive reports that the U.S. data center boom has entered a contradictory phase: demand forecasts remain strong, but projects are running into equipment shortages, labor constraints and rising local opposition. Developers are responding with flexible loads, “bring your own capacity” deals and onsite power.

Background

The demand case is intact. According to Construction Dive, the Electric Power Research Institute said in February that data centers will account for up to 17% of U.S. electricity demand in 2030 and as much as 20% in 2035.

The execution picture is murkier. Goldman Sachs said in May that only 50% to 60% of planned data center capacity will come online as expected over the next two years. Wood Mackenzie’s Caitlin Connelly noted that the 36 GW added to the development pipeline in the first quarter of 2026 was down 19% from the prior quarter, as developers shift attention to existing pipelines.

The article lists several project-level setbacks:

• A Microsoft-backed site in Vineland, New Jersey, took a $1 million fine for running dozens of gas-powered generators without proper permits. It was ordered to obtain them within 45 days or shut down.
• A proposed Google data center in Xcel Energy’s Minnesota territory faces a court-ordered work stoppage for environmental review.
• Oracle moved to protect itself financially against delay or cancellation of Project Jupiter, a 2.5-GW campus in Doña Ana County, New Mexico, after state regulators blocked a gas pipeline meant to serve it.
• Texas Gov. Greg Abbott pushed for a sweeping pause on data center grid interconnections. BloombergNEF said that threatens up to 20% of the total U.S. development pipeline.

Analysis

The most useful detail in the piece is that onsite power does not escape the supply chain problem. It trades one queue for another. Fluxco says typical customers wait two to three years for custom-built power transformers and generator step-up units, with no relief expected before 2027. GE Vernova is quoting early 2030s delivery for a gas turbine backlog above 100 GW. Mitsubishi Heavy Industries and Siemens Energy backlogs are shorter but still measured in years.

That gap explains the move toward smaller generation. EPRI’s Andrew Maxson points to gigawatt-scale procurement announcements for fuel cells and engines, technologies once considered unwieldy at that scale. Nina Sadighi of Eradeh Power Consulting said smaller units can connect at medium voltage rather than needing high-voltage transformers, and that orders are being booked now for 2028 delivery. Her framing is that a two-year wait is tolerable if the alternative is a longer wait for a grid connection.

For field contractors, this changes the work mix. Cleanview counted more than 90 GW of behind-the-meter capacity across 59 large-scale projects, with up to 13 GW possibly online by the end of 2027. BloombergNEF counts 74 GW of announced onsite gas capacity, which would serve about 48 GW of facility load after redundancy. Yet the grid connects only about 10 GW of new data center demand per year. Not every announced megawatt will get built, so schedule volatility is a real planning variable.

Smaller facilities add another wrinkle. NRECA’s Louis Finkel said some co-ops are seeking smaller loads that fit where excess capacity already exists. EPRI’s DCFlex initiative aims to standardize designs around flexibility. Construction Dive does not describe modular construction methods directly, but the direction is toward more numerous, smaller and more repeatable sites. That favors subs who can mobilize quickly across multiple locations over those built around a single gigawatt campus.

Labor may be the tightest constraint of all. Maxson said skilled labor shortages have become “a binding constraint” on data center development and the energy infrastructure serving it, rivaling land, permitting and energy supply.

Construction Dive does not identify general contractors, subcontract packages, bid dates or bidder lists for any project. Subs should treat the pipeline as directional until packages are actually released.

What It Means for Subcontractors

• Electrical and E&I: Price medium-voltage interconnection and switchgear scopes for onsite generation. Sadighi said smaller units connect at medium voltage, so this work may replace some high-voltage transformer scope. Confirm owner-furnished versus contractor-furnished equipment, since transformer lead times run two to three years.
• Mechanical and piping: Engine and fuel cell plants need fuel, exhaust and cooling systems. Price gas piping tied to behind-the-meter capacity. Confirm pipeline status first, since New Mexico regulators blocked the gas line for Project Jupiter.
• Civil and site work: Document permitting and environmental-review risk in every bid. Court-ordered stoppages (Minnesota) and permit shutdown orders (Vineland, with its 45-day window) can idle crews. Add clauses for standby costs and resequencing.
• Schedule risk from interconnection: Document in writing any delay tied to utility interconnection, transformer delivery or pipeline approvals. Records should show dates and causes. Equipment backlogs (turbines into the early 2030s, transformers until at least 2027) make delay claims likely, so check contract language on excusable delay and owner-furnished equipment.
• Permit compliance on temporary power: Certify that temporary or bridge generation has air permits before mobilizing. Vineland’s $1 million fine shows exposure when generators run unpermitted.
• Market selection: Confirm which markets still have headroom. Developers are looking at renewables-rich regions such as the northern Plains over constrained markets like Northern Virginia. In Texas, track the interconnection pause when evaluating backlog.
• Labor: Lock in skilled crews now. EPRI calls labor a binding constraint. Price retention and overtime into 2027-2028 work, when behind-the-meter capacity of up to 13 GW could come online.