Should Small-Scale Data Centers Participate in the Day-Ahead Electricity Market?

TL;DR

This paper proposes a novel framework enabling small-scale data centers to participate in the day-ahead electricity market through a risk-averse bidding strategy, reducing costs and emissions.

Contribution

It introduces a bilateral power purchase agreement and a scenario-based bidding strategy that integrates data center flexibility into electricity market participation.

Findings

Potential 22% cost reduction for data centers in the market.

Flexible workloads impact energy costs significantly.

Virtual de-rating affects grid transfer capacity and costs.

Abstract

The global race to artificial intelligence competitive advantage is challenging electricity grids by demanding growing data center capacity. Addressing this challenge requires synergistic operational strategies that integrate data centers into electricity markets while supporting grid operation. This work proposes a bilateral power purchase agreement between small-scale data centers and distribution system operators, enabling data center participation in the day-ahead electricity market. To facilitate market participation, we develop a scenario-based, risk-averse bidding strategy that leverages flexibility from local energy resources, waste heat recovery, and data center workload. The strategy jointly minimizes operational costs and carbon emissions, creating a carbon-aware cost-effective framework for data center integration in the electricity day-ahead market. The method is evaluated on a study case comparing a conventional time-of-use supply scheme with the proposed custom power purchase agreement, showing a potential 22\% cost reduction, thus highlighting financial opportunities for small-scale data centers day-ahead electricity market participation. Two additional case studies illustrate the marginal effects of: (i) data center flexible workload on energy costs and (ii) virtual de-rating of grid transfer capacity.