I keep hearing how everyone’s electric bills are going up with AI data centers near them. Why aren’t the companies paying the bill? Or is it building the infrastructure to accommodate them the issue?
I keep hearing how everyone’s electric bills are going up with AI data centers near them. Why aren’t the companies paying the bill? Or is it building the infrastructure to accommodate them the issue?
Its supply and demand. The AI data centers are paying their electric bills, but at the same time they represent a significant increase in demand for electricity, so electric companies can raise their prices.
Yep. It’s the same reason everyone has to pay more for RAM now, even though consumers didn’t cause the shortage.
Expanding on that: in competitive electricity markets, in theory, total demand is met by the cheapest plants (by “marginal price”: how much does an additional unit of electricity cost?) that are available.
The marginal price of PV, wind and hydropower is pretty much zero.
The next cheapest are usually older nuclear fission plants and coal power plants.
Then is a huge gap and then come newer nuclear plants and gas fired power plants.
But all of these plants aren’t built over night. So maybe before all of the datacenters, total demand may have mostly been met by renewables and coal and gas power plants only operated a few hundred hours per year. Now, total demand rises and those plants need to operate more often. That’s why the prices rise just because of demand increase. Other effects (e.g. changes in regulation, corporate greed, …) might be at play as well.
Sure, but the companies driving the increased demand should be paying for the increased capacity directly instead of having the general public subsidize it.
Some AI companies are doing this because the cost of relying on the open market is too high to build in certain areas and the standard of electricity required by the data center may be something that the grid can’t supply.
There are also some countries, like Saudi Arabia, trying to lure data centers into their countries by offering cheap land, permitting, and cheap electricity.
No no no! It’s cheaper for them to pay off politicians for special rates and then pass on the cost to the consumer! Won’t you think of the poor billionaires!
Think of the shareholders!
How would that work? With a flat fee or depending on whether ai companies are tipping the scale to a more expensive marginal price within a price period?
Colombia has price discrimination for residential areas: households in richer areas have to pay more than those in poorer areas. I don’t know how good the actual implementation works out for the people there, but it was in effect when I was there more than 10 years ago and it still seems to be (see “estratos” here: https://www.enel.com.co/content/dam/enel-co/español/personas/1-17-1/2025/pliego-tarifario-enel-diciembre-2025.pdf). If that is possible for different areas of one city, of course we could make data centers pay more for 1 kWh than a private consumer would.
It just won’t happen in our hyper-capitalist north american and european countries.
I don’t know how wide spread smart meters are in the US, but it should be fairly simple so have an extra tariff on these kind of consumers, or perhaps just tariffs during peak periods.
At least it could be enforced that the surplus heat from data centers had to be reused in some way, could be residental heating or ptx.
Smart meters aren’t necessary for that. We already have different rates for different usage levels. I’d actually worry that this is the problem. I don’t know how rates work for industrial needs but in a lot of things the biggest users can negotiate a discount. As one of the biggest users, are they driving up rates by not only exceeding supply but also paying less? Are your utility regulators looking out for all their customers or just the big ones?
Smart meters are more useful to vary rates by time of day, to help adjust demand for the level of supply
Make every kWh above the average power draw have a higher cost and it increases further with every additional kWh.
This bears repeating. Datacenters do have to pay the light bill. Even when the VC money dries up. It’s a beautiful thing.
Naw, they’ll just declare bankruptcy and the municipalities will foot the bills for the infrastructure debt.
Basically, have you even seen the Simpsons monorail episode? It’s that.
But their rates are significantly lower then consumers
In certain periods they might have cheaper prices than regular consumers and in other periods it might be more expensive. They just have a fixed price agreement. No producer of electricity hands out free power.
The problem is that because of that, consumer prices have to rise.
And usually the company in charge of power delivery can change their rates regardless of a fixed price agreement from the power generation company.
I don’t think it’s all bad in the long run. A higher base load also give higher incentives to install renewable energy. In Denmark we have issues with the cannibalisation effect, i.e. We have reach a point where it’s no longer financially viable to install more renewable assets. We often see negative power prices on windy and sunny days, which forces the renewable asset owners to either turn off their assets during these periods, or pay the negative spot price.
The US is very different in that regard. This will only be a detriment to the consumers, because extra capacity will be provided by fossil fuels.
But still, wouldn’t renewable assets suppliers have an incentive to install assets in these areas? If the spot price is high and they can produce “free” electricity, their earnings are a lot higher than the fossil fuel plants.