Latest news with #electricityRates
CBS News
16-06-2025
- Business
- CBS News
The AI revolution is likely to drive up your electricity bill. Here's why.
New Jersey residents got some bad news earlier this year when the state's public utilities board warned that their electricity bills could surge up to 20% starting on June 1. A key driver in that rate hike: data centers. The spread of these large-scale computing facilities across the U.S. amid growing demand for artificial intelligence, data storage and other technology services is projected to increase electricity consumption to record highs in the coming years, according to experts. A report from Schneider Electric, a company that specializes in digital automation and energy management, projects that electricity demand will increase 16% by 2029, mainly due to the proliferation of data centers. Most data centers rely on the nation's electrical grid for energy, meaning it will be Americans ratepayers who pick up the tab, Mark Wolfe, executive director of the National Energy Assistance Directors Association, a group that represents states on energy issues. "As utilities race to meet skyrocketing demand from AI and cloud computing, they're building new infrastructure and raising rates, often without transparency or public input," he told CBS MoneyWatch in an email. "That means higher electricity bills for everyday households, while tech companies benefit from sweetheart deals behind closed doors." More data centers, more power Thousands of data centers now dot the country, with the largest concentrations in Virginia, California and Texas. The number of data centers in the U.S. nearly doubled between 2021 and 2024, according to a report from Environment America, a network of environmental groups. It's not just the number of data centers that are expected to rise, but the size. "The trend has been bigger data centers," Dave Turk, the former deputy secretary of the U.S. Department of Energy, told CBS MoneyWatch. "They tend to be more energy efficient." Spurring that expansion is the rapid growth of "generative" AI companies that are consuming vast amounts of electricity to train so-called Large Language Models like ChatGPT and power. AI searches use 10 times more electricity than normal internet searches, according to a study from the Electric Power Research Institute, a nonprofit organization. "AI is an increasing part of data centers and certainly responsible for increased electricity demand," Turk said. Data centers, which contain thousands of computer servers, networking gear and other infrastructure, also require power to cool their systems and keep them from overheating. Torsten Sløk, chief economist at asset management firm Apollo Global Management, estimates that data centers will require an additional 18 gigawatts of power capacity by 2030. To put that into context, New York City power demand is about 6 gigawatts. About 4.4% of U.S. electricity went to power data centers in 2023, according to a Department of Energy's Lawrence Berkeley National Laboratory study. Not all of that demand is related to AI, but it represents a portion, Turk said. Other factors pushing up prices The spread of data centers isn't the only reason U.S. electricity prices are surging. The price of natural gas, inflation, ongoing electrification of buildings and vehicles, and other factors also play an important role. But utilities are factoring the high demand from data centers into their pricing models. For example, when Dominion Energy, one of the Virginia's largest utilities, in April proposed a price hike of $8.51 per month in 2026, the company also floated the idea of a "new rate class for high energy users, including data centers." Electricity prices have risen 4.5% in the last year, according to recent data from the Labor Department, and are estimated to surge this summer. Energy costs also drift higher if a Republican-backed budget package, dubbed the "big beautiful bill," is passed and signed into law by President Trump. Analysts from Rhodium Group predict that the bill, which would repeal a slate of tax credits created under the Inflation Reduction Act, could increase a family's energy expenditures by nearly $400 a year. Beyond price increases, the heightened energy demand from data centers could also compromise the reliability of the grid, according to experts. In a recent report, the North American Electric Reliability Corp said that facilities that service AI and cryptocurrency companies are being developed at a faster pace than the power plants and transmission lines to support them, "resulting in lower system stability. PJM, a grid operator in 13 states plus Washington, D.C., cited data center demand as one of the factors that could lead to capacity shortages in its 2025 forecast.
New York Times
16-05-2025
- Business
- New York Times
Data Centers' Hunger for Energy Could Raise All Electric Bills
Individuals and small business have been paying more for power in recent years, and their electricity rates may climb higher still. That's because the cost of the power plants, transmission lines and other equipment that utilities need to serve data centers, factories and other large users of electricity is likely to be spread to everybody who uses electricity, according to a new report. The report by Wood MacKenzie, an energy research firm, examined 20 large power users. In almost all of those cases, the firm found, the money that large energy users paid to electric utilities would not be enough to cover the cost of the equipment needed to serve them. The rest of the costs would be borne by other utility customers or the utility itself. The utilities 'either need to socialize the cost to other ratepayers or absorb that cost — essentially, their shareholders would take the hit,' said Ben Hertz-Shargel, who is the global head of grid edge research for Wood MacKenzie. This is not a theoretical dilemma for utilities and the state officials who oversee their operations and approve or reject their rates. Electricity demand is expected to grow substantially over the next several decades as technology companies build large data centers for their artificial intelligence businesses. Electricity demand in some parts of the United States is expected to increase as much as 15 percent over just the next four years after several decades of little or no growth. The rapid increase in data centers, which use electricity to power computer servers and keep them cool, has strained many utilities. Demand is also growing because of new factories and the greater use of electric cars and electric heating and cooling. In addition to investing to meet demand, utilities are spending billions of dollars to harden their systems against wildfires, hurricanes, heat waves, winter storms and other extreme weather. Natural disasters, many of which are linked to climate change, have made the United States' aging power grids more unreliable. That spending is one of the main reasons that electricity rates have been rising in recent years. American homes that use a typical 1,000 kilowatt-hours of electricity a month paid, on average, about $164 in February, according to the Energy Information Administration. That was up more than $30 from five years ago. Dominion Energy, a large investor-owned utility based in Richmond, Va., is one of those that Wood MacKenzie expects will spend more on new infrastructure than it will be able to recover from selling electricity to data centers and other large users. More data centers have opened in Virginia than in any other state. Asked about Wood MacKenzie's filings, Dominion said that on April 1 it filed a proposal to electricity regulators in Virginia for requiring large-load customers to pay their 'fair share' of utility costs. 'Ensuring a fair allocation of costs and mitigating financial risk are not new concepts to the company,' Edward H. Baine, president of Dominion Energy Virginia, said in testimony that Dominion submitted to state regulators and provided to The New York Times. 'Addressing both the needs and the risks associated with growth in high-load electric customers with high-load factors is both a public policy and a regulatory priority for Virginia.' A 2024 analysis by Virginia officials concluded that data centers paid the full cost of the service they received. But that report warned that the addition of many more large users of electricity could raise rates for all users if the state did not make policy changes to protect individuals and small businesses. Wood MacKenzie's report found that some states do have policies to protect individuals and small businesses from higher rates. Chief among them is Texas, where customers can pick a power source that is different from the utility that maintains the lines that deliver electricity to their homes. This arrangement, according to Wood MacKenzie, helps protect individuals from having to pay for grid upgrades that mainly or entirely benefit large users. Mr. Hertz-Shargel said many utilities also had programs that allowed large electricity users to buy emissions-free energy directly from power producers like solar and wind farms. Such programs, he said, could be refashioned to help ensure that the cost of new power projects is largely or entirely borne by the users responsible for major grid upgrades. The policies that states and utilities have put in place will significantly reduce risks of spreading the costs of improvements for the large-load customers, but 'they do not provide complete protection,' Mr. Hertz-Shargel said. 'Only by removing data-center-caused infrastructure from utilities books, such as by allowing large loads to contract with third parties for generation via clean transition tariffs, are both ratepayers and utility shareholders fully protected.'
