Power Cost Fluctuations

As data centers increasingly depend on the constrained energy grid to meet their growing power demands, they also face significant fluctuations in power costs. These variations can result from several factors, including shifts in grid demand, regulatory changes, and market volatility. The overall demand for energy is expected to rise due to the proliferation of AI technologies and the expansion of high-density computing, which will lead to spikes in prices and financial strain for data center operators. Furthermore, traditional utility pricing structures often fail to reflect the real-time costs of energy consumption, contributing to unpredictability in operational expenses.

SIDE Solution

Overwatch Capital strategically balances medium to long-term price volatility through controlled price escalators for energy costs. These escalators, a standard industry practice, are structured to pass through rising costs, including energy demand charges and Transmission and Delivery (T&D) expenses, to tenants in a predictable and manageable manner. By investing more up-front in T&D and production capital, Overwatch Capital gains the advantage of controlling margins while maintaining a competitive edge in the market.

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