While tech companies and the business community may be bullish on artificial intelligence and data centers, most citizens are feeling more apprehensive, according to a recent Gallup poll. The most common and reasonable objections to data center growth come from those worried about the increased resource consumption and the energy prices associated with it.
From a consumer point of view, it’s understandable to see a nearby data center as a giant, ugly building that increases your utility bill to benefit some nebulous company with no impact on your own life. But the discourse around data centers and energy prices doesn’t fully paint the picture; data center growth could actually benefit the energy grid if policymakers respond well.
A widely cited Bloomberg analysis shows a causal relationship between data center aggregation and energy prices, and on face value, this makes sense: If your energy supply is stagnant, a massive increase in demand should drive prices up.
THE DATA CENTER DOOMERS MUST BE DEFEATED
In the short term, this is what we see. But a further understanding of market economics demonstrates that an overabundance of demand leads to increased supply. And in spite of the energy monopolies granted in most U.S. states, we see imperfect tracking of this very reality. While energy prices across the board have increased since 2015, states with high energy demand and large data center aggregations actually increase at a slower rate than states with lower energy demand.
What this tells us is that the supply of energy isn’t being met as quickly as it’s being demanded, but that areas with higher demand produce energy faster and more cost-effectively than those without.
Even before the AI explosion, energy demand was outpacing the supply grid. A combination of factors, such as municipal control of utilities, environmental review, hesitation to embrace nuclear, and more, has contributed to sluggish energy expansion in particular regions, but overall energy production has overtaken consumption in the past few years. The exponential increase of demand AI data centers created still threatens to overwhelm the grid, but even existing efficiency gains have offset data center consumption in the past 20 years. The numbers don’t paint a picture of panic but do provide a wake-up call that we can’t kick the can down the road when it comes to increasing our energy grid capacity for too long.
For the first time in decades, embracing nuclear energy is not only a socially acceptable position, but a politically feasible one. With companies subsidizing nuclear sources at their own cost to power data centers and safely reopening existing infrastructure such as the Three-Mile Island, data centers are driving energy expansion forward at a faster rate than ever. If we can make energy gains similar to the growth from 2016 to 2019, energy production can still reasonably be on pace to meet the needs of data centers.
In the short term, local municipalities should have the power to negotiate with data center providers to charge them tariffs to offset their customers’ cost increases and allow an expansion of the energy grid in the area. Oftentimes, companies are willing to work with the local communities through community benefits agreements to ensure they are offsetting costs and helping develop infrastructure to handle an energy expansion.
DATA CENTERS COULD HELP YOUNG AMERICANS OWN A HOME
In the long term, the data center should continue to make efficiency gains to reduce the overall burden of existing data centers. This means if policymakers work with data center developers rather than against them, communities can leverage the immediate demand for data centers to drive long-term energy growth that benefits everyone.
Attempting to meet energy demand by halting data center expansion would mean losing the opportunity to build out a stronger, future-proofed energy infrastructure for the entire community.
Donald Kimball is the communications manager and Tech Exchange Editor for Washington Policy Center and a contributor with Young Voices.