The Department of Energy’s Push to Power America’s AI Future

How Federal Lands Could Reshape the Data Center Landscape

The explosive growth of artificial intelligence is creating unprecedented demands on America’s power infrastructure. Data centers, the physical backbone of the digital economy, are consuming electricity at rates that have caught policymakers, utility companies, and tech giants off guard. In response, the U.S. Department of Energy (DOE) has launched an ambitious initiative to leverage federal lands for AI infrastructure development, potentially transforming how the nation powers its technological future.

The Federal Initiative: 16 Sites and a 2027 Target

In April 2025, the DOE announced plans to co-locate data centers and new energy infrastructure on federal lands, identifying 16 potential sites across the country. These locations, many at national laboratories and former nuclear facilities, were selected for their existing energy infrastructure and ability to fast-track permitting for new power generation, including nuclear energy.

The initiative operates through a public-private partnership model, where the DOE provides land access while private sector partners assume responsibility for financing, constructing, operating, and eventually decommissioning the facilities. The target is ambitious: begin construction by late 2025 with operations commencing by the end of 2027.

By July 2025, the DOE had narrowed its focus to four initial sites: Idaho National Laboratory, Oak Ridge Reservation in Tennessee, the Paducah Gaseous Diffusion Plant in Kentucky, and the Savannah River Site in South Carolina. Each location offers unique advantages, from existing nuclear expertise to established security infrastructure.

Why Federal Lands? The Strategic Advantages

The DOE’s approach addresses several challenges facing data center development:

Existing Infrastructure

Many DOE sites already have substantial power infrastructure in place. Idaho National Laboratory, for example, has a legacy of building and testing advanced technologies, including 52 nuclear reactors with four currently in operation. Oak Ridge offers utilities anticipated to be sufficient for rapid data center development, with proximity to the proposed TVA Clinch River Small Modular Reactor site.

Security Considerations

National laboratory sites operate under strict security protocols, offering a degree of protection not typically available at commercial locations. As AI infrastructure becomes increasingly critical to national interests, this security advantage takes on greater significance.

Research Partnerships

Co-location with DOE research facilities creates opportunities for technological collaboration. The partnership structure allows industry players to work alongside DOE’s world-class scientists on advancing both power systems design and next-generation data center hardware.

The Energy Challenge: Understanding the Scale

The urgency behind this initiative becomes clear when examining the energy demands of modern AI infrastructure. According to the International Energy Agency (IEA), U.S. data centers consumed approximately 183 terawatt-hours of electricity in 2024, representing more than 4% of the country’s total electricity consumption. That figure is roughly equivalent to the annual electricity demand of Pakistan.

Projections suggest this demand could grow by 133% by 2030, reaching 426 terawatt-hours. The IEA estimates that data centers could account for nearly half of U.S. electricity demand growth between now and 2030. AI-specific workloads are driving much of this increase, with electricity consumption in AI-accelerated servers projected to grow by 30% annually.

This demand surge is already affecting electricity markets. Analysis shows wholesale electricity costs have more than doubled in some regions since 2020, with areas near major data center activity experiencing the steepest increases. Studies estimate that data centers and cryptocurrency mining could lead to an 8% increase in average U.S. electricity bills by 2030, potentially exceeding 25% in high-demand markets.

Nuclear Power: A Natural Partner?

The DOE’s emphasis on nuclear energy for powering these data centers reflects several practical considerations. Nuclear plants operate at full capacity more than any other energy source, providing the constant, firm power that data centers require for their 99.999%+ reliability needs. Current nuclear plants operate 18 to 24 months between refueling outages, with those outages typically lasting only a few weeks and planned well in advance.

Nuclear energy also addresses the carbon-free power needs of major technology companies, many of which have made significant emissions reduction commitments. Unlike wind and solar, nuclear provides consistent baseload power regardless of weather conditions.

However, challenges remain. The initial capital costs of nuclear construction are substantial, and regulatory timelines can extend projects by years. Some industry observers have noted that no small modular reactor (SMR) or micro reactor currently under development will be operational by 2027, meaning early data centers on federal sites would likely rely on existing grid infrastructure.

The Colocation Debate

The broader trend of co-locating data centers with existing power plants has generated significant discussion among regulators, utilities, and consumer advocates. Several major technology companies have announced agreements to purchase power directly from nuclear plants, including plans to restart previously retired facilities.

Proponents argue that these arrangements benefit both parties: data centers gain access to reliable, carbon-free power without lengthy grid interconnection delays, while power plants secure long-term customers that can support continued operations and potential expansions.

Critics raise concerns about potential impacts on grid reliability and cost distribution. When large generating capacity is dedicated to serving data centers directly, questions arise about whether this reduces power available to other customers or shifts infrastructure costs to residential ratepayers. The Federal Energy Regulatory Commission (FERC) has been examining these issues, and its decisions will likely shape how such arrangements develop.

Economic Considerations

Data center development carries significant economic implications for host communities. These facilities generate substantial tax revenue for municipalities and states, create high-paying technical jobs, and can attract additional investment in related industries.

The DOE’s request for information specifically sought input on engagement strategies with local communities, tribal governments, and state authorities. The agency emphasized its intent to establish AI infrastructure in a manner that supports relationships with these stakeholders.

However, data center growth can also create tensions. Concerns about energy prices, water consumption, land use, and noise have prompted community objections in some locations. States and localities must weigh the economic benefits against these costs, and thoughtful public-private partnerships can help manage these trade-offs through strong incentive programs, infrastructure investments, and workforce training.

Implementation Timeline and Next Steps

Following the April 2025 request for information, the DOE received substantial industry interest. By September 2025, the agency had released formal requests for applications at Idaho National Laboratory, with site-specific solicitations for other locations following.

The application process requires companies to demonstrate technological readiness, financial viability, and detailed plans for completing regulatory and permitting requirements. Proposals incorporating innovative energy generation, such as advanced nuclear reactor technology, receive favorable consideration.

The DOE anticipates projects will proceed through three phases: a development period of 6-18 months for establishing requirements and completing permitting; a construction phase of 1-2 years; and an operational period of 10 or more years under long-term lease agreements.

Broader Context: The AI Infrastructure Race

The DOE initiative exists within a larger context of rapidly increasing investment in AI infrastructure. Major technology companies have announced plans to spend hundreds of billions of dollars on data centers and computing resources over the coming years. This scale of investment reflects the growing recognition that AI capabilities depend fundamentally on access to massive computing power.

Energy constraints have emerged as a potential bottleneck for this expansion. Utilities in some regions report that they cannot accommodate all the data center projects seeking grid connections. Grid interconnection queues have grown substantially, with wait times extending to years in many markets.

Against this backdrop, the DOE’s offer of federal lands with existing infrastructure and streamlined permitting represents an attempt to accelerate development while ensuring that growth occurs in an organized manner.

Looking Ahead

The outcome of the DOE’s federal lands initiative will likely influence data center development patterns for years to come. Success could demonstrate a model for public-private cooperation in building critical infrastructure, while challenges could prompt adjustments to the approach.

Several factors will determine results: the speed at which regulatory processes can move, the ability to attract qualified private sector partners, the resolution of broader questions about grid costs and reliability, and the development of new energy generation capacity, including advanced nuclear technologies.

What seems clear is that the intersection of AI development and energy infrastructure has become a significant policy priority. How the nation navigates this challenge will shape both its technological capabilities and its energy landscape for decades to come.