AI models and data centers powering them need massive amounts of electricity, with an estimated 50 gigawatts of new power capacity needed in the US to sustain the AI boom, according to Goldman Sachs. Utility companies may foot the bill if Big Tech deals fall through.
The speed-at-all-costs approach to connecting data centers poses risks, with uncertainty about long-term business models and compute requirements. Turning power demand into generation can take years and involves significant costs for utilities, potentially leading to stranded assets if demand falls short.
Microsoft walked away from proposed data center projects, signaling potential oversupply of AI technology power. Monitoring Analytics filed a brief urging the Federal Energy Regulatory Commission to reject a transmission agreement between PECO Energy and Amazon’s Data Services division due to reliability and cost concerns.
Increased energy load from AI data centers is affecting US electrical grids and pushing up electric bills. Bank of America notes a 3.6% rise in utility payments year-over-year in the third quarter due to AI demand. Further increases are expected as electricity supply struggles to keep up with demand growth.
The AI boom is likened to the natural gas boom in the early 2000s, leading to changes in the electricity industry structure. States began restructuring their electric industries in the 1990s, allowing non-regulated companies to generate and sell power. The rush to build gas plants led to oversupply, similar to the current situation with AI demand. Companies like Calpine Corporation and Energy Future Holdings have gone bankrupt due to the high demand for turbines that did not materialize. Utilities like Duke Energy and Southern Company are benefiting from increased demand, with Duke securing a $10 billion investment from Amazon Web Services. Demand for power from industrial customers like data centers is rising, with GE Vernova receiving $500 million in orders. Grid Strategies warns that utilities may face challenges recouping costs due to high equipment prices. Utilities are considering ways to manage risk associated with meeting increasing power demands. Apple and Amazon Web Services are investing in on-site generation to meet power needs until grid infrastructure catches up. Meta has contracted Entergy Corporation to build natural gas turbines for a data center project. Utilities like American Electric Power are looking for ways to shift financial risk to developers in case of load request cancellations. AEP has signed on 24 gigawatts of incremental load by 2030, backed by agreements with big tech players like Amazon Web Services and Google. However, their backlog now stands at 190 gigawatts, equal to nearly 15% of the entire US power grid.
To manage the demand from data centers, AEP Ohio implemented a tariff requiring new customers to pay for unused energy and meet financial criteria. The Public Utilities Commission of Ohio approved the proposal, leading AEP Ohio to cut its data center load forecast by over half.
The Trump administration’s DOE approved a $1.6 billion loan to AEP to rebuild 5,000 miles of power transmission cables. This funding comes as AEP faces increased connection requests from new Big Tech clients like Amazon, Google, and Microsoft. Microsoft declined to comment on the matter. 1. The United States has officially rejoined the Paris Climate Agreement, a landmark international treaty aimed at combating climate change. President Biden signed an executive order to reenter the agreement, signaling a renewed commitment to reducing greenhouse gas emissions and protecting the environment.
2. NASA’s Perseverance rover successfully landed on Mars, marking a major milestone in the exploration of the Red Planet. The rover will collect samples of Martian soil and rock, search for signs of past life, and test technology for future human missions to Mars.
3. The COVID-19 vaccine rollout continues across the globe, with millions of doses administered daily. Countries are racing to vaccinate their populations in an effort to curb the spread of the virus and return to a sense of normalcy. Efforts are being made to ensure equitable distribution of vaccines to all.
4. GameStop stock experienced a wild surge in value due to a Reddit-fueled trading frenzy. Retail investors banded together to drive up the stock price, causing turmoil on Wall Street and leading to calls for investigation into market manipulation. The incident sparked debate about the power dynamics of the stock market.
5. The Biden administration announced a plan to increase the minimum wage for federal contractors to $15 per hour. This move is part of a broader effort to address income inequality and raise the standard of living for low-wage workers. The increase will impact hundreds of thousands of employees across various industries.
Read more at Yahoo Finance: Big Tech’s AI ambitions are remaking the US power grid. Consumers are paying the price.