Stop and Smell the Ocean
Because it might be boiling soon.
In the current sea of information where we all find ourselves swimming, it’s important to take stock of what’s happening around you. Not enough of us are aware or have the time to understand the financial leverage that is being applied at scale across this country and around the world. Which brings us to Data Centers and your power bill.
A new report was recently released by Lawrence Berkeley National Laboratory on the current pricing of retail and commercial electricity. This work was funded by the Office of Energy Efficiency and Renewable Energy at the U.S. Department of Energy under Contract No. DE-AC02–05CH11231. The results are surprising. From the report:
“A notable finding relates to customer load. Recent industry discussion has centered on concerns that load growth has or will push electricity prices upwards… Contrary to these concerns, we find that rising state-level load in recent years (through 2024) has generally been associated with overall price reductions…”
Factors influencing recent trends in retail electricity prices in the United States Ryan Wiser, Eric O’Shaughnessy, Galen Barbose, Peter Cappers, Will Gorman
Come again? We wonder where these people live. While their collective conclusions might be true on a super macro scale, they seem contrary to what people are experiencing, particularly on the west coast of the United States, and most notably California.
It turns out that if you live in a state implementing RPS (Renewable Portfolio Standards), namely most of the west coast and New England, then you are probably enjoying substantial price increases over the past five years. This is all due to the nature of these programs. On the positive side, innovations can be deployed without necessarily changing the rate structure for all consumers. The downside: there is a decoupling of rate structures from cost structure that by nature obfuscates the real costs associated with new programs like renewables, e.g., wind, solar, etc.
Sound familiar? Well, it should. This ‘decoupling’ logic is the same for Medicare, The Affordable Care Act, and behind the meter solar energy panel programs.
As RPS penetrates deeper into the United States, it will create even more upward pressure on rates across the board in our view. There is no free lunch with infrastructure; eventually someone is going to pay. Having seen this scenario before, many large tech companies are getting out front of the issue, namely Microsoft, Amazon, and Oracle. Might sound surreal but consider this:
” Constellation energy announced that it has plans to reopen the plant (yes that plant – Three Mile Island) and signed a deal with Microsoft. The company will purchase the plant’s entire electric generating capacity over the next 20 years. They plan to call it The Crane Clean Energy Center. https://www.technologyreview.com/2024/09/26/1104516/three-mile-island-microsoft/
We might have short memories here in the USA, but we think many remember the disaster of 1979. Reflecting on my old school days and all the talk about the nuclear winter about to engulf the entire country – we were just hoping to get out of class. Not sure who is smoking more clean green, Satya’s crew at Microsoft marketing or Joe’s team at Constellation Energy. It would be fantastic to read the indemnification policy on that one. What’s next, maybe Fukushima or Chernobyl could find incentives to restart their operations?
And then you have the Bookstore / US channel for Chinese Online Retail / Prime Media Empire / Celebrity Space Force / CIA Cloud Computing juggernaut, Amazon purchased a data center next to the Susquehanna nuclear power plant. Jeff is apparently back from his pre-honeymoon/honeymoon/post honeymoon ‘festividades’ and working with Andy to map out the new tax-free monopoly money strategy for Data Centers, including Data Centers in space. Reports say they won’t be getting all the Susquehanna output though.
Then again, they won’t need it because they are investing in another ‘opportunity’ on the west coast close to the sleepy town of Richland, Washington. Besides, that sounds better than saying Hanford. But yes, they just signed up their startup X-Energy with the State of Washington to build microreactors at the Hanford site, one of the two original sites (look out Tennessee you’re next) known historically for ‘enrichment’ of Plutonium associated with the Fat Man atomic bomb. Nice and close to the Columbia River which flows tirelessly into the Pacific. What could go wrong, again — is the river glowing yet? Everyone knows that Hanford has been emitting greater and lesser degrees of seep since 1947.
And not to be outdone, and completely headed in a different direction, you have Oracle, the brainchild of tech elder Larry Ellison – the Warren Buffet of the tech industry Larry keeps things down to Earth. Oracle is in partnership with several groups to deliver low emissions and reliability to its AI Cloud Infrastructure. Volta Grid will do the load balancing and Energy Transfer Partners will provide a ‘supply line’ of Natural Gas generated power to Oracle. Oracle seems to be obsessed with creating an energy arbitrage system with energy providers across the US – guess Oracle had a bad experience with the local power company’s ChatBot when they tried to negotiate better rates.
The dirty secret about all of this is that Data Center investment really means that you and me and everyone else who pays taxes will pay for a lot more for this new energy infrastructure one way or the other. The most direct way is through our rates as utility customers. The indirect way is through the subsidies and tax credits these plants receive from Uncle Sam, for example via the Biden era Inflation Reduction Act.
It is true, the US energy generation and distribution systems are generally not up to modern expectations. Personally, I want my AC to work when it’s hot. Not enough power to go around is not good for our business either. To his credit, Lee Zeldin is big on transparency over at the EPA and is attempting to loosen some of the regulatory chains put in place which do protect some environments but quite frankly went too far and stifled modernization and innovation for large scale base load power. We have stated our views in prior posts that as a country we need all the energy sources and renewables working in concert to make the tech resurrection a reality.
We cannot use pretend electricity and deliver real AI. We have only begun to pay, and we need to be honest about that. The question becomes, should individual consumers pay the bulk of these modernization costs, or should the Tech Bros be stepping up to pay more? Who stands to benefit the most is probably a good starting point in the analysis.
We are all sailing on this collective ocean in a leaky boat. Capitalism is good at plugging holes. Nano Nuclear just started digging theirs in Illinois – hope it turns out ok. Let’s make sure we aren’t a ship of fools.