Yves here. The fact that local politicians are using opposition to data centers due to the impact on power costs in their communities says this has become a hot issue. It also counters Trump’s generally ineffective efforts to combat inflation, although he is keen to contain oil prices. What happens when state and federal officials can no longer hide from the fact that data center proliferation is an transfer from ordinary citizens to tech bros?
By Haley Zaremba, a writer and journalist based in Mexico City. Originally published at OilPrice
- The rapid growth of data centers, fueled by the artificial intelligence boom, is leading to a bipartisan backlash in local communities across the United States due to their significant impact on energy prices and land use.
- Major utilities in the Southeast project substantial increases in electrical load, largely attributed to data centers, which is translating into higher energy bills for consumers, sparking an energy affordability crisis.
- As pushback intensifies in the U.S., with communities successfully halting projects, data center developers are increasingly seeking opportunities in Latin American nations.
It is said that in times of great division, a common enemy can be a force for unification. And that common enemy has arrived, in the form of energy-sucking data centers and their wholesale attack on energy prices. As the artificial intelligence boom continues to pick up speed, massive data center projects are being greenlit left and right, and the communities expected to foot the bill for this expansion are starting to fight back — even if it means reaching across the aisle.
While political debates over data centers are not yet cropping up at the federal level or even the state level, it has become a hot-button issue in local politics, particularly in the Southeast of the country, where data centers are popping up like mushrooms. The Institute for Energy Economics and Financial Analysis reports that in Virginia, South Carolina and Georgia, “data centers are responsible for 65% to more than 85% of projected load growth” for utilities. Accordingly, major utilities in these states, plus North Carolina, project that they will collectively add 32,600 MW of electrical load over the next 15 years.
A recent analysis from McKinsey projects that global energy demand from data centers will likely shoot up by between 19 and 22 percent annually through 2030, reaching a total annual demand of 171 to 219 gigawatts. “This contrasts with the current demand of 60 GW, raising the potential for a significant supply deficit,” McKinsey reported in October, 2024. “To avoid a deficit, at least twice the data center capacity built since 2000 would have to be built in less than a quarter of the time,” the report went on to say.
Someone has to pay for all that additional energy consumption. And it won’t be the tech companies who are behind the omnipresence of AI integration. It will come at the expense of higher energy bills for consumers who source their energy from grids feeding data centers, whether they benefit from AI or not.
“We are witnessing a massive transfer of wealth from residential utility customers to large corporations—data centers and large utilities and their corporate parents, which profit from building additional energy infrastructure,” Maryland People’s Counsel David Lapp recently told Business Insider earlier this year. “Utility regulation is failing to protect residential customers, contributing to an energy affordability crisis.”
And that affordability crisis is now leading to bilateral opposition to the greenlighting of new data center projects across the nation. Reporting from the sidelines of a debate in suburban Virginia county, Semafor noted that the opposing candidates could at least agree on one thing:
“I think we should, personally, block all future data centers,” Patrick Harders, the Republican county board candidate, was quoted by Semafor. His Democratic opponent George Stewart agreed, saying that “the crushing and overwhelming weight of data centers” amounts to a crisis, and an unjust one at that, with massive corporations offloading their expenses onto local constituents.
Data centers aren’t just eating up more and more of consumers’ paychecks, they’re also snapping up massive tracts of land. In Indiana, local residents recently won out in a battle against Google, which wanted to convert more than 450 acres in the Indianapolis suburb into a sprawling data center campus. “When a lawyer representing Google confirmed at a September public meeting that the company was pulling its data center proposal, cheers erupted from sign-waving residents,” NPR reports. Similar stories are unfolding all across the country.
As data centers receive increasing pushback in the United States, developers are increasingly looking to Latin America to host their data center development projects, effectively outsourcing the issue to nations with even more limited resources.
about a decade ago, i did work for a company that did work for Utilities in some of the states mentioned in the article
what the article doesn’t mention, is that in addition to the load, the capacity of the lines has to be increased to handle the data centers power needs.
you need bigger towers, with bigger cabling, and larger spacing between the 3 phases of a high voltage line ( each overhead line you see on large towers carry’s 1 of 3 phases- phase a,b,c). a 500kV system will arc through air further than 230kV than 115kV and so on, so it is not so simple to just open the floodgates to allow for the greater load both on the transmissions towers and at the circuit breakers inside the substations.
who is paying for the new transmission lines, new substations etc.
Our Arizona electric utility (APS) is starting their rate increase process with the Arizona Corporation Commission. We are in the comment phase right now. Is there a list somewhere online that has sample comments against these data centers? I need some ammunition to submit an informed comment.
I don’t know the exact number of data centers in APS service territory but in Maricopa County, which is the main service area of APS there are about 100 data centers now. Salt River Project (SRP) also supplies electricity to Maricopa County but APS is the largest.
Yeah, I’m just going to wing it with my comment. I am going to assume that people like politicians, consultants, State bureaucrats, local donors, wheeler & dealers, etc. don’t actually have their own power grid but use the same one that everybody uses. And that in all those households there has been some pretty acrimonious talk about the rising costs of electricity and supercharged by how they can see that their electricity bills will be going into the stratosphere in the near future. And just to really makes thing sour, they can see how all these corporations working with AI & data centers aren’t really into putting their hands into their own pockets to help pay for the massive amounts of money that will be needed to upgrade the American power grid, which is already suffering from under investment for years, but want to skate free from all that icky industrial stuff and let everybody else pick up their tab. If it was just something that effected the peons and the little people, all those important people would just shrug their shoulders and mutter about progress. But it isn’t and those important people are being slammed too and have the receipts to prove it – in the form of electricity bills whose totals resemble telephone numbers.
I miss from articles like this an analysis on how the electricity bills components (generation, transmission and distribution) are being affected sepparately by data centres and other causes. It might be the case that consumers are helping to finance data centre power infrastructure but it also could be the case that transmission and or distribution companies might taking advantage of the situation to increase their fees, may be somehow disproportionately, and in collusion with local/state regulators. Being this a natural monopoly you know…
Yes – the impact of any one source of demand on overall costs is complex and much depends on the contractual details of the data centres. A sharp rise in demand will raise costs as grid managers fall back on the more expensive sources of energy during peak times – or peak times themselves can become extended, but a general rise in itself will not in itself cause cost rises – if the demand source is sufficiently flexible it can help cost control (by using surplus power in the grid).
While there is no question that data demand is causing all sorts of issues with regional grids, I suspect that it’s become a convenient excuse for electricity suppliers to push up prices. Without a very deep dive into each grid region its very hard to be sure the real drivers.
Every other Saturday a group of us from my fraternity have a video call for an hour. One of our over 50 years since graduation men (all of us!!) spent his career in “electricity”. He is retired north of DC metro. He related the increase on load in the DC region will be immense.
US regions may be set up differently how they regulate and organize regional generation and transmission. Underpinning generation is distribution/supply of fuel hopefully natural gas which we export a huge amount since spring 2022…..
Plans for sink holes for NVDA GPUs are being made. It would be interesting to see what the federal energy regulation cabal is doing for the AI bubble.
Utility bonds are also something to investigate. Are the underwriters going to assume the rate paying household will pay the interest and principal on the bonds once the bubble bursts?
This is doubly problematic the way we regulate electric utilities in the US — which I get PUC approval to add assets to the rate base, then increase rates to earn a return on the asset. If you believe, as I do, that AI datacenter are an unsustainable financial bubble that will implode (not talking about the stocks, the companies) then when they go belly up and the utility is effectively guaranteed a return who pays, well the consumer of course.
Another example of heads they win, tails we lose.
I find this whole situation to be more proof of how arrogant and narrow sited the Trump administration is. They’re canceling billions of dollars of loans and grants for solar and wind generation. Many of these projects are years in the development which means they are probably not far from being ready to turn on the generation. We need that energy capacity now; but deciding we’re going to stop these projects and swing to nuclear and fossil fuel generation means we’re going to have to start from ground zero. This means it’ll be at best another 5 years before any of that power is running – probably closer to 10 or 15 years for new nuclear. Oh, and there is a world gas turbine shortage so expect delays there too.
I can understand that they don’t believe or care about climate change, but if they were smart they would have let these projects continue if only because not adding that power to the grid is not going to go well for them politically because utility bills arrive monthly as a reminder.
‘Last month, the administration abruptly halted construction on a nearly finished $6 billion 65-turbine wind farm off the coast of New England known as Revolution Wind. The holdup has put thousands out of work and raises big questions about not just the future of this project, but similar efforts across the Eastern Seaboard.’
https://www.pbs.org/newshour/show/economic-fallout-mounts-as-trump-halts-near-finished-wind-power-project
That project was about 80% complete when Trump shut it down. And the reason that he did so was the worse. He did so on ideological grounds and nothing more.
Rev, Adam 1, is it unreasonable after reading many articles re: wind powered generation (esp. offshore) linked here at NC and elsewhere, to suggest we should quit the relexive “wind-and-solar” shared branding as being a bit of an inauthentic boost to the former?
We may in the end not be especially regretful that various wind projects are dropped or dismantled.
I’m from the if-it-works-use-it school of thought and cancelling that project at 80% completion was just plain nuts.
Not sad, the only good thing that is coming out of this mess is that the oceans may be saved from off shore wind.
💯
Sad very sad indeed.
Trump is only canceling things on federal lands, both on and off shore.
His canceling the already permitted and mostly completed offshore winds won’t hold up in court.
His canceling the large 6GW in nevada might work as it’s not in construction yet, but probably just postponing it really.
All the other projects of private funding are mostly going forward as they are the least expensive and fastest to install. The canceling of the tax credits will hurt, but won’t stop solar, wind and batteries.
“I can understand that they don’t believe or care about climate change”
I was at the cancer hospital for my tri-monthly shot today, and the place looked deserted. I remarked to the woman at check-in–who shares my birthday–that perhaps Trump had decreed that cancer was a hoax.
It’s hard for me to believe that these a–holes doubt that climate change is having some various serious impacts on everything from property insurance rates to real estate values to the reliability of the electrical grid. This “hoax” business is paid for by fossil fuel and fits the Murdoch’s narrative for the gullible and change-averse. I expect it to be abandoned and switched almost immediately to, “We must shoot sulfur in the sky ASAP because it’s too hot,” along with a claim that it’s all the fault of the sun, perhaps because old Sol being manipulated by the Chinese/Russians/Iranians.
Probably the ChinaGov will be the first Government to shoot sulfur into the sky, followed very closely by the IndiaGov. They will not wait around forever for the carbon skydumping problem to get solved.
A proposed data center in the metro area was recently pulled at the last minute by Google’s attorneys. They’ll refile in a more rural county that won’t be able to muster opposition.
Oh, and Black Rock is looking to enter the utility biz by purchasing AES (which serves our city). What could possibly go wrong?
https://pestakeholder.org/news/blackrocks-bid-for-aes-signals-an-alarming-utility-takeover-spree/
I am quite sure this is simplistic, but why should the be higher costs for all users? You want a data center? You pay the cost, don’t stick the public with it. But then the thought pops into my simplistic mind that of course, costs are socialized, only profit is private.
Who gets stuck with the bill when the AI bubble bursts and all those shiny data centers are redundant?
Better get your cheque book ready. :(
In this year’s energy bill in the Illinois legislature, there was an attempt to mandate just that — that new large-scale electricity users (i.e. data centers) must provide new, locally supplied, clean energy sources, going on line around the time the data center would, as part of their connection proposal. No relabeling of existing supplies, no long-distance burdens on the electricity grid.
It had a charming acronym, BYONCE – Bring Your Own New Clean Energy.
It got shot down in this spring’s legislative session – data centers don’t want to pay full freight! – so isn’t part of the still-ambitious energy bill that I hope will pass this fall.
I’m hoping as the data center pitchforks come out that that BYONCE will soon return to Illinois.
But its opponents are trying to claim that our electricity price shocks are all the fault of the coal plants that decided to close.
I don’t know the specifics of closing coal plants in your area, but it is true that under the biden harris administration, the EPA I think is the agency that did put very stringent emissions standards on power plants that coal plants can’t meet, which did force many to close and many were going to close.
Of the many things the forced closure of those plants did without having replacement power online, is create shortfalls which does create demand pricing, IE higher costs. Of which can also be congestion transmission line costs as power needs to be brought in from further out.
So yeah you can put at least some of the blame on the biden/harris administration for increased costs which have nothing to do with AI
I think we are closer to the AI bubble bursting than many people think. One reason is that other than engaging in endless wars, the US simply cannot do big projects any more, like upgrading the electrical grid. We lack the industrial base and the trained industrial workforce necessary to do these projects at an affordable cost. Another reason is our reliance on China for rare earths among many other things. And lastly, trillions in borrowed money have been invested in the AI/data center boom and on the hope that this gives the US a comparative advantage over other countries. I think it is all Wall Street hype that has the stock market at unsustainable levels. And that which cannot be sustained, will not be sustained.
Wholesale electricity is market priced. So if demand (from data centers) outpaces supply (from generation), the price rises. Residential customers are on a fixed rate tariff, so they don’t see the market fluctuations. But eventually the local distribution utility, who is paying market prices for the electricity they distribute, has to pass those on to the consumer.
The sooner the AI Bubble pops, the better as far as I am concerned. The cons outweigh the pros 50 to 1 for most people from what I can tell. The only benefit these data centres have is to hit people in their pocketbooks and wake them up to all the cons.
I’m surprised there are any data centers in the Northeast U.S., which has some of the highest electricity costs in the country outside of California.
I’m currently paying about 32 cents per kwH in addition to a flat $10 fee from Eversource (private monopoly utility). Got news those rates are going up by 8 cents this January.
Maybe the plan is to milk the current U.S. electricity infrastructure for all it’s worth before it collapses, then transfer overseas when the host dies.