Artificial Intelligence data centers are putting increasing strain on electric grids in the US and around the world, the International Energy Agency reports. The demand for electricity by data centers will exceed 1,000 terawatt hours by 2026, according to an IEA report. Later in 2024, plans to expand the US electric grid will increase capacity by about 550 terawatt hours, intended for general energy consumption, not specifically for AI data centers.
From 2020 to 2023, the average retail price for electricity in the United States increased from $10.59 per kilowatt hour to $12.72 per kilowatt hour, about a 20 percent rise. According to the Federal Reserve, lower-income households are most affected by increasing energy costs.
According to economic laws of supply and demand, increased demand for electricity puts upward pressure on prices. The demand from AI data centers causes electricity prices to be higher than they otherwise would be.
Amazon, Microsoft, Alphabet, and others are building data centers that draw increasingly large amounts of electricity. Pankaj Sharma, Executive Vice President of Schneider Electric’s data center division, told Ars Technica that “Demand for data centers has always been there, but it’s never been like this.” Appleby Strategy Group Chief Technology Officer Daniel Golding said, “One of the limitations of deploying [chips] in the new AI economy is going to be… where do we build the data centers and how do we get the power.”
In late May, Duke Energy signed initial agreements with Amazon, Google, and Microsoft to supply them with electricity. Duke Energy provides electricity to 8.4 million customers throughout the US South and Midwest. A report for their North Carolina residents details a 14 percent increase in electric costs through 2026.
Speaking on the Lex Friedman podcast, Elon Musk said, “We have a silicon shortage today, a voltage step-down transformer shortage probably in about a year, and then just electricity shortages, in general, in about two years.”
He added that demand for electricity for vehicles and heating will be more than the demand for electricity by AI in the short term but included AI as a factor that “will obviously lead to an electricity shortage.”
In March, reports detailed a Microsoft and OpenAI project to build a $100 billion data center, speculated to be powered by nuclear energy.
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