Rising Energy Prices: A Challenge for AI and Data Centers
As tech companies expand their data center networks, a new survey reveals that consumer concerns over rising electricity costs are heightened, particularly due to the demands of AI technology. According to a report commissioned by Solar installer Sunrun, 80% of respondents expressed worries about how data centers could impact their utility bills.
These concerns are not baseless. According to the U.S. Energy Information Administration (EIA), electricity demand in the U.S. remained stable for over a decade; however, in recent years, commercial sectors, including data centers, have significantly ramped up their consumption, with annual growth rates of 2.6% and 2.1%, respectively. In contrast, residential use has only increased by 0.7% each year. Data centers now account for about 4% of U.S. electricity consumption, double the number from 2018, and projections estimate this could increase to between 6.7% and 12% by 2028.
The surge in demand has been somewhat mitigated by advancements in renewable energy sources like solar and wind, which are now leading new capacity generation. Data centers have shown considerable interest in large-scale solar power agreements due to cost efficiency and the ability to begin drawing electricity before project completion, typically within 18 months.
However, the outlook for natural gas, favored by data center operators, is less optimistic. While production has increased, much of it is directed towards exports rather than domestic use. A staggering 20% increase in consumption by electricity generators from 2019 to 2024 contrasts starkly with a 140% rise in usage by exporters. New natural gas plants take about four years to build and are currently facing delays from supply chain issues, including a significant backlog of turbine deliveries.
This backdrop leaves data center developers in a challenging position as AI’s demands on electricity intensify. Although industrial users also contribute to rising demand, AI is becoming increasingly scrutinized, especially since public sentiment is largely negative towards it, as evidenced by a recent Pew survey.
With energy prices climbing, a potential backlash against AI and its associated infrastructure is brewing as consumers look for accountability in how energy demands affect their costs.
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