Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hey, mister Stanley, how you doing great?
Speaker 3: How are you doing?
Speaker 4: I'm good, So I'm Josh.
Speaker 2: We talked on the phone all right.
Speaker 5: Earlier this month, Bloomberg reporter Josh Sall visited a man
Speaker 5: named Kevin Stanley. He's fifty seven and he lives in Baltimore.
Speaker 3: Do you'll need me to turn the lights on more
Speaker 3: because this sounding here can get kind of dark here.
Speaker 5: Josh was in Maryland to report on the effects that
Speaker 5: data centers have on people who live near them. Kevin
Speaker 5: lives about a two hour drive from an area known
Speaker 5: as Data Center Alley, the world's largest concentration of data centers,
Speaker 5: topping other hotspots like Iowa and Oregon, and Josh was
Speaker 5: there to talk to him about one thing, in particular,
Speaker 5: his electricity bill, which has gone up ever since data
Speaker 5: centers came to the region.
Speaker 4: Kevin's a really nice guy, really interesting guy, and he
Speaker 4: talked about how his high power bills have had a
Speaker 4: really rough effect on his life. He has had to
Speaker 4: cut back on buying the groceries he likes, getting haircuts
Speaker 4: as often as he likes. He tries to make his
Speaker 4: diabetes medication stretch out.
Speaker 3: The power bills just keep going up and up, and
Speaker 3: for me, I'm a single person in here, so I'm like, wow, Wow,
Speaker 3: the bill's gone up so much.
Speaker 5: Kevin is blind and he lives on disability payments. He
Speaker 5: says his energy bills are now eighty percent higher than
Speaker 5: they were just about three years ago. And there were
Speaker 5: days when the utility asks customers like him to use
Speaker 5: less power to prevent blackouts or encourages them to use
Speaker 5: less power to save money.
Speaker 3: They have days where they tell us, don't use any electricity,
Speaker 3: don't run air and dig but it's like ninety five degrees,
Speaker 3: I'll dine here.
Speaker 5: It can be difficult to pinpoint the exact root of
Speaker 5: higher electricity bills and strain on the electrical grid, so
Speaker 5: Josh set out to put some numbers to the growing
Speaker 5: pressure data centers are putting on local power supply, and
Speaker 5: he found that at a time of rapid data center
Speaker 5: construction and investment in AI technology that needs them, demand
Speaker 5: is driving up wholes energy costs and those costs are
Speaker 5: being passed on to consumers.
Speaker 2: Josh spoke to some people that you know, started telling
Speaker 2: him that their bills were really high.
Speaker 5: That's Leonardo Nicoletti, a data visualization reporter at Bloomberg who
Speaker 5: traveled with Josh and crunched the numbers.
Speaker 2: When we were thinking about it. They seem to be
Speaker 2: living close to the hotspots of you know, AI data
Speaker 2: centers in the United States. The main finding was that,
Speaker 2: quite strikingly, if you are in an area that is
Speaker 2: located close to data centers or data center activity, you're
Speaker 2: much more likely to experience high price increases.
Speaker 4: The massive increase in the demand for AI and the
Speaker 4: speed with which the data centers get bigger and bigger.
Speaker 4: I think it's been a huge surprise to all of us.
Speaker 5: I'm David Gerrett, and this is the big take from
Speaker 5: Bloomberg News today. On the show, the staggering electricity needs
Speaker 5: of AI data centers and how you could end up
Speaker 5: putting the bill. AI needs a lot of energy to
Speaker 5: work from summarized answers on Google to chat, GPT, grocery lists.
Speaker 5: The rapidly growing technology requires massive amounts of computing power,
Speaker 5: which requires a lot of actual power.
Speaker 2: We actually quantified this in an earlier story that Josh
Speaker 2: and I worked together. We compared the total amount of
Speaker 2: electricity that data centers use yearly to how much electricity
Speaker 2: individual countries use. And we've found that, for example, countries
Speaker 2: like Italy or Australia are using actually less electricity as
Speaker 2: a total than data centers use globally. And these numbers
Speaker 2: are actually higher now because we did this one year ago,
Speaker 2: and electricity demand is growing exponentially from data centers.
Speaker 4: That numbers supposed to keep going up and up. So
Speaker 4: Bloomberg NIF projects that it's supposed to be over four
Speaker 4: percent by twenty thirty five total global electricity consumption. So
Speaker 4: if you took all the data centers at that point
Speaker 4: and made them their own country, at that point, they'd
Speaker 4: be the fourth biggest consumer of electricity after China, the US,
Speaker 4: and India.
Speaker 5: But what Josh and Layo wanted to understand was whether
Speaker 5: the huge demand for electricity was showing up on customers' bills.
Speaker 2: It took us like three months to find the data
Speaker 2: because you know, it's actually really hard to get granular
Speaker 2: data on power prices.
Speaker 5: To get that more granular picture, Layo and another Bloomberg
Speaker 5: data visualization reporter named Demetrius Pogcas found a company called
Speaker 5: grid Status that collects real time data for more than
Speaker 5: twenty five thousand nodes around the US.
Speaker 2: A node is like the location on the grid, so
Speaker 2: that's connected to transmission lines and it measures real time congestion,
Speaker 2: real time fuel prices, and real time like supply costs,
Speaker 2: things like that, right, and then the different factors that
Speaker 2: are measured by that node then make up the price.
Speaker 5: With that data as well as data on the locations
Speaker 5: and capacity of data centers from a company called dc Byte,
Speaker 5: the reporters measured the distance between those nodes and areas
Speaker 5: where there's significant data center activity. They use that to
Speaker 5: create a data set that showed the price changes recorded
Speaker 5: in those areas over time since twenty twenty.
Speaker 2: Essentially, the main finding is that seventy percent of nodes
Speaker 2: that recorded price increases are located within fifty miles of
Speaker 2: significant data center activity.
Speaker 4: And if you look at your power bill, you're going
Speaker 4: to see in most places a distribution charge. That's what
Speaker 4: you're paying for all of the infrastructure, all the wires.
Speaker 4: But you're also going to see a supply charge. And
Speaker 4: the supply charge is what you're paying for that wholesale power.
Speaker 4: So what Lao's research says is by pushing up the
Speaker 4: price of wholesale power. Data centers are putting that upward
Speaker 4: pressure on your power bill.
Speaker 5: So effectively, if I open up that bill, I'm not
Speaker 5: going to see AI data centers as a line item,
Speaker 5: but it's having that effect on what you're describing exactly.
Speaker 5: Josh says there are two key mechanisms that drive up
Speaker 5: electricity costs around data center hotspots.
Speaker 4: The first, to really summarize supply and demand. They use
Speaker 4: a lot of electricity, which can make electricity more expensive
Speaker 4: for everybody, So that's one way that can push up
Speaker 4: customer bills. The other ways that they require a lot
Speaker 4: of new infrastructure, mostly transmission lines, but also new power
Speaker 4: plants and the costs of building that are spread out
Speaker 4: among all customers, including regular people like you.
Speaker 5: Monitoring Analytics is an outside watchdog that keeps an eye
Speaker 5: on the largest US electric grid, PJM, and it says
Speaker 5: that data center development raise costs for customers on pjm's grid,
Speaker 5: which spans from Illinois to Washington, DC, by more than
Speaker 5: nine point three billion dollars over a twelve month period
Speaker 5: starting in June. Today, thirty three percent of all the
Speaker 5: electricity used in Oregon is attributed to data centers. In Virginia,
Speaker 5: it's thirty seven percent. That's according to data from dc
Speaker 5: BYTE and the US Energy Information Agency. Communities in surrounding
Speaker 5: areas are starting to do the map, and they're also
Speaker 5: connecting higher bills to data centers.
Speaker 6: You don't have to see those data centers to see
Speaker 6: the higher electric bills.
Speaker 5: That's David Lapp, a consumer advocate from the Maryland Office
Speaker 5: of People's Council.
Speaker 6: We don't have in Maryland too many data centers, so
Speaker 6: the costs are being driven up by data centers that
Speaker 6: are out of state, largely in many of them in
Speaker 6: northern Virginia.
Speaker 5: In February, the Baltimore City Council led a hearing on
Speaker 5: the issue of rising Baltimore gas and electric bills.
Speaker 4: The current state of these BGE bills and the skyrocketing
Speaker 4: rates is simply not sustainable for our constituents.
Speaker 5: And one of the people who spoke at the hearing
Speaker 5: was Kevin Stanley, the man Josh and Lao interviewed in Baltimore.
Speaker 3: Yes, good evening, everyone, My name is Kevin Stanley.
Speaker 5: Kevin didn't know what was causing his bills to spike.
Speaker 5: He just knew it was a problem.
Speaker 3: And there's no reason that Baltimore is shold have the
Speaker 3: excess of gas electric Race said that.
Speaker 2: When Josh asked Kevin Stanley what he thought about data centers,
Speaker 2: his reply was.
Speaker 3: So they could say, oh, this is going to help
Speaker 3: with AI. But how's that going to help me? How's
Speaker 3: that going to help me pay my bill?
Speaker 5: So how do utilities decide who fronts the cost? And
Speaker 5: how are those communities responding? That's after the break. A
Speaker 5: team of Bloomberg reporters dug into the rising costs of
Speaker 5: electricity to see if the rapid construction of data centers
Speaker 5: in some areas could be to blame, and they found
Speaker 5: a link. Places with heightened data center activity were more
Speaker 5: likely to see higher wholesale energy costs, meaning the presence
Speaker 5: of data centers was raising power prices and eventually pushing
Speaker 5: up customer bills. I asked Bloomberg reporter Josh Saul about
Speaker 5: why that's happening when people usually expect to pay for
Speaker 5: their own utility costs. I think about how I study
Speaker 5: my electricity build to the extent that I do, And
Speaker 5: maybe in the summer I'm using my air conditioner more.
Speaker 5: Maybe in the winter I'm using my heat more. But
Speaker 5: these are all kind of selfish things. I'm determining when
Speaker 5: the bill goes up or down, why should I be
Speaker 5: paying for the expenses of associated with these data centers.
Speaker 4: I think there's two arguments that people make. I mean,
Speaker 4: the first is that AI, whether you like it or not,
Speaker 4: is becoming an increasingly large part of our world. So
Speaker 4: from national security to the argument that we don't want
Speaker 4: other countries to be way better at AI than we are,
Speaker 4: to the fact that now our Google searches and even
Speaker 4: our texts to our friends are guided by or instructed
Speaker 4: by AI. So there's one argument there that we're all
Speaker 4: using AI. And there's also an old utility law. The
Speaker 4: way we do this is that the costs are shared
Speaker 4: among everyone. So if you build a new house or
Speaker 4: hook up to the grid as a new business, you
Speaker 4: don't pay for all of those costs to hook you up.
Speaker 4: It's socialized among everyone on the grid. So utilities are
Speaker 4: following that general principle. Now now with these large new
Speaker 4: customers data centers.
Speaker 5: It's tech companies that are deciding when and where to
Speaker 5: build a new data center. Amazon, Microsoft, and Alphabet's Google
Speaker 5: are the three biggest US cloud providers in twenty twenty four,
Speaker 5: those companies spent more than two hundred billion dollars on
Speaker 5: capital expenditures, most of it to build new data centers.
Speaker 5: What's the relationship like between these tech companies that need
Speaker 5: all of this power and the utilities themselves. Are they
Speaker 5: paying their fair share? Are they paying a disproportionate amount?
Speaker 5: How's that shaking out?
Speaker 2: Well?
Speaker 4: Utilities are really excited because it's a huge new customer
Speaker 4: base for them, and this is coming after decades of
Speaker 4: very flat growth. At the same time, there's some conflicts.
Speaker 4: Tech is known for moving fast and breaking things, that's
Speaker 4: their philosophy. Utilities are known for moving very slow and
Speaker 4: making sure nothing ever breaks, you know, making sure the
Speaker 4: lights stay on. So they're working together here. But one
Speaker 4: thing that we're seeing is that utilities are actively figuring
Speaker 4: out how to make sure that big tech is paying
Speaker 4: its share for these data centers. They're doing things like
Speaker 4: creating new customer classes for data centers to pay differently
Speaker 4: than say, residential or small businesses. They're creating requirements like
Speaker 4: data centers have to pay for certain costs, pay for
Speaker 4: a minimum amount of power over fifteen years, even if
Speaker 4: they use less putting, non collateral different things like that
Speaker 4: to protect their existing customers.
Speaker 5: Josh Leo and their team reached out to Amazon, Microsoft,
Speaker 5: and Alphabet for comment. An Amazon spokesperson said the company
Speaker 5: works closely with utilities and grid operators to plan for
Speaker 5: future growth. Microsoft's vice president of energy told them, quote,
Speaker 5: it's literally our responsibility to make sure that when we
Speaker 5: come to a community, when we get connected to a grid,
Speaker 5: that the cost of the infrastructure that's being dedicated to us,
Speaker 5: that those costs of service get allocated to us. Google
Speaker 5: said it's been working to use less electricity even as
Speaker 5: it expands data centers, and that it supports paying its
Speaker 5: fair share. What did you hear from utilities about this phenomenon?
Speaker 5: What do they say about why builds your going up?
Speaker 5: And what they intend to do about it?
Speaker 4: Utilities mostly point to the idea that data centers are
Speaker 4: paying their fair share. So if a data center requires
Speaker 4: a specific substation for its operations, the tech company will
Speaker 4: pay for that, and they'll point to the reforms that
Speaker 4: they're making in their own rate structure to charge these
Speaker 4: large load customers differently. All of that's true, and all
Speaker 4: that's good, but it doesn't change the fact that a
Speaker 4: lot of costs are still being loaded onto regular customers.
Speaker 5: Dominion Energy, the utility company that serves Northern Virginia's data center,
Speaker 5: Alley told the reporters quote, we believe data centers should
Speaker 5: pay for the full cost of their power. That's how
Speaker 5: we design our rates and it's the standard our regulator
Speaker 5: uses in reviewing them. The CEO of Exelon, which runs
Speaker 5: Baltimore's utility, said the company is pushing for long term
Speaker 5: solutions that are fair and bring peace of mind to customers.
Speaker 4: Talking to one of the utilities, we asked about how
Speaker 4: they pass these costs onto customers, and their experts said,
Speaker 4: we sign long term contracts, so if power spikes up,
Speaker 4: that's for the power sellers to deal with. Customer doesn't
Speaker 4: have to deal with that. However, the next time we
Speaker 4: sign a contract, if there's been a lot of variability
Speaker 4: in cost in power prices, and if the power prices
Speaker 4: have been overall just higher, which happens because of data centers,
Speaker 4: then the next contract that we sign will be for
Speaker 4: higher prices, and then yes, that will get passed on
Speaker 4: directly to our customers.
Speaker 5: Now, some communities are starting to have conversations about what
Speaker 5: it really means to have these big AI data centers
Speaker 5: in their backyard. Are we seeing communities, Are we seeing
Speaker 5: states push back on this in any way?
Speaker 4: Yeah, I'd say there's more dramatic conversation around the power
Speaker 4: grid than anytime in my years covering it. There was
Speaker 4: just a summit in Philadelphia where the governor Pennsylvania, Joshapiro,
Speaker 4: talked about affordability. We talked about these rising bills.
Speaker 1: As governor of this great comme, privilege to represent thirteen
Speaker 1: million pens of land, and I can tell you they
Speaker 1: can't afford never ending price increases because of pgm's policies.
Speaker 4: That's something we're seeing from politicians all around. Sometimes there's
Speaker 4: a little bit of a personality split, where you know,
Speaker 4: local government's excited for the tax income. They want companies
Speaker 4: moving in, they want business activity, they want to fund
Speaker 4: their local school district.
Speaker 5: In the city of Fayetteville, Georgia, for example, the taxes
Speaker 5: paid by a new data center developer, we're expected to
Speaker 5: bring in over one billion dollars in state and local
Speaker 5: taxes the next fifteen years. Taxes going to the county
Speaker 5: Board of Education last year covered the equivalent of some
Speaker 5: half a dozen teachers salaries.
Speaker 4: Then there's a split between that view and people who
Speaker 4: live around there who don't want big new transmission lines
Speaker 4: going through their yards. They don't want big three Walmart
Speaker 4: stacked on top of each other size data centers. They
Speaker 4: don't want all of that around them. So, yeah, there
Speaker 4: can be a lot of conflict in these communities.
Speaker 5: When you look at projections for the growth of AI
Speaker 5: data centers, what do they illustrate and what is that
Speaker 5: likely to mean for the cost of electricity in this country.
Speaker 4: Think it's something that needs to get figured out. Utilities
Speaker 4: are working on it. They can't have their customers and
Speaker 4: their regulators and politicians angry at them. Big tech similarly
Speaker 4: very attuned to what people think of them. That's why
Speaker 4: there's a lot of conversations and a lot of push
Speaker 4: right now to figure out how to charge data centers
Speaker 4: for both the power that they're using and the infrastructure
Speaker 4: that has to be built to supply their data centers.
Speaker 5: In the meantime, Kevin Stanley is doing his best to
Speaker 5: deal with higher electricity bills.
Speaker 3: You know, they talk about upgrading to greed and this
Speaker 3: and that, but we don't see it, especially when you're
Speaker 3: dealing with low income people or working class people. They
Speaker 3: have to feel something. It has to be more tangible.
Speaker 3: You would tell people what is a data center? Say, well,
Speaker 3: what is it? But just surviving.
Speaker 5: This is the Big Take from Bloomberg News. I'm David Gerra.
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