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Oh! Planet Money just did a really good episode on this exact topic.
It’s complicated and I recommend a full listen to the episode, but the big two reasons are:
Those two, combined with the deregulation in most markets, has meant that the price for everyone is going up.
The electric companies have to build more generation and infrastructure to accommodate the huge demand from data centers. The electric companies tend to spread that cost among all customers.
Mine is going up 10% next year, got a letter from them. Data center coming soon even though not 1 person in town wants it.
FUCK THESE CORPORATIONS
I think it's important to input blame in to ALL responsible parties. Fuck the AI companies but "not 1 person in town wants it"? Politicians are people and if they didn't want it they could stop it or bump taxes so high it would drive them out, if they are not doing anything they are getting something out of it.
don't "dehumanize" politicians. They are not gods they are just regular people that you have power to remove.
Add their names to the list EVERY TIME. AI companies are getting away with a lot BACAUSE of politicians, bribe, lobby etc. They are responsible. Make them understand
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!
The AI data centers are paying their electric bills
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.
Our federal government is currently hostile towards renewables, and they're sticking these data centers in states whose leadership largely aligns with the feds.
To build a new power plant, you need approvals and permits, and the fossil fuel corporations pay lots of money on astroturfing to sway public opinion, filing BS lawsuits to bleed the competition dry, or just outright bribing officials.
What you're saying makes perfect sense if you're not only planning one quarter at a time. Their goal is to maximize short term profits even if it hurts them in the long run.
The same way you pay more for gas in summer or when the economy is doing well: demand is higher so prices go up.
Don't forget that when the bubble pops companies holding the bag will be trying to recoup their initial capital so the price won't go down.
I'm not sure about that. The way I see it, there will be more supply for the below-expectation demand, which would make prices go down
Let me introduce you to a little scam called "price stickiness"
Basically prices are quick to go up but VERY SLOW to go back down... on the opposite side, wages are quick to go down but VERY SLOW to get back up
I never said it would happen immediately 😉
well, if it won't happen in our life time, I assume it to be "never"
They can turn off some generators and adjust the supply down for ideal revenue/profits, reduce staffing levels, and extend equipment life. There's no reason for them to charge you $50 for something once you've told them you'll pay $100 for it.
You should listen to some of the recordings of the energy traders at Enron. They did this stuff all the time.
Still nothing terribly new here. Energy has always had inelastic demand, meaning usage doesn't change much with price. Whether gas costs 1, 3, or 5 dollars people still need to get to work and will still buy stuff. Maybe people will start to combine trips or whatever with higher prices, but nothing huge.
Exactly, so there's never a reason to bring down the price. If anything you'd bring down the supply (e.g. Enron during the California energy crisis).
I mean... Gas prices are relatively low right now, at least here in 'Merica. I've seen them more than double what they are now, how did that happen?
Gas isn't energy, it's fuel. It's a commodity with a global market. Producers have to physically store it. Refined gasoline has a shelf life and production is planned weeks to months in advance. If demand falls off their product depreciates and they have storage expenses. If a gas company cuts production below demand competitors can ramp up and eat that market share because consumers have options.
But electricity tends to be a captured, monopolistic market. There's no scalable physical storage. The supply is whatever they are producing locally right now and they have some say in that. There's no tanker of Saudi electricity coming to relieve the market and you're not going to drive your house to a filling station to top off your electricity.
Liquid natural gas is similar, in that most people will just pay whatever is asked for what's pumped into their homes, but less dramatic because it is a physical commodity that can be replaced or substituted.
Gas isn't energy
It absolutely is. Do I need to explain why that's a ridiculous take, or have you had enough coffee by now to realize it?
It absolutely is not. It is a commodity fuel that can be converted into heat energy when vaporized and ignited by a secondary energy source. You can pour it directly into a combustion engine and nothing will happen until you provide a spark. It can evaporate without being converted into a significant source of energy.
Electricity is energy. It does not need a secondary source of energy to convert it into heat or light. Electricity arcs through the atmosphere it instantly and automatically converts to light and heat.
That's why they are produced, transported, and sold in such radically different ways.
Energy is not created or destroyed, it only gets transformed from one form to another. Fuel represents a storage of energy. So when you burn fuel, you are taking the energy contained in that fuel and using it to create heat energy, harness it to make a car move, generate electricity (which you seem to agree is energy as well), or whatever.
Think about high school physics. Bring a 200 pound weight to the top of a tower, and it has potential energy. Nothing happens, just as nothing happens to fuel without a spark, but if you drop it out turns into kinetic energy. Let it hit the ground, and the sidewalk will absorb some of that energy as it breaks, it gets absorbed into sound energy, the whole process repeats on a smaller scale as it bounces, etc. All energy, and not in the hippy "the universe is all energy, maaan" kind of way.
The first part of this Technology Connections video also shows how propane is stored energy that gets converted: https://youtu.be/OOK5xkFijPc - just because that spark was needed to convert the energy in that propane to heat, doesn't mean the spark is the source of the energy. If you're going to be pedantic enough that I have to explain that.
Ah, but you are forgetting about corporate greed and industry collusion.
Which wasn't a factor before? 😉
When there is a finite amount of something and someone with more money wants it, it makes the price of it for everyone go up to make it so that some people can no longer afford to compete for the resource, making it available for the higher spender. (Yes there's also infrastructure being built, but they will out compete us for that too)
Same thing with land & property on it, the working class can't afford to buy housing now, because rich people want to use housing as an investment vehicle.
Food is another (though also tied to land ownership)
Ultimately it's the same problem across the board and the solution is generally a wealth tax to prevent densely concentrated capital from distorting the market.
Specifically for these companies, they're simply too big. They need to be broken up and need to be prevented from getting this size again. If they truly cannot be broken up, they should be nationalised.
Failure to address these issues will result in these companies and people holding a total monopoly on all the resources available. More expensive electricity is only the beginning.
This is the part where I tell you that residential electricity costs are higher to basically subsidize commercialized electricity!! This is how it's always been even without AI. Not defending it, I definitely think it's bullshit
Or is it building the infrastructure to accommodate them the issue?
It's this, but that's only part of the story.
Datacenter companies are very efficient at building new ones now, once they have all the proper permits and can start building it can go from an empty lot to fully functional in a year or two. Maybe longer for the huge hyperscalar ones.
Once they are online, their power demand is comparable to a small city, coming online all at once. But the local utility never had this demand in its plan, so they have to build more capacity to service it, and building a new power plant takes much longer. In the meantime, the demand will outstrip their capacity and the utility will have to buy more power on the open market. This drives up costs for all their customers unless the utility is allowed to charge these customers (whose existence has blown up all their capacity planning) more.
As a side note, they often get advantages and tax breaks because they promise to bring jobs to the area. And the initial construction jobs usually are significant. But once the place is built, it's ongoing operations only requires a few dozen positions, many of them low-tech and outsourced like site security. The higher-tech jobs (like the network engineering) is often not on-site anyway. A shopping plaza would generate more jobs than a datacenter.
It's worse than that. While the power company starts making plans for the additional load that's already there, datacenter developers bring in gas turbine generators. This adds to the noise and pollution. The local municipality may fine them a few hundred dollars a month for violations, but that's the cost of doing business.
Here in Texas my rates tripled from last year. I spent more and didn't cool my house nearly as much this last summer
Where in Texas do you live?
Fort Worth
Conversly, accorsing to most of these responses it sounds like if your nearby data center were to mysteriously vanish, your electric bill would go down.
Really, it would just have to blow up or something.
Why would the companies pay the bill? What are we gonna do, not have electricity or go use the other company that either doesn't exist or is raising rates for the same reason? Folks like you are just now noticing that this whole system is a scam, but unfortunately the time for action was 30 years ago.