Big Tech's Private Power Plants Will Drive Up Your Energy Bill, Experts Warn
- Data centers permitted through 2025 could use as much electricity annually as all of Mexico, putting massive new strain on energy markets.
- Tech companies building private gas-powered plants lock in cheap bulk contracts, pushing natural gas prices higher for residential heating and electricity customers.
- The shadow grid sidesteps utility regulators, creating unregulated emissions sources and eliminating pressure on Big Tech to help modernize aging U.S. energy infrastructure.
As urged by President Donald Trump, tech companies are starting to build power plants alongside their new data center campuses to provide their own energy. The Trump administration has promised that this approach will help to shield ratepayers from skyrocketing power prices as data centers move into the neighborhood, but experts contend that it will do the opposite.
As data centers continue to rapidly increase in number and size thanks to the artificial intelligence boom, the amount of energy needed to power those data centers is skyrocketing. A June report from Business Insider found that "if all data centers permitted through 2025 come online, they will use between 224.3 terawatt-hours and 358.8 terawatt-hours of electricity annually, an increase of 50% over the previous year across the range." To put that staggering figure in perspective, that's about as much energy as all of Mexico -- a country with a population of more than 130 million people -- uses in a year.
Until now, data centers have almost entirely been powered by local energy grids, and neighboring consumers have seen their energy prices skyrocket in response to the overnight demand spike. "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 told Business Insider last year. "Utility regulation is failing to protect residential customers, contributing to an energy affordability crisis."
As a response to this affordability crisis, lawmakers on both sides of the aisle have ramped up pressure on tech companies to foot their own energy bills. Increased pressure from lawmakers, as well as long wait times to connect to existing energy grids, are pushing hyperscalers to develop their own alternative power sources. While some of these are clean energy enterprises or hybrid gas-plus-renewables models, most of them are gas-powered.
While it would stand to reason that this approach would relieve pressure on power grids and therefore shield ratepayers from energy price hikes, the real-world impact is actually the opposite when the data centers are powered by natural gas -- which is the case in the vast majority of these new data center campuses.
"Natural gas is a market-traded commodity, meaning data centers that gobble up lots of natural gas will naturally compete with other gas customers, increasing prices," explains UtilityDive in a recent report. As a result, ratepayers can expect to see rises in both their heating and electricity bills.
What's more, the push for decentralized power production to provide individualized energy to data centers risks creating a sort of "shadow grid" that is not subject to the same regulations and oversights that govern utilities.
"A data center with its own gas power plant signs a contract with a gas supplier, not with a utility, putting its gas rates outside the jurisdiction of state utility regulators," UtilityDive goes on to report. "Data centers can buy gas in bulk and sign long-term contracts (as we've seen in Texas, Pennsylvania and New Mexico), giving them access to cheap gas, even if this unfairly drives up prices for everyone else."
And pricing deregulation is not the only concern for these privatized power plants. Indeed, the data center 'shadow grid' could soon become a "major source of unregulated greenhouse gas emissions." But, perhaps even more importantly, Trump's plan misses a major opportunity to incentivize investment into the country's aging and insufficient energy infrastructure by some of the most moneyed companies in the nation. Investing in expanding and modernizing the grid would be in Silicon Valley's own interest, as long wait times to connect represent one of the most critical bottlenecks for powering the artificial intelligence boom.
By pushing Big Tech to foot the sizable bill for modernizing the power grid, policymakers could far more effectively lower energy rates for constituents while also maintaining greater regulation capacity over energy production and associated greenhouse gas emissions, in a win-win for consumers and the environment alike.
By Haley Zaremba for Oilprice.com
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