Power for data centers could come at 'staggering' cost to consumers
A new report from Harvard’s Electricity Law Initiative highlights how the explosive growth of data centers driven by artificial intelligence could lead to skyrocketing electricity bills for average residents.
Staggering Power Demands
Data centers are projected to consume up to 12% of all U.S. electricity by 2028, compared to the current 4%. Traditionally, the costs for building new power plants are spread across all customers under the assumption that everyone benefits. However, the report argues that the massive power demands of data centers challenge this assumption.
Hidden Costs and Regulatory Challenges
The report reveals that in many cases, agreements between tech companies and utilities regarding electricity costs for data centers are confidential, limiting transparency. Some utilities may have concealed the costs borne by average residents to offset special rates or incentives provided to data centers.
Environmental and Economic Impacts
Aside from bill increases, the report points out that utilities' profitability from building new generation for data centers could hinder the transition to cleaner, more sustainable energy sources. Instead of investing in renewable energy, some utilities are opting for gas-fired power plants to meet data center demands, potentially stalling decarbonization efforts.
Recommendations for Future Regulation
To prevent a "race to the bottom" among states offering incentives to data centers, the report suggests that public utility commissions standardize terms and rates for all data centers. It also proposes the establishment of guidelines similar to those in Kentucky, where special contract rates must align with the cost of providing power and not extend beyond five years.
Ensuring Fairness for Ratepayers
The report emphasizes the importance of protecting ratepayers by implementing quality regulations that directly address data center demands. One proposed solution is to allow data centers to contract with independent electricity providers or create "energy parks" dedicated to serving clusters of data centers, insulating ratepayers from the costs of data center energy consumption.
Regulatory Challenges and Economic Development
Regulators like Louisiana Commissioner Davante Lewis are faced with the challenge of balancing economic development opportunities brought by data centers with the potential long-term financial implications for residents. The growth of data centers presents a rapidly evolving landscape that requires careful consideration to ensure the public's best interests are protected.
Floodlight is a nonprofit newsroom that investigates powerful interests impeding climate action.
