As the development and use of Artificial Intelligence (AI) continues to explode, fueling the need for additional data centers, experts are left with the challenging task of determining how the rapid influx in technology will be powered. These physical infrastructures—used for storing, processing, and delivering data—are struggling to keep pace with demand, and their energy consumption is a real concern.
While policymakers grapple with what is best suited to source the buildings’ power needs, exactly who is footing some of the bill is raising a few eyebrows.
Harvard recently released a report claiming ratepayers are subsidizing data centers’ electricity bills. They argue that existing and new rate structures, as well as secret contracts, could be transferring tech’s energy costs to the public. Consumers could also be on the hook for new infrastructure built to accommodate data centers, sometimes even if the buildings never materialize. Additionally, data centers can strategically reduce their energy consumption during select hours to reduce their bills and shift costs to others.
It is critical data centers get built, and quickly. Yes, AI is exponentially advancing. But we aren’t the only nation seeking to control the market. The stakes are high as we race with China to lead the future of AI. The winner sets the rules for the AI age, and if we don’t lead, China will. The U.S. must stay on top.
This means building more data centers, and fast.
The power-hungry edifices shouldn’t scare off potential energy-sharing neighbors, however. Constructing these large structures within your community has its advantages.
Louden County, VA—known as the mecca of data centers in North America—is home to roughly 50 million square feet of operational data center space and expecting to bring in close to $1 billion in tax revenue just this year. The average homeowner is saving about $3,000 annually on property taxes since the arrival of various data centers.
Neighboring county Prince William has seen tax revenue increase by an impressive 1,500 percent within a decade. They have been able to expand and fund much-needed projects and programs like schools, libraries, parks, and public safety.
Virginia’s economy is slated to benefit with an estimated 74,000 jobs, $5.5 billion in labor income, and $9.1 billion in GDP. The data center industry has been a real boon to the state.
While data centers residing within the borders of a state and county offer numerous benefits, they need to exercise caution when hooking up to local electrical grids. All the goodwill brought through financially bettering the surrounding community will vanish if utility bills jump. Suddenly the tax breaks become inconsequential and forgotten.
This kind of hit can really hurt as the world continues to manage and navigate the last few years of massive inflation. Small businesses and lower-income households especially feel the pinch as their budgets have little wiggle room for increased costs.
To help decrease the chance that all energy customers pay for data centers’ energy use, guardrails should be in place. Energy companies ought to consider creating a separate data center customer class, changing cost allocations, and adjusting utility rates more frequently. Above all, transparency is key.
Constructing data centers ought to be highly encouraged. We need to compete on the global stage of AI and keep China from dominating. But residents should not be burdened by their presence, and certainly should not be picking up some of their energy tab.
Tech companies and utilities should collaborate to maintain positive working relationships within the communities they serve. Policymakers, who understandably want the economic advantage of bringing data centers to their jurisdictions, should establish policies that keep utility rates appropriate for all involved.
Kristen Walker is a policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, follow us on X @ConsumerPal.