rising energy prices put ai and data centers in the crosshairs

Growing Concerns Over Data Center Energy Consumption

Recent surveys indicate a growing apprehension among consumers regarding the potential for increased electricity costs driven by the rapid expansion of data centers supporting artificial intelligence (AI) technologies.

Consumer Worries and Rising Demand

A new report, commissioned by Sunrun, reveals that a significant 80% of consumers express concern over the impact of data centers on their monthly utility bills.

These anxieties are substantiated by observed trends in electricity consumption. For over a decade, overall electricity demand in the United States remained relatively stable, as reported by the U.S. Energy Information Administration (EIA).

However, over the past five years, a noticeable increase in demand from commercial and industrial users, including data centers, has emerged.

• Annual growth for commercial users reached 2.6%.
• Industrial user growth registered at 2.1% annually.
• In contrast, residential electricity use only increased by 0.7% per year.

Data Center Consumption and Future Projections

Currently, data centers account for approximately 4% of the total electricity generated in the United States, a figure that has more than doubled since 2018.

Forecasts from Lawrence Berkeley National Laboratory predict this consumption will escalate to between 6.7% and 12% by the year 2028.

Renewable Energy's Role

The ability to meet increasing demand has been largely attributed to the expansion of renewable energy sources, specifically solar, wind, and grid-scale battery storage.

Large technology companies are increasingly entering into substantial agreements for utility-scale solar power, drawn by its cost-effectiveness, modular design, and rapid deployment capabilities.

Solar farms offer the advantage of delivering power to data centers even before construction is fully completed, with typical project timelines around 18 months.

The EIA anticipates that renewables will continue to dominate new generating capacity for at least the coming year.

However, experts suggest that a potential repeal of key provisions within the Inflation Reduction Act by a Republican administration could impede the continued growth of renewable energy.

Challenges with Natural Gas

Natural gas, another energy source favored by data center operators, has not adequately addressed the growing demand.

While production has increased, a substantial portion of the new supply is being directed towards exports rather than domestic consumption.

Electricity generator consumption of natural gas rose by 20% between 2019 and 2024, while exports increased by a significant 140%.

Furthermore, the construction of new natural gas power plants is a lengthy process, typically requiring around four years for completion, as indicated by the International Energy Agency.

A backlog in the manufacturing of turbines for gas-fired power plants is exacerbating the issue, with manufacturers quoting delivery times extending up to seven years.

Implications for Data Center Development

The slow development of natural gas infrastructure, combined with potential setbacks for renewable energy growth, presents a challenge for data center developers.

Although AI and data centers are not solely responsible for the increase in electricity demand – industrial users contribute significantly – they are receiving considerable attention.

Public Perception of AI

Consumer concern is likely to focus on AI, as a Pew survey reveals more individuals are apprehensive about the technology than enthusiastic about it.

This sentiment is fueled by the perception that AI is often implemented by employers as a means of reducing workforce size rather than enhancing employee productivity.

The combination of rising energy prices and these concerns could potentially lead to public opposition.