A subsidiary of utility Northern Indiana Public Service Company (NIPSCO) has struck a deal with Amazon to construct 3GW of new dispatchable capacity, with the aim of serving the tech company’s planned data center expansion.
Although the deal includes the construction of a new 400MW/1,600MWh BESS facility, it also involves the establishment of two new fossil gas turbines, with a combined capacity of 2.6GW.
Details of the deal were disclosed within filings published with the Indiana Utility Regulatory Commission (IURC) earlier this month. Despite the filings not naming a counterparty, both Amazon and NIPSCO’s parent company, NiSource, released their own press releases this week confirming involvement.
As one would expect, neither release mentioned the proposed fossil fuel expansion, nor its hugely detrimental environmental impacts, but instead centered on job creation and increased tax base.
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With some of the world’s largest tech companies all vying for electricity to power their growing data center portfolios, this deal between Amazon and NIPSCO is one of several similar announcements having made headlines in the past six months.
As reported by Energy-Storage.news in September, Arkansas utility Entergy is being financially supported by Google to develop a 1.4GWh hybrid BESS to serve the tech company’s data center portfolio.
Structure of the deal
As revealed within recent IURC filings, NIPSCO is set to build a 1.6GWh BESS at the site of its former coal-fired Mitchell Generating Station located in Gary, Indiana, that was permanently decommissioned in 2013 and has since been demolished.
The utility is also proposing to construct two 1.3GW fossil gas turbines, which it says will eventually be converted to combined cycle gas turbines (CCGTs). The locations of both plants were redacted within the filings.
NIPSCO is seeking regulatory approval of two agreements, one which is referred to as a “special contract” and the other is a power purchase agreement (PPA).” Under the “special contract”, Amazon will fund the construction of the new BESS and fossil fuel plants.
Additionally, Amazon will also fund the construction of any new transmission infrastructure required by the utility to deliver power to its data centers across Northern Indiana, of which the tech company is developing “several,” according to recent regulatory filings.
Amazon will pay these fees to a newly-formed NIPSCO business subsidiary, NIPSCO Generation, LLC (GenCo). This new subsidiary will be the ultimate owner of the assets, with sole responsibility for schedule and dispatch into the Midcontinent Independent System Operator (MISO) energy market.
Under a separate PPA, NIPSCO will then purchase the power required to serve Amazon’s data center from GenCo.
As revealed within recent filings, GenCo has already secured equipment for the BESS project, as well as having entered into an engineering, procurement and construction (EPC) to carry out development.
Completion of the BESS is expected by 1 January 2027, with Amazon’s data center electricity demand from NIPSCO expected to reach its 2.4GW peak in 2032.
GenCo controversy
With NIPSCO being a regulated utility, it would ordinarily obtain regulatory approval before purchasing project equipment and executing third-party contracts.
However, as explained by NIPSCO Chief Operating Officer Vincent Parisi, under the GenCo structure, the utility was “willing to take on these financial commitments to more quickly serve [Amazon].”
In September, IURC officials approved the creation of GenCo to operate as a “generation-only” subsidiary. Unlike any of NiSource’s other utility subsidiaries, GenCo won’t sell power to retail customers, but will procure energy on behalf of NIPSCO to serve its largest customers, such as Amazon.
Despite the deal supposedly saving NIPSCO customers up to US$1 billion over the next 15 years, the creation of GenCo has been heavily criticised by clean energy advocates for being anti-competitive and undermining the regulatory process.
Additionally, with this huge fossil fuel investment and timeline in mind, it’s difficult to see how NiSource could possibly reach its goal of having net-zero scope one and two emissions by 2040, without relying heavily on relatively unproven carbon capture technology.
