Data center constraints shift from “megawatts” to “permits”: a new investment theme emerges across the APAC energy transition value chain

Overview

This report is JPMorgan’s conference takeaway from its recent APAC data center and energy transition research. The core issue is that constraints on AI-driven data center construction are escalating: the market is no longer focused solely on whether the grid can serve data centers, but also on whether communities will accept their expansion and whether regulators will allow ordinary customers to bear the related grid costs. This change has spillover significance for APAC data center markets, which remain in the early stages of expansion, and will also affect APAC power equipment, energy storage, and low-carbon power supply chains serving the U.S. data center market.

Core views

The report’s core views are: first, data centers have become a distinct and scrutinized new source of electricity demand, and community opposition may lead to stricter permitting, longer construction timelines, and more complex power arrangements. Second, U.S. regulators are shifting incremental grid costs driven by data centers toward large-load customers, reducing the economics of purely grid-connected expansion. Third, behind-the-meter solutions are therefore becoming more attractive, with ESS being the most scalable near-term tool, while SOFC fuel cells and SMRs offer options for speed, low local impact, and long-term low-carbon power supply, respectively. Fourth, APAC beneficiaries include companies involved in energy storage, power equipment, fuel cells, and nuclear power.

Analysis framework

The report uses a thematic conference-takeaway approach, combining analysis of U.S. data center community opposition, regulatory cost allocation, data center load curves, and APAC supply-chain mapping to derive the relative advantages of different energy technologies in permitting speed, peak-shaving capability, local impact, decarbonization attributes, and investment accessibility.

Methodology notes

• thematic researchsocial license constraint framework

  Data center construction is constrained not only by grid capacity but also by community acceptance and the political economy of permitting.

  The report expands the bottlenecks to data center expansion beyond technical power-supply capability to include community, regulatory, and cost-allocation factors, emphasizing that opposition sentiment may change project approval outcomes and construction timelines.

• regulation and cost allocationlarge-load customer cost attribution framework

  Large-load customers such as data centers may be required to bear the costs of incremental generation, transmission, interconnection, and grid upgrades.

  FERC requires the six major grid operators to update rates for large-load customers. The policy direction is to protect ordinary ratepayers and reduce the socialization of data center costs.

• value-chain mappingbehind-the-meter solution screening

  ESS, SOFC, SMR, and power equipment opportunities are screened based on peak shaving, permitting speed, local impact, and low-carbon attributes.

  The report identifies energy storage, onsite generation, and electrical equipment as key pathways for data centers to reduce grid dependence, improve community acceptance, and optimize their cost structures.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ESS energy storage: Sungrow, LG Energy Solution, CATL

  Potential beneficiaries of data center peak shaving and behind-the-meter integration

  Strengths

  Scalable and deployable in the near term; can use intraday peak-to-trough differences to ease peak electricity pressure, potentially lower peak-period prices, and reduce the impact of diesel backup generation.

  Weaknesses

  Energy storage does not add net electricity supply and remains dependent on the power-generation mix and grid interconnection conditions over the long term.

  Comparison

  Compared with new generation and transmission construction, ESS is more localized, modular, and permitting-friendly.

  Risks

  Uncertainty remains around battery costs, project interconnection rules, storage revenue mechanisms, and the actual integration rate at data centers.

• SOFC fuel cells: Weichai A/H

  Onsite generation and low-local-impact power supply solutions for data centers

  Strengths

  Relatively short delivery timelines; generates electricity through an electrochemical process rather than combustion, helping reduce noise and improve local emissions performance, while offering future fuel-switching flexibility.

  Weaknesses

  Costs, fuel supply, and commercial scale still require validation.

  Comparison

  More favorable for community acceptance than diesel backup generation and more likely to be available in the short to medium term than SMRs.

  Risks

  The pace of technology cost reductions, fuel prices, equipment reliability, and customer adoption rates.

• SMR small modular reactors: Doosan Enerbility

  Long-term low-carbon behind-the-meter power option

  Strengths

  Low-carbon and capable of reducing grid pressure; its capacity scale may fit the needs of large data centers.

  Weaknesses

  Policy, public risk perception, and commercialization timelines are challenging.

  Comparison

  Unlike ESS, SMRs can provide net electricity supply. Compared with conventional nuclear power, they emphasize modularity and siting flexibility, but have greater deployment uncertainty.

  Risks

  Permitting timelines, construction costs, nuclear safety perceptions, financing conditions, and commercialization schedules.

• Power equipment: Yingliu, Hyosung Heavy Industries

  Potential beneficiaries of demand for electrical equipment driven by data centers and large-load interconnections

  Strengths

  Benefits from greater complexity in interconnection, transmission, grid upgrades, and behind-the-meter configurations.

  Weaknesses

  Demand timing depends on data center permitting outcomes and customer capital expenditure.

  Comparison

  Compared with power-generation and energy-storage companies, power equipment companies have more direct exposure to grid upgrades and load-interconnection investment.

  Risks

  Project delays, delayed order recognition, cost inflation, and supply-chain delivery risks.

Key data

• U.S. data center opposition rateRose from slightly above 40% in August last year to slightly above 70% in MayReasons for opposition include water consumption, electricity usage, and higher utility bills.
• Number of canceled U.S. projects20 data center projects canceled in 1Q 2026Shows that community opposition has affected actual project outcomes.
• Scope of moratorium discussions14 states are discussing or considering moratoriumsReflects expanding permitting and political resistance.
• FERC regulatory actionRequires the six major U.S. grid operators to update rates for large-load customersThe policy direction is for large-load customers to bear incremental infrastructure costs.
• Cost allocation directionLarge-load customers pay 100% of incremental infrastructure costsIncludes generation capacity, transmission, interconnection, and related grid upgrades.
• Typical intraday load fluctuationApproximately 50% peak-to-troughEnergy storage can capture unused capacity during troughs and discharge during peak periods.
• Estimated U.S. ESS battery demand in 2030Raised by 52%JPMorgan’s Korean battery analysts raised their estimate because data center ESS integration may shorten permitting timelines.
• Companies and ratings listed in the reportCATL-A 300750.SZ/Rmb374.51/OW; CATL-H 3750.HK/HK$668.00/OW; Doosan Enerbility 034020.KS/W85,000/OW; Hyosung Heavy Industries 298040.KS/W3,125,000/OW; LG Energy Solution 373220.KS/W354,500/OW; Sungrow-A 300274.SZ/Rmb128.18/OW; Weichai Power-A 000338.SZ/Rmb29.57/OW; Weichai Power-H 2338.HK/HK$37.48/OW; Yingliu Electromechanical-A 603308.SS/Rmb62.71/OWPrices as of the July 6, 2026 close, unless otherwise stated.

Impact & implications

For investors, the shift in the center of gravity of data center expansion constraints may redirect value from simple power capacity toward solutions that are easier to permit, reduce grid peak pressure, lower local negative impacts, and provide clearer cost attribution. Within the APAC supply chain, companies related to ESS, power equipment, SOFC, and SMR may receive greater attention as U.S. and local data center construction models evolve.

Risks

• Community opposition may continue to intensify, potentially further extending permitting timelines or leading to project cancellations.
• Regulatory requirements for large-load customers to bear more grid costs may weaken the economics of grid-connected data center expansion.
• The commercialization pace, cost curves, and policy support for ESS, SOFC, and SMR remain uncertain.
• APAC markets are still in the early stages of data center expansion, and opposition sentiment may escalate rapidly once capacity clusters form.
• Although the relevant companies are listed as beneficiaries, the report also discloses that JPMorgan has market-making, client, investment-banking, or compensation relationships with some of these companies.

What to watch

• Whether U.S. states continue to expand data center moratoriums or tighten permitting requirements.
• Implementation details of updated large-load customer rates from FERC and major grid operators.
• The pace at which data center owners adopt ESS attachment, SOFC, and other behind-the-meter solutions.
• Whether APAC data center cluster markets experience community opposition and cost-allocation disputes similar to those in the U.S.
• Relative changes in the costs of early-stage Chinese SMR projects versus conventional nuclear power, nuclear power in developed markets, and SMR benchmarks.
• Orders, capacity, and project progress at Sungrow, LG Energy Solution, CATL, Weichai, Yingliu, Hyosung Heavy, and Doosan Enerbility.