Jul 23, 2025
Data Center Power Demand Soars—But Who Should Foot the Bill?
Data centers are notorious power consumers. Even before the advent of artificial intelligence (AI) and deep learning, data centers were among the most power hungry of all customers. Their power needs only grow as AI grows. Who is going to pay to keep data centers online?
That is the big question even as U.S. energy companies are poised to spend a record $212.1 billion this year alone. According to data cited by the Financial Times, 2025 spending will eclipse its 2024 counterpart by more than 22%. Compared to a decade ago, 2025 spending represents a 129% increase. And in two years? Total investments could be closer to $228 billion.
All this investment is necessary to keep the digital world humming. We have reached a point of no return thanks to our insatiable appetite for both the traditional internet and the internet of things (IoT). But utilities are facing a very real problem: passing all the costs of new infrastructure investments to consumers will not fly. So who is going to pay the bill?
The Regulation Quagmire
Decades ago, utilities became state regulated entities hoping to insure equity for both consumers and commercial interests. Utilities were granted state monopolies in exchange for subjecting their pricing to regulators. As you know, utilities now must have all rate increases approved by the state before being implemented.
The costly infrastructure necessary to satisfy data center power consumption leave utilities scrambling financially. Undoubtedly, they are going to ask their respective states for rate increases in the coming years. States will undoubtedly grant those rate increases. But they will be reticent about the size of any such increases.
Regulators are only going to be willing to go so far. At some point, they will not allow consumers to keep bearing the entire cost of building new plants and putting up new transmission lines. So that leaves utilities with one of two choices: eat the losses or find a new way to pay for upgrades.
New Tariffs on Hyperscalers
One idea currently in the pipeline is to create new tariffs for hyperscale developers. These would be companies like Microsoft, Amazon, Meta, and Google. Their new data centers are designed to power their operations, so the demand they place on energy production should be borne by them. At least that is the prevailing theory.
If new tariffs on hyperscalers are a good idea, then why stop there? Why not charge all data centers a higher rate based on consumption? Both data centers and hyperscalers would still pass along increased costs to their customers. But at least consumers would have the opportunity to participate or opt out based on the services they buy.
Not a Simple Question or Answer
The truth is that who pays for higher power consumption is not an easy question or answer. We have built a patchwork power grid over the last hundred years. What happens in one state can affect power generation and distribution in multiple states. So it is not as simple as saying to a company like Google, "you have to pay more because of your data centers."
Our industry must now wrestle with the fact that data centers are consuming ever more power. We need to build more plants and infrastructure to support those data centers, and someone needs to pay for all the construction. One thing is clear: consumers cannot bear the entire cost themselves. Their bank accounts and wallets are not bottomless. Somehow, those consuming all the energy need to bear some of the responsibility for paying for it.
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