Rising energy prices put AI and data centers in the crosshairs

As tech giants unveil ambitious plans for expansive data centers, a recent survey reveals rising fears among consumers regarding the potential surge in electricity costs. Conducted by solar provider Sunrun, the report indicates that a significant 80% of participants are anxious about how the proliferation of data centers will affect their utility bills. These fears are not without merit. For over a decade, electricity consumption in the United States remained relatively stable. However, a marked shift has occurred in the past five years, with commercial entities, particularly data centers, significantly increasing their energy consumption. The U.S. Energy Information Administration (EIA) reports annual growth rates of 2.6% for commercial users and 2.1% for industrial users, while residential demand only grew by 0.7%. Currently, data centers account for approximately 4% of the total electricity generated in the U.S., a drastic rise from their share of just 1.9% in 2018. Projections from the Lawrence Berkeley National Laboratory suggest that this figure could climb to between 6.7% and 12% by 2028. This spike in consumption has been met with a surge in renewable energy capacity, particularly from solar, wind, and grid-scale battery storage, which have helped meet the growing demand. Big tech firms are increasingly turning to large-scale solar projects, attracted by their cost-effectiveness and rapid deployment capabilities. Solar farms can supply power to data centers even before they are fully operational, with typical project completion timelines of around 18 months. The EIA anticipates that renewable energy sources will dominate new generating capacity for at least the next year. However, the potential repeal of significant elements of the Inflation Reduction Act by Republican lawmakers may hinder future growth in renewables. Meanwhile, natural gas, another energy source favored by data center operators, is struggling to keep pace. Although production has increased, most of the new resources are being allocated for exports rather than domestic use. Between 2019 and 2024, consumption by electricity generators surged by 20%, while exports rose by an astonishing 140%. The International Energy Agency also notes that new natural gas power plants typically require about four years to become operational, compounding the issue with a backlog of turbine deliveries that are now projected to take up to seven years. These challenges place data center developers in a precarious position. While they are not solely to blame for rising electricity demand—industrial users are also significant contributors—they are frequently in the spotlight. Additionally, a Pew survey indicates that public sentiment towards AI technology is shifting; many view it with apprehension, especially as companies often use it to reduce workforce numbers rather than enhance productivity. As energy prices continue to climb, the potential for a consumer backlash against both AI and data centers looms large.