We aren’t ready for AI: The energy debate we need to have 

This year’s presidential election, like many before it, has seen a big focus on the rising cost of energy and the reasons behind the growing bills eating into families’ wallets. What both candidates have failed to mention, is the major threat to electric bills from Big Tech’s AI-driven appetite for electricity and America’s archaic monopoly utility system.

Artificial Intelligence is data- and energy-intensive — and the sweetheart electricity deals that giant tech companies like Amazon and Google receive from utility companies on multibillion-dollar data center expansions have several costly implications for consumers.  

Electric utilities such as Dominion Energy give data centers sweetheart deals because their for-profit utility shareholders can reap a sweet reward: generous, guaranteed profits from investing in new power plants and transmission lines. Everyday customers pay the price, sometimes disproportionately.  

Regulators in recent years have allowed many utilities to impose higher fixed charges on electric customers, especially those with solar panels, making efficient users pay a higher price than energy hogs. This dynamic exists between different kinds of customers as well, with home and small-business users often paying higher rates than industrial customers. Although industrial customers cost less to serve than residential customers because they take power at higher voltages, regulators often allow this pricing disparity based on faulty trickle-down economic logic. 

Even before AI motivated the latest round of expansion, tech corporation data centers were reaping rich rewards from lobbying state and utility officials, with scarce economic benefits for their communities. A 2016 report found that 27 states provided economic incentives for data center development, despite the facilities purchasing little of their computer hardware locally and providing few jobs. Eight states further subsidized data centers by exempting their electricity purchases from sales taxes. On one megadeal in Ohio, an Amazon Web Services facility received $93 million in subsidies for the promise to create 120 jobs, a cost of more than $750,000 per job.

Sweetheart electricity deals for Big Tech expose the underlying problem –– an entire system for delivering an essential public service monopolized by private, investor-owned corporations.

Utilities have broken their century-old promise of prudent public service in exchange for monopoly protection time and time again. Costly speculation in the 1920s required massive federal reforms. In the 1970s, poor planning led utilities to more than quadruple average electricity rates –– a still-sizable jump of 55 percent when accounting for inflation –– from 1970 to 1983. And utilities have chronically under-invested in energy efficiency because it isn’t profitable to their shareholders, despite it being the least costly tool to meet electricity demand.

Today, monopoly-induced disasters continue to pile up, driven by utilities that profit by spending capital — often on new, polluting power plants — and by utility lobbying that insulates them from proper oversight.

Ohio’s FirstEnergy spent $60 million bribing public officials to win billions in fraudulent subsidies for their aging power plants, but federal and state penalties barely recoup a quarter of the utility’s illegally obtained haul. Management decisions to forgo maintenance in favor of quick profits led California’s Pacific Gas & Electric to literally light their state on fire multiple times, with the resulting blazes killing dozens of residents and causing billions in damage to property.  

Big Tech’s data centers provide a perfect excuse for monopoly utilities to propose more profitable capital spending at the expense of customers and the climate. Utility lobbyists in Georgia have already marshaled recent industry reports of high load growth from data centers to justify an enormous investment in new natural gas generation capacity (on top of rapidly rising bills from a mismanaged nuclear plant investment).

Gas investments will line shareholders’ pockets even while putting customers at huge financial risk, as when Winter Storm Uri caused giant spikes in natural gas prices. In Oklahoma, some utilities will make their customers pay $1,700 each, over the next 25 years, for one week of gas use during Uri that racked up unusually high costs. And that cost doesn’t include possible further effects from emitting and burning methane on the climate and, consequently, on extreme weather events. 

Monopoly utilities and monopoly tech corporations alike deal in public handouts, receive special deals, and sidestep public oversight. Rather than guarantee that new clean resources will supply their energy-hungry facilities, utilities prioritize profit while Big Tech firms advocate for carbon offset programs that work as shell games for hiding fossil fuels behind fig leaves.  

Government can address the costly threat from Big Tech’s data centers and monopoly utilities, with a common focus on reducing monopoly power. The Federal Trade Commission can protect consumers by breaking up Big Tech firms, reducing their power to win sweetheart deals from politicians or big utilities, and investigating the anti-competitive behavior of utility companies.

State legislatures can require that new data centers use state-of-the-art technology to reduce power consumption, that they be 100 percent supplied by renewable electricity, and that other customers won’t be forced to subsidize them.

States can also help by breaking the utility monopoly grip –– allowing innovative approaches to meet data center electricity needs –– by introducing competition in power generation and reducing barriers to renewable energy grid connections. Congress can pass legislation to remove the antitrust shield for private utility companies, and the federal government can collect data on interconnection timelines and costs to uncover utility efforts to hinder clean energy construction.  

We can’t avoid climate and electric bill effects from data centers in a system dominated by utility and Big Tech monopolies. But we can put Big Tech’s data centers to good use. Their intense digital demands on the electricity system bring focus on a recent and age-old problem of the badness of bigness. If we break the for-profit, monopoly grip over our digital economy and our electricity system to put the public first, we can serve the climate and consumers — and a little AI, too. 

John Farrell is co-director of the Institute for Local Self-Reliance and director of ILSR’s Energy Democracy Initiative, spending the past two decades researching the economic and environmental benefits of local ownership of decentralized renewable energy.