AI Boom Sparks Fight Over Soaring Power Costs 87
Utilities across the U.S. are demanding tech companies pay larger shares of electricity infrastructure costs as AI drives unprecedented data center construction, creating tensions over who bears the financial burden of grid upgrades.
Virginia utility Dominion Energy received requests from data center developers requiring 40 gigawatts of electricity by the end of 2024, enough to power at least 10 million homes, and proposed measures requiring longer-term contracts and guaranteed payments. Ohio became one of the first states to mandate companies pay more connection costs after receiving power requests exceeding 50 times existing data center usage.
Tech giants Microsoft, Google, and Amazon plan to spend $80 billion, $85 billion, and $100 billion respectively this year on AI infrastructure, while utilities worry that grid upgrade costs will increase rates for residential customers.
Further reading: The AI explosion means millions are paying more for electricity
Virginia utility Dominion Energy received requests from data center developers requiring 40 gigawatts of electricity by the end of 2024, enough to power at least 10 million homes, and proposed measures requiring longer-term contracts and guaranteed payments. Ohio became one of the first states to mandate companies pay more connection costs after receiving power requests exceeding 50 times existing data center usage.
Tech giants Microsoft, Google, and Amazon plan to spend $80 billion, $85 billion, and $100 billion respectively this year on AI infrastructure, while utilities worry that grid upgrade costs will increase rates for residential customers.
Further reading: The AI explosion means millions are paying more for electricity
Costs (Score:4, Informative)
AI companies need to spend billions of dollars across all of the countries from which they are sucking down massive electrical resources.
Re:Costs (Score:4, Informative)
Maybe permission to build and expand data centres should come with obligations to upgrade the grid and install new renewable generation too.
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If they had a choice they would externalize as much of the cost as possible, and use the cheapest source of energy possible. Fortunately renewables and storage are the cheapest now, but there is a lot of fossil fuel generation that is a sunk cost and subsidized by other users, and areas where there is poor connectivity to the wider area.
The latter seems to be one of the points of contention.
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I think that what is really happening here is that someone is trying to establish a false narrative about who pays for what and how rates are set, for the purpose of preventing the US from building out more power and processing capacity. I suspect it is being driven by Chinese interests, as that's something they have
Re: Costs (Score:2)
Does created and hyped scarcity make asking decoupling commissions for rate hikes easier, even when the profits from their investments and hedges alone cover their operating costs?
Re:Costs (Score:4, Insightful)
The California PUC requires large consumers to pay their connection costs-- line and substation upgrades for starters. Paying for generation upgrades as well is a pretty easy provision to force as well.
What it will ultimately do though is combine (or at least couple) combined cycle turbines with data centers for the majority of capacity. Expect big rushes to build data centers on Indian reservations and states with lax emissions regulations.
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Re: Costs (Score:2)
When the public's rates are set by decoupling commissions, why wouldn't they raise prices just because they can, whereas free market supply and demand prices would often go negative and average much less than the administered prices the public pays?
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Besides, the point is that electric bills can't just shoot up because a datacenter moved in. Yes, there are arguments for and against regulating utilities, but that's not the question at hand. A regulated power company can't just raise everyone's rates, as the article's author and many other individuals seem to think.
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Paying for generation upgrades as well is a pretty easy provision to force as well.
Is it? The CPUC doesn't seem able to regulate PGE in any reasonable manner or to any useful degree.
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Requiring individual companies to build their own bespoke power generation is inefficient and wasteful.
Datacenters should buy electricity just like anyone else. If the utilities need money to finance that, there's a way to do that using something called "capitalism", which means they get the money from investors by issuing bonds or equity.
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They wouldn't even have to build it themselves. They could just invest enough for some other company to do it, somewhere else. Whatever gets built would probably feed into the grid, not just the datacentre. They are going to want some hefty batteries on side for outages, so could go grid scale.
The basic goal is to stop them externalizing their costs.
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They could just invest enough for some other company to do it
Instead of forcing datacenters to be utility investors, perhaps the financing could come from professional utility investors that already exist and have capital available and expertise at pricing risk.
Should everyone be forced to pre-pay for infrastructure? When you buy a car, should you be required to send some money to road construction companies? Should new people moving into your area be required to invest in farms or new shelving for the grocery stores?
Should we shut down the NYSE, since companies will
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Thanks for providing a great example of "reductio ad absurdem". However....
perhaps the financing could come from professional utility investors
"Professional utility investors"? You mean shareholders? They're interested in stable income, dividend payouts, and a defensive play during market volatility. This is not a group that has demonstrated interest in increased spending now in return for a chance at increased profits downstream.
When you buy a car, should you be required to send some money to road construction companies?
You are, at least for ICE vehicles. Every gallon of gasoline purchased provides funding for road construction and maintenance. Measures to force E
Re: Costs (Score:2)
There is the issue of risk. Typically, utilities take this on when financing system upgrades to serve new loads. Charging their customr base for the cost of funds. But on occasion, the risks become too large. Or the forecasts of power sales too uncertain. As in the case of WPPSS [wikipedia.org]. When those new income sources walk away, or were never there to begin with, the other rate payers get stuck with the bill. No thanks.
AI/cloud computing/crypto have a very high potential of being a flash in the pan, so to speak. Th
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There is the issue of risk.
Golly, it's too bad we don't have a $28-Trillion dollar institution in the business of capitalizing risk.
nyse.com [nyse.com]
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Given the risk adjusted discount rate, the returns will be phenomenal. Or nonexistent. Banks probably won't be allowed to touch these securities. And you probably won't want your pension fund invested in them either.
Re:Costs (Score:5, Insightful)
Datacenters should buy electricity just like anyone else.
Their sudden, massive gobbling of scarce electrical resources are causing those scarce resources to be become even scarcer. Most utilities are regulated, and prevent them from operating as a free market (and rightfully so, in most cases). If these data centers were subject to capitalistic principles, they would be paying 100 times what they're paying now.
Regulations meant to protect you and me from the excesses of unrestrained natural monopolies are now working again us, which means we all pay higher prices to prop up the excesses of data centers. That is a problem that needs to be rectified. Data centers need to be made to pay the actual prices for the damages they are causing. AI companies as well. They are both severe outliers that are ruining electrical availability for most people.
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Datacenters should buy electricity just like anyone else.
Indeed that is what they are doing and we are discussing. How is that working out?
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Must it be renewable energy?
We've seen examples of data centers investing in nuclear power before. One example is seeing Three Mile Island produce power again, though under a new name and new management. It's the same nuclear reactor though from the 1970s.
I see nuclear power playing a large part in meeting the energy demand of new data centers. I can expect some contraction on AI demand as people figure out where is doesn't help as well as added efficiency. That's not likely to diminish the need for new
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Re:Costs (Score:5, Insightful)
Paying for power is one thing, but if the power demand requires an electric grid upgrade, it ends up being the consumers who pay that cost, even though AI is not providing them any benefit. This is similar to when Internet capacity in a neighborhood starts to max out, the ISP comes in and adds more capacity for that neighborhood, but then, who ends up paying in the long run for the cost of the neighborhood capacity increase?
Now, picture if it's just one person who is using so much bandwidth that it forces your ISP to do an upgrade, but then, the ISP raises the rates for EVERYONE because of the need to increase the neighborhood capacity. In reality, it should be the one person using so much bandwidth that the neighborhood as a whole needs an upgrade, but instead, the burden gets applied to everyone.
The cost of AI from an infrastructure perspective isn't being picked up by these corporations, and that's what needs to change.
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One solution is to have different price for electricity and transfer of that electricity. Then you can set the price of transfer based on top demand. This way those who demand most from the grid, will pay most to the grid. And those who require most electricity, will pay most to the produces of electricity.
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It's not enough. The value of electricity is extremely variable based on both location, time and the extent to which it fits with previous plans for electricity. The price that they pay will vary depending on time but if they are coming in with new, unpredicted, demand then the cost of satisfying it becomes even higher and they should be paying even more per unit than the other people that are more or less following what was predicted.
On the other hand, if the AI people can move their demand to places and t
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They have this information in your bill, but again, the cost for infrastructure gets spread out to everyone, even when one or a small few businesses that don't even contribute to the local community cause the costs for everyone to go up.
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Many jurisdictions already charge transmission separate from generation. Transmission charges are already based on your kva demand. More demand means you pay more for transmission. In fact we pay twice as much for transmission as we do generations here.
Interestingly I do not pay transmission on solar power my microgeneration systems (150 kw each) put on the grid. But then again gas plant generators don't pay to put power on the grid either. Makes some sense that transmission is paid by the electrical us
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This way those who demand most from the grid, will pay most to the grid.
I hate to break this to you but it mostly works the exact opposite. Large consumers pay less per unit at wholesale rates than your typical residential user.
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And you should verify your assumption that a company like Microsoft wouldn't have to pay quite a lot extra to get a new data center hooked up.
Your assumption that there is no local benefit from having a data center built also needs revisiting. Jobs and taxes count.
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Paying for power is one thing, but if the power demand requires an electric grid upgrade, it ends up being the consumers who pay that cost, even though AI is not providing them any benefit.
That's only true if there is some separation between the energy source and the energy sink where there needs to be a grid connection between them. I can recall an instance, which I believe made it to Slashdot, where an AI data center wanted to have a direct connection to a power plant and some utility wanted to insert itself in the middle. The path was so short that there was no need to involve any kind of utility, the wires would have been maintained under some agreement between the two, but the utility
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>"Paying for power is one thing, but if the power demand requires an electric grid upgrade, it ends up being the consumers who pay that cost, even though AI is not providing them any benefit."
^^THIS
My Virginia Dominion Energy bill keeps going up. I don't use AI *at all*. And yet those costs are being pushed onto me and countless other non-AI users. It is not like "AI" is "benefiting everyone." Even though it might be unreasonable to try and "externalize" every type of mammoth electricity user, it see
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Oh? From everything going on, these businesses that cause a need for new power plants and infrastructure upgrades aren't paying the money to avoid rate increases caused by their use. If solar, batteries, and whatever are NEEDED to compensate for AI or crypto-mining activities, then the businesses should be covering ALL of those expenses. Microsoft, Google, and the other big players that have enough resources to build a power plant are exceptions. The majority are "small business, Inc." that sets up
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As the old saying goes (Score:1)
Privatize the profits and socialize the losses. This capacity will get built on the tax payer dime because paying congress is cheaper.
Re:As the old saying goes (Score:4)
Why? I don't see anything particularly mendacious with the statement.
Just turn of all the crypto mining crap (Score:4, Insightful)
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I agree with you that all Proof of work should go, but I would not be sure if it is really at the scale AI processing will be.
And don't focus too much on these two. Videos streaming is another huge energy demand. You can create a lot of content using AI with the energy used for *streaming* the content of a Netflix video, let alone the rest of processing cost.
We all pay (Score:3)
There is nothing new about this. When public services have to be expanded to serve new private businesses, everybody pays the costs. Home builders build developments and everyone in the school district pays for the expansion of the schools needed to serve the additional kids. If there is increased demand on the electric grid the cost of building the new facilities required are shared by everyone, not just those creating the new demand. These kinds of public subsidies are rarely recognized. The cost of meeting the new energy demands for AI is going to be shared by all of us. The only way around it is to require the companies to build their own private power plants disconnected from the public grid. And even then, we have to deal with the issue of available resources to build those plants.
There is a discussion elsewhere on slashdot about a new Chinese AI technology. They have come up with a replacement solutions for the high end processors that they can't get because of sanctions. But their solution uses more power than the current high end processors. The article makes the point that this is not a serious limitation in China because they have very large established industry building new power plants of all descriptions. The article contrasts this with the United States which has a much more limited capacity to build power plants. The difference means that power consumption is a real limitation for the United States' AI industry,but much less of a constraint for China's.
We haven't even talked about the impact of the demand for new energy on efforts to replace the use of fossil fuels. If the limited capacity to build new power plants is being used for AI, where is the replacement power for closing legacy fossil fuel plants.?
Re:We all pay (Score:5, Interesting)
The cost of meeting the new energy demands for AI is going to be shared by all of us.
Well this is where the subjectivity comes into play, a lot of people are not convinced AI is worth absorbing more shared costs.
For a completely hyperbolic example but if a company came in and said "We have a new firm that takes your elderly relatives and processes them into nutrient paste. It requires 6GW of new power capacity but you all get some of the nutrient paste and it keeps the nation out of a nutrient paste gap" many would say "I dunno, we don't really care about that and seems like a waste of energy. Why should we share that cost?"
I can see the pitch of a new housing development or a factory to a town of people as an economic upside worth the shared costs. The AI companies have done a piss-poor job of that, probably into the negative.
Doesn't help when the pitch seems to be "Our stated goal for AI is to put you out of work. Oh and we also supported the party that wants to provide zero safety net for that outcome".
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then the AI should pay for the upgrade as it is replacing employment costs. means for every JOB AI costs, equivalent taxes should be paid for that job by the AI company and the company that used the tech that it took away.
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That is a good idea, the job losses would be considered an economic externality and should be balanced via public policy, ie, taxes.
Now this creates a new issue though as the negative is very localized (They took my jerb!) and the positive (more taxes for the town) are diffuse, as in the person losing the job may say "that's great but what about me?"
It's not an easy thing to solve for but it has to be solved. This is where I would say a much stronger welfare apparatus helps smooth those edges out but that'
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I can see the pitch of a new housing development or a factory to a town of people as an economic upside worth the shared costs.
There is no "pitch" really required. Home builders have to have some permits, but the local utility can't really decide it isn't going to provide power to those homes. The school district can't decide not to teach the kids who live there. The highway department can't tell the people they can't drive during rush hour because the roads are full. No one is going to ask the public whether it thinks a business is important enough to receive public services.
My bet would be the current Supreme Court would find any
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There is though, anecdote but in my neighborhood a new large development is going up and they had to do open meetings, public opinion, votes and such because specifically it would come with some changes in taxation and other public services. This is it's second go around, it was denied the first time.
Any large project has some sort of buy-in from the town, just a matter of how much notice and pressure there is, it's the whole bedrock of NIMBYism.
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Basically, the public is asked, and they often say no.
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I think you're underestimating the amount of regulation involved.
I was understating the regulation involved. But it doesn't change the reality that the full costs of public services for new development are typically not covered by the developer. The more specific, immediate and local costs may get covered. A new power plant? Not likely.
Yes, sometimes developments don't happen because the immediate added costs are too great. So they go somewhere else. In the context of AI, they can go just about anywhere it is cheapest. That usually means where the public will share part
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Then there's the facts that the people who comprise Google and Microsoft are also members of the public, and the companies are consumers of power. The "us vs them" framing of the issue then seems a bit misleading.
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then they also get the benefits from it
I think that's where the opinions are breaking apart. Yes a new power plant get's built, on the whole for the region that's good, more energy. For the individuals though, the residents, will they see a decrease in their energy costs?
I think a lot of people are seeing this and also seeing "well my energy costs seem to keep going up" so it's going to raise some hackles. Not to mention if that new plant is say ran of NG then that carries a bunch of negative externalities for the locale.
An increase in
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the public gets benefits from it, like taxes and jobs AI can't do. And even if the public does end up on the hook for a new power plant, then they also get the benefits from it and its construction.
Taxes and jobs? How are those public "benefits". And how does a new power plant that wouldn't need at all if AI wasn't using the power benefit the public? In many cases the taxes won't cover the cost of the increased public services required, just like the power they buy won't cover the cost of the new power plant.
Then there's the facts that the people who comprise Google and Microsoft are also members of the public, and the companies are consumers of power. The "us vs them" framing of the issue then seems a bit misleading.
Actually you make it clear it isn't. Perhaps we should make AI a public utility where everyone shares the benefits along with the costs. Then we could balance the public benefits with the public c
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I think you responded to the wrong thread.
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And can we please remember that most power companies are regulated utilities that must ask permission to raise rates? Or that
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Local stuff is just that, local so I am not speaking to every local opinion because I can't, but the reason we are even having this discussion still is the overall negative public perception of AI. There's a reason these come up in the news about crypto and AI and not regular-ass datacenters or manufacturing plants:
The public and experts are far apart in their enthusiasm and predictions for AI. But they share similar views in wanting more personal control and worrying regulation will fall short [pewresearch.org]
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I have to wonder how much of this narrative is being orchestrated from Beijing. They're the ones who benefit from the US not building power plants or AI capacity. And they already fund a lot of the environmental opposition.
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Correct, "they" as in the tech companies do have me treating these things differently, now I know the difference personally but the everyman is also feeling a bit of a difference. A company putting in a new traditional use datacenter versus an AI datacenter are and should be treated differently.
Now we can make the arguments for each on their merits but its a bit of stolen valor on AI's part to treat these the same. No Beijing needed, our American companies are doing a good enough job at poisoning the well
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If Microsoft set up a data center, and had a bunch of employees living in the area working there, at least that provides SOMETHING to the community. The problem is, those living in the area see their electric rates go up because of increased infrastructure expenses by the power company, increased costs from buying power from those who have surplus, and the company that runs the data center isn't paying to cover the source of THAT increase. It's unusual to see a corporation BUYING a new power plant to co
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There is nothing new about this. When public services have to be expanded to serve new private businesses, everybody pays the costs. Home builders build developments and everyone in the school district pays for the expansion of the schools needed to serve the additional kids.
Home builders pay proffers to local governments to pay for new schools when they apply to build subdivisions. They also pay hookup fees for public utilities to fund expansions. I had to write a $10,000 check to my water utility just for the right to connect to public water (and another $50,000 if sewer was available).
$10, (Score:2)
I had to write a $10,000 check to my water utility just for the right to connect to public water (and another $50,000 if sewer was available).
You are right, there are fees. They almost never cover the full costs of expansion. A new water plant costs a lot more than $10,000. And, no, I am not suggesting you should pay for it. But it will get paid for.
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A developer building 1000 homes would pay $10 million for water and $50 million for sewer. I don't know what those facilities cost, but saying "everybody pays the costs" is false. My $10k got me a slice of existing extra capacity. The developer would be paying for an expansion.
It should be that way for data centers as well, but I've heard that is not the case in Virginia, which is why we're the data center capital of the world. They would save immensely on real estate costs to build elsewhere, so there
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How about the "upstream expenses" like increased infrastructure that the water and power companies charge? If my electric bill goes up by 10% because a data center was set up in the garage of some person, that's NOT going to be something positive that benefits people.
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A developer building 1000 homes would pay $10 million for water and $50 million for sewer. I don't know what those facilities cost, but saying "everybody pays the costs" is false.
I don't know what they cost either. But I suspect most small towns of 2500 or so people would be very happy to pay that little for water treatment or sewer treatment plants. It sounds like you have an example of exactly what I was talking about. We have lots of public services that are relatively cheap compared to the cost to build new ones today. Here is a description from one web sitet on the cost of water treatment
For example, the town of Gretna, Virginia, with a population of about 1,250, will be replacing its old plant with a new package plant for approximately $10 million. A proposed water treatment plant in Maryville, Missouri, with a capacity to serve a population of just over 10,000 people, is slated for commissioning in 2027 for $50 million.
In most places that have regulated utilities new facilities are added to the rate base and
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But all of those together don't come close to matching the scale and fast timeframe that tech companies want for AI datacenters. That's not an established business. What if it's a bubble and they close down in 5 years or find new tech which requires 1/10th the power? The rest of us would get stuc
There is something deeply frustrating (Score:5, Insightful)
I think one of the things folks don't realize is that the upper class is painfully aware that they are dependent on us pleads as consumers for their wealth and prestige and they don't like it.
They want to go back to being Gods like the days of the divine right of kings. Completely unmored from the concerns of lesser species of human. And AI is there ticket to doing that.
AI exists to allow wealth to access skill without skill accessing wealth. It is the fundamental breakdown in the capitalist system and the social contracts used to maintain it. Techno feudalism.
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That was a long rant and I didn't bother reading past the first idiotic sentence. Such an asinine claim was all I needed to know that you were just an angry moron wasting everyone's time.
Are you a bot too? (Score:2)
The grandparent comment is a bot that uses my old comments to train an llm. These quickly get modded down and ignored.
But there is always somebody to reply who has a +2 moderation which of course anchors the bot's post keeping it visible.
I'm wondering if it's just somebody playing around or if it's somebody working on there llm and trying to break into the AI industry. I am one of the few people on this forum that posts long
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In this matter, I am 100% on your side. You're wrong enough on your own, it is as unnecessary as it is rude to try and put wronger words in your mouth. It ruins the fun! I like arguing with you, not some dickhead imposter!
And if I made the post permanent
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its good to be the king?
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Well, at least the AI monster is consistent, taking all your stuff away!
Don't worry, there are still nice, remote places in the hills of Texas and Tennessee, where people escaped the Y2K calamity that destroyed the world. I hear they're friendly people, and will be glad to welcome you to their encampments! It's all off the grid, so no worries about AI data centers.
Technology NOT AI (Score:2, Interesting)
If you look at the graph of electrical usage you see it is a steady rise with a slight downturn during the covid years.
There is no sudden increase due to AI. There is a clear increase due to increased use of electronic equipment. Bitcoin, electric cars, etc. all contributed just as much as AI.
AI is merely the most modern use of electricity, not a drastic change.
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Re:Technology NOT AI (Score:4, Informative)
There is no sudden increase due to AI. There is a clear increase due to increased use of electronic equipment. Bitcoin, electric cars, etc. all contributed just as much as AI.
This is just plain incorrect.
The freaking summary points out that "Tech giants Microsoft, Google, and Amazon plan to spend $80 billion, $85 billion, and $100 billion respectively this year on AI infrastructure." That's a quarter trillion dollars worth of infrastructure (that has not a thing to do with bitcoin or EVs) which is going to require a shit ton of power.
On a more personal and anecdotal note, I work for a company that serves the power industry and one of our customers (a gas turbine manufacturer) will be increasing their capacity by more than 3x over the next five years--this is not speculative, they have already taken the orders, their capacity is booked through the end of the decade, and the reason is the datacenter boom. Most of our other customers are dealing with similar growth and their stated reasoning is the same.
This complaint doesn't make sense. (Score:1)
So, what's the problem? That we aren't generating enough electricity? That's not new and fixing it is more about fighting the people who don't want more electricity generati
Greatest and greater power usage (Score:1)
Power should be subsidized (Score:2)
If these companies are insisting on these sorts of crazy rollouts, we should start looking at only charging residential customers a de minimus fee and letting corporations subsidize power for these communities. We're supposed to reap the benefits of new technology in the market. If companies are just going to eat up any new capacity, then they should be paying for ALL of the infrastructure.
Who wins when the electrical grids are overloaded? (Score:1)