Utilities and Big Tech: Who Pays the Price in the Data Center Boom?

As we advance into a digital age where data flows like the lifeblood of society, the infrastructure supporting this vast network grows more quietly yet influentially. But at what cost? Harvard University’s recent report raises an essential question: are utilities indirectly placing the burden of this rapid data center expansion on unsuspecting ratepayers?

A Surge in Demand

The digital revolution has led to a staggering increase in data center demands, predicting they will encompass about 12% of all U.S. electricity demand by 2030. This surge is drawing utilities into competitive fervor, with utilities offering lucrative yet opaque contracts for data center projects that require up to 2 GW—comparable to a large city’s consumption. “Utilities must be transparent,” stresses an analyst from the Environmental & Energy Law Program, warning that without oversight, other ratepayers may unknowingly bear these costs.

Special Contracts Under Scrutiny

The report delves into the realm of special contracts, often approved by state Public Utilities Commissions (PUC) with minimal scrutiny. According to pv magazine USA, these proceedings frequently lack opposition, making it easy for utilities to isolate data center energy costs without impacting data center bills, a red flag for fair market practices.

The Hidden Costs of Infrastructure

Utilities may shift the cost of infrastructure, required to support these digital colossi, onto ratepayers. With new technologies potentially reducing power needs, there’s a risk that unused capacity could further inflate consumer bills. The specter of utilities exploiting their monopolistic status looms large, as private contracts circumvent traditional rate structures.

Co-Location: A Double-Edged Sword

The appealing pitch for “co-locating” generation sources behind the utility’s point of interconnection could lead to a significant financial shift. Harvard’s report highlights one plan that could move up to $140 million in costs away from data centers and onto general ratepayers. The allure of ²⁴⁄₇ power reliability at consumer expenses might be too enticing for data centers to pass up.

Embracing New Solutions

Despite the challenges, solutions are at hand if PUCs enact robust review processes for these contracts. One intriguing proposal involves “energy parks” where data centers self-fund their power generation, aligning with big tech’s low-carbon ambitions.

As stated in pv magazine USA, unregulated expansion without sufficient oversight is an invitation to inequity. It is imperative for policymakers, utilities, and stakeholders to thoughtfully engage in strategy and regulation, ensuring balance in this rapidly evolving landscape of power and progress.