They also get massive subsidies and tax breaks for building these data centers. They require the negotiations be done in secret and often fight to keep the agreements secret to make it so people don’t flip out when they see how bad they are.
> Here’s the problem for consumers: To meet data center demand, utilities are building new power plants and power lines that are needed only because of data center growth. If state regulators allow utilities to follow the standard approach of splitting the costs of new infrastructure among all consumers, the public will end up paying to supply data centers with all that power.
I don’t agree with the premise of this article. Of course they will “include these costs” for all ratepayers because the alternative would be Meta (or whoever) just buys all the electricity (or at least a much greater share). Of course ratepayers share in the cost of building new infra because the equilibrium price of electricity has gone up.
Except little of that infrastructure is going to serve rate payers at all. The sort of high capacity data center connections being built aren't strengthening or improving the electricity supply for residential consumers - their lines aren't changing, in fact most of the transmission infrastructure is unlikely to be able to serve them at all.
most of the cost here is coming from generation, especially given that these plants are often being colocated with the data center and the companies themselves are oftentimes financing the transmission lines. i agree where possible, transmission costs (and associated liability) should be internalized to the particular consumer (also in residential fire-prone areas).
This is not the case for AEP customers in Ohio. Our transmission costs have increased so much over the last few years that many are paying almost as much for transmission as generation (on $200+ bills). The Columbus Dispatch recently wrote about it after so many people posted their bills in the Columbus subreddit.
I thought most utilities weren't allowed to increase rates to fund new development and that's semi an issue for new nuclear plants because you can't add say 1 cent to everybody's bill to finance the loan until after it's been built. Which many people argue is a good thing considering America's inability to stick to a budget and inability to achieve economics of scale.
Although even if it's false. Adding more demand without a corresponding increase in supply leads to a price increase and I'd suspect most residential power demand is inelastic (hence the issue for Griddy customers during Texas's winter storms) so you're going to feel it for a different reason.
Public utility Commissions are corrupt with shocking frequency, and Americans just shrug it off without reform. Arizona is notorious for this. It even reached into state legislatures, there was a massive Ohio bribery scandal not too long ago. But there's a lot more that never gets any attention, especially with the death of so much journalism.
If the utilities didn't get any subsidies from the government then it wouldn't be an issue. Electricity costs would increase as demand shifts out, the excess surplus for the power company would allow them to invest in more infrastructure. The big customers would contribute more to the new infra because they buy more electricity.
However if utility companies do get subsidies to spend on infra, then it doesn't matter how much electricity a person buys, the money is coming from taxes separately from how much electricity anyone is buying. This would allow large consumers to take advantage of tax payers to build the infra to shift out the supply, which mostly benefits the large consumers.
The TLDR is that this is a known drawback of utility monopolies and subsidies, and if you took those away it wouldn't matter how much electricity anyone was using, it would all sort itself out with prices.
I'm not sure you can say a utility company prices are better set by the free market. Even outside government enforced monopolies, you can't exactly pick and choose a utility, or hook multiple up
I specifically said that you needed to get rid of monopolies and subsidies for prices to work.
Most places are not set up for that, and giving a power company a monopoly is a necessary evil. That's not a solution without a tradeoff though. When you have a monopoly, the consumers need to collectively negotiate prices. Part of that negotiation can lead to other forms of rent-seeking in the form of subsidies, or whatever else. It's just trading problems for problems.
What might a better solution look like? Having municipalities own the last mile, and take ownership of the grid might eliminate the need for energy monopolies. Multiple energy suppliers could compete, and the grid would be maintained through contractors. The contractors hired to tend to the lines and conduits wouldn't be in the power business, they would be in the plumbing and wiring business. There is a state monopoly on the grid infrastructure, the same way there is a state monopoly on roads. There's no government truck or car monopoly even though that's what uses the roads.
There has to be some sort of regulation --- ~50% of the cost of electricity is for transmission/line maintenance --- though I would argue that the traditional electric co-operatives are the best option for rural areas.
I’m surprised that big data centers aren’t just locating in proximity to nuclear plants that can probably easily supply the extra power and reasonable rates.
Because (1) they are at or near capacity, (2) they are very costly to operate so those 'reasonable rates' are very hard to come by when using nuclear as power source. There are other, cheaper sources for power than nuclear that are more in line with what data center operators are willing to pay. There has been some talk of data centers with their own power plants. But usually that centers on fossil fuels rather than on nuclear.
I apparently made a bad assumption. I thought I remembered reading that nuclear plants were looking to shut down due to economics of electricity not being profitable for them anymore, which I assumed meant lack of demand.
I also remembered seeing several articles about a crypto mining operation doing exactly that.
Well, technically they always are, but the GP suggested that there was a lot of spare capacity and there really isn't. The WNA has a nice set of graphs about this, which show 80%+ utilization and that's not too far from the practical limit.
It's a side effect of the economics of nuclear power.
The cost of the nuclear fuel is more-or-less a rounding error. On the other hand, personnel has to be paid no matter at what load the reactor is operating, and paying back the construction loan is also a fixed monthly fee.
This means running a nuclear reactor at 10% costs about the same as running it at 100%, so running it at anything but full capacity means you are losing out on potential income. Running it at 10% capacity means having to sell that electricity at 10x the usual rate!
Combine this with the incredibly high risks involved in such a massive long-term investment, and most reactors operate on a "strike price" principle: they negotiate a fixed electricity rate with the government, and the government has to pay (or gets to keep) the difference between the market rate and the strike price. More importantly, this applies to all the electricity the reactor could sell: if the reactor is able to generate power but the grid operator for one reason or another wants to source it somewhere else, the reactor operator still gets paid.
All this means nuclear reactors can only really be used to supply base load. In an ideal world we'd want to use them as peaker plants to make up for deficiencies left by solar and wind, but in practice we'll be turning off wind farms to let nuclear reactors run. Nuclear power might've made sense a couple of decades ago, but there just isn't a place for them left in a modern renewable-heavy grid.
As long as you stay under 5%/minute or so, yes, you can with the latest generation of nuclear plants. Above that there are other alternatives that are more suitable (pumped storage, natural gas fired turbines).
And indeed, what you describe is exactly how it goes, nuclear power pretty much dictates the price of energy because it is the most expensive form. This is the big controversy of market based energy pricing to me. It should be the cheapest energy source that determines the price, not one of the most expensive ones.
I've recently looked into this in some detail and the situation is actually a lot more complex than you might think looking from the outside in. This is an interesting article on how energy markets arrive at their price (it is incomplete, and a bit dated, but still useful):
They don't need to for the location to be reasonable; you can use the grid connection with reverse power flow to feed the data center just fine. Leave enough to feed the coolant pumps in an outage though.
i think that is a large part of what they are doing, although unfortunately so far most of the collocation has been gas turbines due to the shorter timelines
Company decides to brick a popular product? Who picks up the landfill tab?
Your electricity one is a good example
Hell, even RTO - SF offered some pretty nice tax incentives for companies who enforced RTO to “revive” the city. Who pays for this? They did a great job keeping those on the DL
I only know because I happened be involved in those conversations on the periphery - it was no coincidence we started an RTO policy right as we got a huge, huge new office
my comment is just a recognition that corporations are a polite fiction and all taxes are ultimately incident on individuals, the same as any economist would tell you. taxes on the rich should be higher, agreed.
What makes you believe highways are nearly free? Do all those people doing highway maintenance not get paid?
Also, road wear scales with the fourth power of axle load. This means a 3-axle 30-tonne truck causes 15.000 times the wear of a 2-axle 2-tonne car. Even if highways are currently "nearly free" to maintain with a car-dominated traffic mix, moving all that rail transport into heavy trucks is going to rapidly make highway maintenance costs explode.
it would be a subsidy to deliver power at below equilibrium price to residents simply because they are residents and not a corporate buyer. raising prices for consumers when demand comes from elsewhere is not a subsidy.
Here in Data Center Alley (Virginia) area, the power company Dominion is adding a pretty significant base cost increase (+$10.92) for consumers for this reason. Seemingly with no promises that the generation rate won't also keep shooting up as it has.
Power rates have been going way up and up for consumers in the area. We're still nowhere near CA levels of absurd, but it sucks a lot seeing the merciless tick up year after year. After being a pretty reasonably priced power area for so long. It sucks feeling like only worse & worse pain is on the way.
i have trouble understanding why the US is the best place for building these data centers, surely it is not the best place to do electricity arbitrage and LLM training and even inference doesn’t need fast networking
Should residential properties and industrial properties really compete for the same electricity?
This is like a perfect place for the government to step in and create a formula that forces electricity companies to allocate a percentage of their energy to each of these groups. So, demand from manufacturing or data centers does impact the cost of turning on the air conditioning in my home.
Great example of where business isn't incentivized to care about the greater good, so government needs to adjust things.
Commercial power nearly always pays a monthly charge based on the peak deliverable power.
However, the utility rates are regulated, and the regulators allow the power companies to charge customers more to recoup any capital expenditures. Presumably when demand increases, the utilities increase capex to meet the demand.
It's proof of the power of marketing and push from behind inclusion, not necessarily proof of real demand or value.
There's a strong case that road traffic increases to meet road building, much as public use of AP expands as AI centres are built and dependencies built into every new bit of IT tat.
Labubu dolls are the fastest growing recent fad ..
> How can you say this when people are active paying for subscription that are hundreds of dollars per month?
People like cute things and people like to gamble. It's not surprising people are getting their fix via something like that.
But that is behavior distinct from real need .. what happens, for example, should AI suddenly disappear for everybody save for a few in, say, code generation or other low population applications?
I'm sure the people that won't be able to afford to heat their homes will be thankful they'll be able to generate slop cheaper and faster than ever before
