I am curious how electricity is priced. Why are more and more utility providers charge based on ‘infrastructure cost’ or ‘fixed platform fee’ instead of usage fee?
> Why are more and more utility providers charge based on ‘infrastructure cost’ or ‘fixed platform fee’ instead of usage fee?
Because unlike many commodities, electricity, once generated, is hard to store, yet supply must match demand in real time. You need to meet peak demand, even if normal usage is not as high. If you pay purely for usage, that might not send enough price signals to ensure that you have the necessary capacity when you need it. https://www.canarymedia.com/articles/enn/explainer-how-capac... has a more detailed overview of how markets are being structured to provide capacity, separate from actual generation.
We've been here before [1]. In that case, extra load on the grid meant the municipality needed to purchase more power (at higher prices), which raised everybody's prices.
Electricity supply is highly regulated. Prices for electricity are constrained and often set by state regulators. These are so-called "usage fees". But beyond that the utility is allowed to charge customers for infrastructure and transmissio and those fees are out of control. We recently had a court case where a North Carolina utility illegally overcharged customers but the judge didn't assign damages because legally the utility could just charge customers for those damages [2]. And the legislature passed laws to protect the utility as well.
This is going to get worse too because private equity is rapidly moving into this market and they know that capex can be entirely pushed onto customers with no recourse.
So the data centers tend to get sweetheart deals on electricity too. So while the total cost of electricity has gone up (per Mwh), they pay less pushing even more burden onto everyone else. Plus they get discounts on property taxes, energy tariffs and other taxes, as in the case of Kevin O'Leary's mega-DC in Utah.
But this state interconnect bill is another level of evil because it's pushing the costs onto states that have nothing to do with the data center and won't get any "benefit" (there is no benefit) anyway.
What we need are laws that make these projects pay for their own infrastructure. This might cause them to build near power sources. Great. Away from people, mostly.
The level of regulatory corruption here is actually sickening. Take Elon's Grok DC in Memphis that exploits local laws against clean air by using "mobile" gas turbines in the city of Memphis.
This is the craziest part. We've long had publicly subsidized private projects, or corporate tax breaks given to entities with the fig leaf explanation that the projects will bring economic activity, or jobs, or some sort of long lasting, durable benefit, or even at its most craven, keep a stupid populace happy that their favorite sportsball team hasn't left their town.
Datacenters do none of these things. They don't bring any true employment numbers to make a difference. They don't materially improve their surroundings. They don't increase land value. They aren't an attractive neighbor. They don't benefit the tax base, not least of all when you're doling out massive tax breaks and deferments... no one _wants_ them, so it's not even like this is a "well, you're just not a Buffalo Bills fan, but the rest of us are, get on board!" situation.
There is zero net benefit to the citizens in these places to welcome these facilities to their town. Shorter latency to their chatbot of choice, maybe? But in any practical, moral hazard sense, these are all pure net negatives for the communities, and it's wild that these leaders think they're some sort of marquee, glamorous, prestigious win of a project.
Compare this with other, things-that-rhyme-but-aren't-the-same projects, like the TSMC fabs in Phoenix: these projects are bringing a ton of high-paying, new jobs (and, somewhat controversially, an expat community from Taiwan to help onboard them in the meantime), but they're also delivering in other economic terms because of the supply chain's knock-on effects: the TSMC fabs further the reputation of Phoenix as the Silicon Desert that Intel, OnSemi, Microchip, and Motorola had long been working towards, but at a much more amplified scale, and in a truly meaningful capacity. The money being spent here is staying here, and driving some real practical benefits. But even still, it's an open conversation around how careful we need to be with the water usage of these fabs (though TSMC is aiming towards 90%+ recapture in the next few years, I think it's ~60% right now), and other considerations... they are still, on balance, bringing 6,000-12,000 direct jobs, and even more indirect jobs as they continue to expand.
These datacenter projects don't even do _that_ well. They're just upsetting the power grid and creating unfortunate microclimates for the immediate vicinity for a handful of NOC jobs. (And some itinerant construction and engineering jobs.)
I'll be the first to complain about Texas being on its own energy grid and the dumpster fire of resultant things that happen because of it, but it is worthwhile to call out that this sort of thing is not possible in Texas because of that.
It's not clear from the article whether this is just datacenters -- or if that is just the convenient boogeyman.
The grid operator for the northeast, according to my Governor, has been well-behind in building out infrastructure. Of course new datacenters cause more load. But so do new houses (we're building as many as we can) and electric cars, etc.
It seems that big money can overrule local government regulators at will.
Here in Nevada, (Warran Buffet owned) NV Energy already has approval for a "Demand Charge" that will increase rates for everyone, and further reduce the ridiculously low amount of money that consumers get for selling their excess solar power back to the grid.
The regulators didn't even resist, but there has now been so much backlash that they're finally scheduling public hearings after the fact. The announcement doesn't even mention the Demand Charge by name, and many consumers aren't even aware they they're about to be screwed.
One of the more obscene things about this new charge is that people with PV arrays will pay a fee for demanding more power from their own grid-tied systems.
Friend of mine used to work in that space. He said there were people who were trying to do their job making sure the rate payers interests were being looked after. And people whose only interest was sucking up to the utilities in hope that they'll be rewarded by an offer to switch sides.
It's not obscene it's economics - supply and demand.
In power grid dominated by solar production the value of MWh of electricity is highest at night (because the supply from solar is zero), the value MWh of electricity is lowest at noon (because the supply from solar is maximal). So the residential grid-tied PV system is supplying power when the value of electricity is low and consuming power when the value of electricity is high.
Better solution than fix rates are digital smart meters which calculate using variable rates from electricity market.
The pressure onto normal citizens will push and increase renewable energy build out (E-Car, Balcony solar/roof solar), to get away from these companies faster. Their utility will increase further, the pressure increases even more.
But people like Elon Musk are also very ignorant: He populates going into space to fix the energy topic, but apparently can't do math because it would be a lot cheaper to use batteries and solar and potentially also sell the heat the DCs produce instead of doing any of it in space.
It would even be easier to just buy something in new mexico, building out the energy infrastructure in a non livable area because latency doesn't matter that much with AI (not all use cases, but for that you have edge locations).
The richest and smartest people (excluding here elon musk) are not able to do a fast proper buildout? ... They could even just build a whole town with DCs and combine this with other energy intensive industries and sharing the prorcess heat reuse.
Similar patterns occurred with telecom corporations and communities that setup their own internet services. In some states the community ISP service model was either shut down, or restricted from expanding further due to lobbying from large corporations.
these out of state AI companies are fairly quickly going to realize that their lobbying for the CURRENT administration doesnt mean shit after the next election.
they're going to have to learn to be a lot more thoughtful about the seething masses (that their products are forcing them to lose jobs to)...
I've been saying this is going to be _the_ biggest political issue of the upcoming midterms and then the 2028 election. High electricity prices are something that really whacks the middle class, there's an easy bogeyman to hate here (AI and datacentres, neither of which are popular), and it crosses partisan lines.
Even in Texas' "disconnected" grid, we're seeing the same mess. Oncor is currently staring down a mind-boggling 350 GW in data center requests - to put that in perspective, that's more than triple ERCOT's entire peak demand. They’re now pivoting to a $47 billion infrastructure spree just to keep up, and they’ve already pushed through a $560 million rate hike to help foot the bill. It’s the same story as Maryland: no matter how the local market is structured, residential ratepayers are the ones getting squeezed to subsidize the massive high-voltage buildouts these AI projects require. One benefit: the increased human interaction pulls me away from the terminal. Door-to-door power salesmen now have a regular relationship with my Nest doorbell, warning me of the impending "AI-pocalypse" because ratepayers in Dallas are going to be the ones subsidizing the West Texas buildout.
Seems people have the choice between power outtages and getting pollution by the untreated exhausts of small gas turbine that are running on the premises of AI data centers. It's horrible for humans.
Humans are so annoying, can't they move away from data centers?/s
I wrote a multi-page essay about this for our condo association last year. There's lots of complexity and externalities here — Pepco grid modernization, PJM interconnection cap auctions, AI buildouts in NOVA, etc; it's a really complicated issue.
Can someone explain to me why local governments are so against datacenters? It seems like a golden opportunity to build electric infrastructure that's paid for by corporations and if AI is a bubble at least that infrastructure will remain and continue to provide cheap power.
> his $2 billion bill will cost the state’s consumers an extra $1.6 billion in the next ten years alone — that means an extra $823 million for residential (approx. $345 per customer)
The customers will see their monthly bill go up by $2.88
What is the reason some percentage of the billions going to build out data centers isn’t going to build new energy sources and distribution infrastructure? Seems like policy malpractice by local governments.
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[ 3.8 ms ] story [ 83.6 ms ] threadBecause unlike many commodities, electricity, once generated, is hard to store, yet supply must match demand in real time. You need to meet peak demand, even if normal usage is not as high. If you pay purely for usage, that might not send enough price signals to ensure that you have the necessary capacity when you need it. https://www.canarymedia.com/articles/enn/explainer-how-capac... has a more detailed overview of how markets are being structured to provide capacity, separate from actual generation.
Electricity supply is highly regulated. Prices for electricity are constrained and often set by state regulators. These are so-called "usage fees". But beyond that the utility is allowed to charge customers for infrastructure and transmissio and those fees are out of control. We recently had a court case where a North Carolina utility illegally overcharged customers but the judge didn't assign damages because legally the utility could just charge customers for those damages [2]. And the legislature passed laws to protect the utility as well.
This is going to get worse too because private equity is rapidly moving into this market and they know that capex can be entirely pushed onto customers with no recourse.
So the data centers tend to get sweetheart deals on electricity too. So while the total cost of electricity has gone up (per Mwh), they pay less pushing even more burden onto everyone else. Plus they get discounts on property taxes, energy tariffs and other taxes, as in the case of Kevin O'Leary's mega-DC in Utah.
But this state interconnect bill is another level of evil because it's pushing the costs onto states that have nothing to do with the data center and won't get any "benefit" (there is no benefit) anyway.
What we need are laws that make these projects pay for their own infrastructure. This might cause them to build near power sources. Great. Away from people, mostly.
The level of regulatory corruption here is actually sickening. Take Elon's Grok DC in Memphis that exploits local laws against clean air by using "mobile" gas turbines in the city of Memphis.
[1]: https://newsroom.haas.berkeley.edu/research/power-hungry-cry...
[2]: https://www.wcnc.com/article/news/local/no-refunds-for-duke-...
This is the craziest part. We've long had publicly subsidized private projects, or corporate tax breaks given to entities with the fig leaf explanation that the projects will bring economic activity, or jobs, or some sort of long lasting, durable benefit, or even at its most craven, keep a stupid populace happy that their favorite sportsball team hasn't left their town.
Datacenters do none of these things. They don't bring any true employment numbers to make a difference. They don't materially improve their surroundings. They don't increase land value. They aren't an attractive neighbor. They don't benefit the tax base, not least of all when you're doling out massive tax breaks and deferments... no one _wants_ them, so it's not even like this is a "well, you're just not a Buffalo Bills fan, but the rest of us are, get on board!" situation.
There is zero net benefit to the citizens in these places to welcome these facilities to their town. Shorter latency to their chatbot of choice, maybe? But in any practical, moral hazard sense, these are all pure net negatives for the communities, and it's wild that these leaders think they're some sort of marquee, glamorous, prestigious win of a project.
Compare this with other, things-that-rhyme-but-aren't-the-same projects, like the TSMC fabs in Phoenix: these projects are bringing a ton of high-paying, new jobs (and, somewhat controversially, an expat community from Taiwan to help onboard them in the meantime), but they're also delivering in other economic terms because of the supply chain's knock-on effects: the TSMC fabs further the reputation of Phoenix as the Silicon Desert that Intel, OnSemi, Microchip, and Motorola had long been working towards, but at a much more amplified scale, and in a truly meaningful capacity. The money being spent here is staying here, and driving some real practical benefits. But even still, it's an open conversation around how careful we need to be with the water usage of these fabs (though TSMC is aiming towards 90%+ recapture in the next few years, I think it's ~60% right now), and other considerations... they are still, on balance, bringing 6,000-12,000 direct jobs, and even more indirect jobs as they continue to expand.
These datacenter projects don't even do _that_ well. They're just upsetting the power grid and creating unfortunate microclimates for the immediate vicinity for a handful of NOC jobs. (And some itinerant construction and engineering jobs.)
The grid operator for the northeast, according to my Governor, has been well-behind in building out infrastructure. Of course new datacenters cause more load. But so do new houses (we're building as many as we can) and electric cars, etc.
And it's not fair to citizens that they can't have electricity but a datacenter can.
Here in Nevada, (Warran Buffet owned) NV Energy already has approval for a "Demand Charge" that will increase rates for everyone, and further reduce the ridiculously low amount of money that consumers get for selling their excess solar power back to the grid.
The regulators didn't even resist, but there has now been so much backlash that they're finally scheduling public hearings after the fact. The announcement doesn't even mention the Demand Charge by name, and many consumers aren't even aware they they're about to be screwed.
One of the more obscene things about this new charge is that people with PV arrays will pay a fee for demanding more power from their own grid-tied systems.
https://www.nvenergy.com/publish/content/dam/nvenergy/bill_i...
In power grid dominated by solar production the value of MWh of electricity is highest at night (because the supply from solar is zero), the value MWh of electricity is lowest at noon (because the supply from solar is maximal). So the residential grid-tied PV system is supplying power when the value of electricity is low and consuming power when the value of electricity is high.
Better solution than fix rates are digital smart meters which calculate using variable rates from electricity market.
The pressure onto normal citizens will push and increase renewable energy build out (E-Car, Balcony solar/roof solar), to get away from these companies faster. Their utility will increase further, the pressure increases even more.
But people like Elon Musk are also very ignorant: He populates going into space to fix the energy topic, but apparently can't do math because it would be a lot cheaper to use batteries and solar and potentially also sell the heat the DCs produce instead of doing any of it in space.
It would even be easier to just buy something in new mexico, building out the energy infrastructure in a non livable area because latency doesn't matter that much with AI (not all use cases, but for that you have edge locations).
The richest and smartest people (excluding here elon musk) are not able to do a fast proper buildout? ... They could even just build a whole town with DCs and combine this with other energy intensive industries and sharing the prorcess heat reuse.
I honestly think they should pay fully for the infrastructure that provides power for them. It's not fair to have regular users pay for this.
they're going to have to learn to be a lot more thoughtful about the seething masses (that their products are forcing them to lose jobs to)...
Humans are so annoying, can't they move away from data centers?/s
The customers will see their monthly bill go up by $2.88