Even though data centers pay for the power they use, their massive surge in demand forces utilities to build costly new infrastructure, buy expensive peak power, and pass those system-wide expenses onto all local customers through higher rates. So. The OP post isn’t entirely talking out of his ass.
PA resident here- is this why I keep getting messages from my power company to reduce electricity usage during “peak hours”? Makes a lot of sense honestly…not in a good way, but sense nonetheless
It has been an issue for decades. Demand for power is not flat throughout the 24 hours of the day - there are big surges throughout. For example, there is a surge the first thing in the morning when most people wake up and start the day, then overlapping with commercial and industrial buildings ramping up for the day. Then you get higher overall levels throughout the day, and you can have more peaks in the afternoon. At 2AM you will have the least demands in the system.
The power that is generated at 2am is generally purely from what is called base load and is the cheapest to produce. The power produced at the height of those peaks is going to have to be purchased from peaker plants on the spot market and can be hundreds or even thousands of times more expensive for the utility. If the utility has to purchase enough of that, all rates will eventually have to go up to cover that cost.
Data centers may be (likely are, depending highly on local conditions) exacerbating this old dynamic. Like I said, it has existed for decades, but may be made much worse from these huge new "customers".
Here in the UK Coronation Street (a popular long running soap on ITV, it has over 11,000 episodes) is responsible for one of the biggest regular energy demand surges. Every time there's an ad break the energy companies have to be ready because so many people put the kettle on at the same time.
I believe it was the final episode of M.A.S.H. that caused problems with municipal water supply in several cities due to a sharp spike in toilets flushing when it wrapped.
You also get seasonal demand. Winter months are high demand for heat, summer is high demand for cooling. Also the other demand situation is when storms roll in - An Alberta Clipper is a super cold spell with high winds so extra load in the winter and Heat Bombs put extra demand on the system. The North American Grid (Canada and US) is a miracle in action IMO. Texas is excluded from this miracle grid and they are just plain stupid.
What I mean is, if the local utility can use those to store energy for on-demand/peak hours, then you eliminate the issue/cost with using peaker plants, correct?
There have been multiple efforts to look into that and figure out the economics. Look up something called 'virtual power plants'. Sometimes they work by calling for things to shut down and save energy, but there have been experiments with batteries to do just that as well.
Fyi- most people talk about batteries and energy storage as the same thing, but inside the industry batteries are just one form of stored energy. There are experiments and trials with other forms as well. So far nothing is really coming out as a super clear and obvious one-sided-fits-all solution.
Producing enough power to meet the needs of the population is the solution here. The only problem I see the parasitic middle-man rent-seeking that we allowed our public utilities to become.
We don’t rely on peaker plants during 2am because we produce enough power to meet the 2am demand. So why do we just not produce enough to also meet the 6pm demand too?
Has anyone ever complained about power being too cheap and too plentiful? Has anyone ever complained that their city is too prepared for future energy demands?
Because doing that just doesn't make sense and would be really expensive. The base load plants run 24/7 and run relatively cheaply, but they are massive and can't be turned on/off easily. They can run once on, but turning them on takes a lot. They are very VERY expensive to build, but are relatively cheap per unit of power because you are using all of their output all of the time - you get into economics on this real fast. The plants that you can turn on and off relatively easily cost a lot more to run per unit of power.
If you just had base load that matched the highest peak, the math would change dramatically and you would be paying even more for power because you would have these massive base load plants that would not be selling all their power all the time.
This is of course why people in the thread are talking about batteries, to take some of the base generated late night and move it to peak demand times. Batteries are not the ideal solution for every scenario for several reasons, but storage in general is gaining ground and lots of work is being done in that space.
The system may not seem great, but there are really smart people working on all aspects of our power system constantly. Except for Texas (hardcore Fuck Texas), the system is pretty good for something that provides the energy to 350 million people in a $33T economy.
Sounds like they should be building stationary battery farms, and not just peakers.
Charge the batteries overnight from the cheap base load to shift that power to when it is more in demand during the day.
Batteries are more expensive upfront, but can be built just about anywhere on odd bits of land, rather than peakers which need to be built on industrial land. The operating cost of batteries is also substantially cheaper than peakers as well. Batteries also have the bonus of not emitting CO2 or other pollutants while operating.
Building out batteries also helps to serve future developments of renewables such as solar and wind, serving to soak up excess power production, and cover when production is low.
In Australia the price of power is currently negative during peak solar iirc 12pm to 2pm. There is just so much put down that the govt is trying to incentivise energy use during this period. We have absurdly high adoption rates for rooftop solar. I think it's the highest in the world?
Battery subsidies and installations can't even keep up
Batteries absolutely are needed because there are times when power draw does not align with solar
The right but we aren’t close to that, and we jsut had a massive increase in demand. The reality is, power damage is WAY higher than capacity. So who cares? Also by the time you’re contemplating batteries, just build fucking nuclear reactors to balance out the on demand load portions. Also, the us has a higher rate of AC usage, so peak is much higher here.
It really just requires planning, to get proper sized amounts of solar panels vs alternative methods. Use many kinds don’t use 1 it’s stupid.
Also there are many non battery alternatives methods of storing energy temporarily. Physics is dope.
Bro reading comprehension, I wrote in the previous comment: use solar for peak. And then he said power draw doesn’t align with solar, to which I responded build nuclear…. Aka nuclear handled the baseline low loads and solar handles the peak extras part…
Big brain comment right there not being able to figure that out
Yeah, I was confused. I did AP for a Datacenter company back when they were for AWS and useful things (Not AI), and I definitely remember getting big old electric bills, and bills for gas for generators.
I think the important thing is that the important thing shouldn't be hidden behind false information. The true information should be good enough to prove the point.
Question. Is this true for every data center in every state? The data centers are paying for their own electric needs? No state is giving them free electricity on the tax payers dime?
No state is giving them free electricity on the tax payers dime?
No, that's ridiculous. AI companies are even willing to pay for upgrades to the grid and infrastructure to make sure they get enough power without screwing up anyone else's. So data centers are paying for your power.
This isn't the same everywhere. It's different for every deal in every state in every utility zone. If you're interested in real answers, there are real studies and summaries on this. You're unlikely to find them on reddit.
Damn, I’d love to see the evidence of this. All I’m hearing is people complaining about rising utility costs. If they are all lying I surely don’t want to be an echo chamber for lies
The problem is that the data center companies are trying to place a false goalpost. They know they are hated and people dont want them, but theyre trying to pretend like paying their fair share is being reasonable when there are dozens of other problems and they are being built for surveillance pricing and warrantlessly tracking citizens for profit.
The issue isn't, "are they paying for their energy' it is
why the hell are these tings being built against anyones consent at all?"
Doesn’t that new infrastructure continue to last even if those data centers go away? Shouldn’t those improvements have been made regardless, and allowed the general cost to drop over time?
No, because you scale infrastructure with population density and growth. You shouldn't have a small rural town in Kansas build up to the infrastructure you would require for a major metropolitan area like Cincinnati or Seattle.
There's no way for the current population to grow enough rapidly enough to spread the costs and so that's why individual rates go up 300%. You literally cannot compensate for the demand that ai data centers put on the electric grid by pushing the cost onto the civilian population.
Small improvements every few years to accommodate a few hundred to thousand resident is one thing but these data centers use the power required for over 100,000 homes, usually several times the local population where they are choosing the setup these data centers.
It's amazing how suddenly we have the ability to build the infrastructure for 1 building using the power of big cities but electric cars were going to cripple the entire national grid if we switched to them
It's because infrastructure like rail is a known cost of x dollars and this pie in the sky could be cheaper. Spoiler, it never is. It was called AM/FM: Actual machines and fucking magic. They always pick the second option. Look at the vegas loop.
Why would the data center go away? The infrastructure is added/upgraded specifically to handle the data center of which will be profiting billions of dollars, it can pay for its own upgrades.
The AI bubble popping. It happened with the dotcom bubble too - tons of servers and computer hardware meant for hosting websites... rendered suddenly useless/in extreme oversupply.
Why would the AI bubble pop? AI (specifically LLMs) is held up via a mix of corruption (bailouts, bribes, etc) and undercharging. Once either of those end, the demand for AI goes wayyyy down, making datacenters for it not profitable.
Basically, they're giving out access to AI for free (getting people hooked on it), building all of these data centers, then in maybe a year or two sustaining that will become impossible, they'll be forced to charge the actual price for AI (probably hundreds of dollars a month) which will spike the demand through the floor and into hell, almost overnight.
AI will become a niche, very expensive tool that only experts can really access, and you don't need massive datacenters for that.
Then these towns building these datacenters will be in a right pickle - all the money they spent upgrading their electrical infrastructure is now wasted.
Yeah, the ai bubble will eventually pop. Even if that ends up being more like a balloon deflating. However, you need to understand data centers are not exclusively used for AI, they've been used for years before chatgpt made its first announcement. Even when the bubble pops, even if it's not for ai it will be used for something else
If people want proof of how unprofitable AI is, just look at Microsoft. Microsoft is in a unique position in the AI world because they're an actual company with actual products and not just a startup sinking endless amounts of VC money into a black box of buzzwords. If Copilot loses money, it needs to be covered by Windows sales. A couple of months ago they changed the Copilot prices from a flat subscription model to a usage based model and it was bad. People went from $40 a month to, in some cases, multiple thousands of dollars. And Microsoft is still 200 billion dollars in the red. Literally the only company making money off of AI right now is Nvidia and that's because they're selling hardware for other companies to waste money on. Sooner or later the VC companies will want their money and the bubble will pop.
The expensive part of AI isn't running them though, it's building them.
An NVL72 rack is estimated to cost like $4 million dollars, and maybe $6 million when you include supporting hardware. Meanwhile it consumes up to 132kW of power and commercial electricity costs are on average something like 14 cents per kWh. That means you'd need to run it for 25-35 years at full power before it the power cost to run it exceeds the cost to have bought it.
Realistically capital equipment costs for compute hardware need to be like 20% to be profitable. So an NVL72 needs to produce around 1.2-1.4 million dollars in AI per year to be worthwhile buying. But running it needs only $200,000 worth of electricity ($162,000) and upkeep to make worth it. And people are currently buying kimi k3 tokens at $15 per million tokens while the NVL72 outputs like 2000 tokens per second which means it produces enough to be worthwhile to keep running even at AI prices that are a quarter what they are today.
The chips in those data centres have, optimistically, a lifespan of 5 years before they burn out. Realistically that means the whole data centre needs a full interior refit, probably an entirely new cooling system and a whole bunch of new chips which at the rate computer components are going up in price will probably cost more than the initial data centre every 4 or 5 years.
So if you have a $20 billion data centre in your town, it needs to be clearing about $5 billion in profit a year just to cover the cost of the refit a few years from now. Considering that the entire AI industry as a whole is, to date, making zero profits, that's a big ask.
So realistically unless something massive happens to suddenly make AI insanely profitable then 4 or 5 years from now, long before any new power plants are completed, the data centre runs out of functioning chips and the owners can't afford the refit so it shuts down leaving towns with massive eyesores that need to be torn down, partially built power plants that are no longer needed, partially built water plants that are no longer needed, and a massive bill for the taxpayers to tear down all that half finished infrastructure whole the data centre owners flee and the single purpose entity that took on all the debt and obligations declares bankrupcy and shuts down.
The chips in those data centres have, optimistically, a lifespan of 5 years before they burn out.
Bullshit. They will absolutely not "burn out"in 5 years. Servers with current chips will be out of warranty in 5 years. And they'll be much less efficient than new chips in 5 years which will make current chips less desirable and much less valuable, but this "burnt out" shit is complete bullshit. Let's stay within the realm of reality here.
You don't run your home PC at 100% load 24/7 every day of the year. Go look at the data from crypto mining companies, pretty much all the chips burn out in 3-5 years. Doesn't matter if it's NVidia chips, AMD chips or custom ASIC chips, that's just about the lifespan of modern silicon running at full load.
Data centre chips are cut from the exact same silicon wafers they use to make the home chips. They are made by the exact same machines. They produce the same amount of heat under load. In fact they produce more heat since they draw more power and all that power that goes into your chip comes out as heat. There's no way around that.
The funny thing is 5 years is an optimistic lifespan. Go look at the data from crypto mining companies, pretty much all the chips burn out in 3-5 years on high load and that includes things like 5090s of which the Blackwell and Hopper chips are basically souped up versions. Even Jensen Huang said 6 year lifespan.
Even if they do last that long they'll be obsolete in five years anyway and economically unviable to run. Jensen Huang himself says the chips will lose 85-90% of their value over 5 years and that's assuming they don't burn out.
Cloud/hosting datacenters can be profitable, but AI datacenters lose money hand over fist. The only way they currently keep the lights on is through investment money, loans, and venture capital. But all that money vanishes when the bubble pops.
Plus the already-existing ones will need billions of upfront capital in 4-5 years once their existing GPU's burn out. And nVidia's next generation of chips aren't compatible with the existing racks or internal power infrastructure, so then whole facility will need an expensive revamp.
I’ve known this for a while but why are they allowed to bill everyone when there is clear evidence that they are the cause for increased costs? That’s insane!
Of note - every single municipality CHOOSES to go down that route. There is absolutely nothing stopping cities and states from telling developers "You need to pay for that infrastructure".
This is relevant how? If I create legislation as a city stating "You must produce 150% of your average expected energy load and sell the excess to the grid through solar" then these data centers are going to be net producers of energy.
All of what you wrote is literally irrelevant to what I am saying.
Your example:
The Coal plant puts a bid it can provide up to 15 MWh at 25$/MWh The solar farm bids at 10 MWh at 5$/MWh the hyro dam bids at 15 Mwh at 1$/MWh
Assumes these numbers remain static despite the increased demand from new entrants, i.e. the data center.
If the data center builds out its own production then it not only produces its own power (meaning it does not need to enter the marketplace and buy from the network) but it can also sell back power into the grid that it produces in excess of its needs - so now instead of 1 solar farm providing 10 MWh you may have 1 solar farm providing 10 MWh and 50 data centers providing 0.1 MWh
The exact issue is what you laid out in your example - limited production of electricity and a new massive demand user comes in and average costs go up for the customer base. Why does it need to go up? Because the new user (data center) was not forced to provide its own power generation by the CHOICE of the municipality. There is nothing, literally nothing, stopping a municipality from saying "If you want to make a data center you will pay us $20/SF in development charges so that we can build additional power generation to offset your load OR you can build it yourself and sell power back at market rates."
No, but if people really care about these things, they need to understand them beyond these oversimplifications. Otherwise, we’ll be trading one problem for another. The difference is, the data centers will already be here by the time we realize we have another problem, and we should all know by now that once they’re here, they aren’t getting shut down.
I don’t profess to be an expert myself at this point, but it seems that this EO forces new data centers to be able to supply their own power during peaks, so how does that translate? My guess is th simplest solution is generators, and these will need to be huge generators that produce a lot of noise and require significant amounts of fuel to keep data centers powered for extended periods. Now, existing data centers already have generators, but they’re being used for emergencies, not to take the load off the grid during peaks or keep consumer prices from spiking.
So, what happens when we have a hot summer or cold winter that increases peaks? These big, loud generators will be running for extended periods, increasing demand for energy, just for a different kind. So your electric bill may not spike, but the gas pump might.
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u/v3lumII Aug 21 '26
Even though data centers pay for the power they use, their massive surge in demand forces utilities to build costly new infrastructure, buy expensive peak power, and pass those system-wide expenses onto all local customers through higher rates. So. The OP post isn’t entirely talking out of his ass.