Listen to “Data Centers Make Power Bills Go Down!” on Spreaker.
Screaming at the top of his lungs, wearing a look that could kill — if looks could kill — a boy of perhaps nine stands amid a group of protesters chanting, “No data centers!”
One might think an archenemy had stolen his device and smashed the screen with a sledgehammer.
Does he even understand what he is so angry about? I doubt it.
The example is real.
Like many Americans, he appears to have become trapped in a world of data-center myths — a phenomenon that leaves people frustrated and unwilling to consider either the economic benefits of these facilities or America’s race with China for leadership in artificial intelligence.
Sidenote: how quickly we forget the alarm caused by Sputnik orbiting overhead and the fear that the Soviet Union might surpass the United States in the space race. A bit of that concern today when it comes to this issue wouldn’t hurt. It might even unite us.
One of today’s most persistent claims is that data centers will inevitably raise everyone’s power bill. Many say they already have. The reality is more complicated.
Electricity prices reflect many factors. The cost of fuels such as natural gas and coal fluctuates with market conditions. When those inputs become more expensive, the cost of generating electricity can rise and it has.
The electric grid is also old, and much of it must be replaced or upgraded to provide a reliable and resilient supply of power. Some infrastructure would qualify as a senior citizen if it were a person. Steel, wooden poles, transformers and the other materials needed to make the lights come on are more expensive than when much of the system was first built.
More storms bring more storm restoration costs making their way into rates.
Add the effects of inflation — especially the sharp increases of several years ago — and nearly everything costs more than it once did. Electricity is no exception.
All of those pressures would exist with or without the emergence of data centers.
Here is what receives far less attention: In some places, data-center development can help lower electricity rates.
Consider Indiana.
The Journal Gazette of Fort Wayne reported that Indiana Michigan Power, an American Electric Power utility, requested permission to reduce customer rates. Yes, reduce them. The utility had already lowered its rates twice during the year.
Why?
“The plan is made possible thanks to load growth and increased revenue from large customers, including data centers,” Indiana Michigan Power said in a news release.
In this case, revenue associated with data centers is helping reduce rates. That should not be surprising to anyone who understands how utility costs, especially fixed costs, are allocated among customers.
When data centers connect to the grid, they become large customers that can help support costs shared across the system. Because they consume so much electricity, the revenue they provide can reduce the share of certain costs that other customers would otherwise bear. That opportunity can be especially significant in places with available generation and transmission capacity.
Indiana Gov. Mike Braun, a Republican, welcomed the development.
“Indiana Michigan Power’s proposal shows what’s possible when we create the right environment for investment while keeping Hoosier families front and center,” Braun said. “Lower utility bills, long-term rate certainty and continued investment in our electric system are exactly the kinds of results we want to deliver for Indiana.”
Indiana Michigan Power described its proposal as part of “one of the nation’s largest base-rate reduction plans.”
To be clear, powering data centers will require additional electricity generation and, in many places, new transmission infrastructure. Policy that resulted in retiring existing power plants early didn’t do anyone any favors.
Data centers should, however, pay the costs they create or bring their own generation to the table.
Recent proposals from PJM Interconnection to the Federal Energy Regulatory Commission point in that direction, as do steps utilities are taking to ensure that new costs are borne by the customers responsible for them. That principle — often called cost causation — is a longstanding foundation of utility regulation.
If those protections are structured properly, data centers can pay for the generation and infrastructure they require while also contributing revenue toward system costs that would otherwise fall more heavily on other ratepayers.
The effect of a data center will not be identical in every community. It depends on available capacity, utility-rate design, regulatory decisions and the terms under which the facility connects to the grid. But the blanket assertion that data centers always raise residential electricity bills is not supported by the full picture.
Before making up your mind, do your own research. Don’t take it from me or anyone else. Understand what is actually driving electricity prices instead of simply accepting what someone on Facebook, especially someone with an agenda, tells you.