(Reuters) – PG&E, California’s largest electric utility, has seen a jump of more than 40% this year in requests for power supplies from data center developers across the northern part of the state, an executive with the company told Reuters on Tuesday.

California’s Silicon Valley is one of the world’s largest and oldest data center markets, but analysts have widely said that pricey land and costly electricity will limit the state’s ability to capitalize on the current wave of demand for artificial intelligence data centers, which is concentrated in the middle of the country.

PG&E, however, said it is seeing signs that the state still has room to run.

PG&E Launches Cluster Study

Last month, PG&E, which delivers power and natural gas to about 16 million people in northern and central California, including Silicon Valley, launched a process for data center developers interested in connecting to the utility’s system.

The so-called cluster study yielded 4.1 gigawatts of interest, on top of the 8.7 gigawatts announced during the company’s most recent earnings call in late April, said Mike Medeiros, PG&E’s vice president of South Bay Delivery.

Not only did the pipeline of prospective data centers being built within PG&E grow, but the size of the projects has also jumped since the previous year’s cluster study, Medeiros said.

Last year, the typical data center wanting to power up through PG&E had 50 to 100 megawatts in capacity. Current proposals are for projects of 500 megawatts to as much as 1,000 megawatts.

“We’re seeing quite a change in what customers are looking for, and some of that might be based on land availability or just scale and the efficiencies of building bigger,” Medeiros said.

Unlike earlier data centers, those for AI are used primarily for training the large language models, like ChatGPT, and can be further away from city centers.

Fresno, Contra Costa County Propose Inland Developments

While California’s older data centers are in Silicon Valley in the western part of the state, many of the new proposed developments are inland, including in Contra Costa County and the Fresno area.

Not all of the data centers making inquiries are expected to ultimately connect to PG&E. Some of the top challenges in data center expansion for the utility include meeting the tight timelines by developers and operators and backlogs in the equipment needed to build out the grid.

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(Reporting by Laila Kearney; Editing by Richard Chang)