The Answer to AI’s Power Problem? Free Markets

 Artificial intelligence (AI) companies are facing a critical issue: the growing demand for electricity. Although these businesses are thriving, they must find ways to cover their electricity needs without burdening consumers. A recent consensus emphasizes that AI firms should fully bear their energy costs to promote innovation and affordability.

• Electricity Demand Struggles: AI companies electricity needs are rapidly increasing, with projections indicating a potential doubling or tripling by 2028, causing concern for energy affordability.

• Bipartisan Agreement: President Trumps National Energy Dominance Council suggests that AI data centers must pay for their electricity usage, supported by bipartisan leaders from all states within the PJM Interconnection grid.

• Current Regulations: Existing regulations, including the Inflation Reduction Act and state-level Renewable Portfolio Standards (RPS), put restrictions on energy procurement that raise costs. These should be reformed to allow for cheaper energy sourcing.

• Energy Sources: To lower costs, data centers should be able to access various energy sources, especially natural gas, which has proven to be significantly cheaper than alternatives.

• Permitting Reforms Needed: Legislative changes are necessary to streamline the lengthy permitting processes that delay the construction of energy infrastructure and increase costs.

• Encouraging Innovation: By forcing AI companies to absorb their electricity costs, firms will need to innovate, finding new energy-efficient solutions. Some companies are already exploring direct energy agreements and advancements like quantum computing to reduce energy consumption.

Reducing regulation and ensuring that AI firms take responsibility for their energy costs is essential for fostering innovations and enhancing power affordability. By allowing market forces to guide electricity supply for data centers, both the industry and consumers could benefit significantly. 

https://www.city-journal.org/article/artificial-intelligence-data-centers-electricity