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The rapid proliferation of services powered by artificial intelligence, ranging from the genuinely useful to the frivolous to the unnecessary, has a common element: the need for vast amounts of electricity and water for the data centers that make them possible.
In the last two years, hundreds of so-called hyperscale data centers have been built across the U.S., straining the ability of utilities to provide them with the power they need to run and water to keep them cool. In New Carlisle, Indiana, for instance, an Amazon-owned complex of data centers operated by Anthropic already needs at least 500 megawatts of electricity, enough to power hundreds of thousands of individual homes, according to The Atlantic. When completed, the sprawling facility will use as much power as two Atlantas, the story estimates. Until recently, such facilities, typically in rural areas or small towns, were generally well received, seen as a sign of local progress despite the fact that they create relatively few jobs or economic benefits.
But amid spiking household electricity rates–up nearly 10% this year, largely due to data centers–things are starting to change. More communities are realizing how much they strain existing infrastructure, and across the U.S., including in Arizona, Virginia and Ohio, there’s local pressure to slow or halt new data centers. A survey of New Jersey voters finds that a majority want the facilities to pay higher energy rates, while a Wisconsin poll finds most voters don’t think data centers provide sufficient benefits to offset their cost.
That challenge is further complicated by the Trump administration’s bewildering reversal of federal incentives for large-scale renewable power projects, including solar and wind farms with battery storage. Such facilities that are already in the pipeline will be built through at least next year, but the policy shift means the outlook for cheap new sources of electricity will taper off later in the decade. That’s a problem because they are faster to build and cheaper to operate than natural gas or coal plants. Promising geothermal power projects, which still have federal support, could be integrated into data centers but are mainly in the early planning stage. Next-generation small nuclear reactors or even clean fusion power could be carbon-free energy gamechangers, but neither is likely to be in widespread commercial use for years.
A survey by Sunrun, the top U.S. installer of residential solar and battery systems, underscored the growing concern Americans have over rising power prices and data centers. Of the 1,000 people interviewed, 80% are worried that data centers will keep driving up residential power prices.
Wealthy tech firms like Google, Microsoft and Amazon may work to solve the problem by investing far more aggressively in their own dedicated clean power facilities. But for now, maybe we should all try to use ChatGPT less, make fewer AI-generated videos and look things up on human-curated Wikipedia instead of Grokipedia, Elon Musk’s AI-powered energy hog.
The Big Read
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Why Electric Cars May Soon Become Cheaper Than Gasoline Cars
For years, electric vehicles were the privilege of the few—high-tech, high-priced symbols of the future. But that future just hit an economic reset. Across the U.S., Europe and China, a quiet revolution in pricing is underway in which the average cost of an EV is falling faster than at any point in the past decade. Industry insiders are calling it the EV price collapse—and for the first time, electric cars could soon be cheaper to buy than their gasoline counterparts.
At the heart of the shift lies a perfect storm of three forces: the prices of raw materials like lithium and nickel have plunged by more than 60% since their 2022 peaks; Tesla has triggered a global price war with aggressive discounts; and Chinese automakers like BYD and Zeekr are flooding markets with affordable, feature-rich models. Chinese exports of “new energy vehicles,” including EVs and plug-in hybrids to regions such as Europe, jumped 100% to 222,000 units in September, according to a report in Automotive News.
The result? Automakers from Detroit to Tokyo are slashing margins and rethinking production strategies to stay in the game.
Dealers are also feeling the chill. “We’re seeing EVs that once sold at a premium now sitting longer on lots,” says the automotive site carcoachreports. “Buyers are realizing they have leverage again.”
Read more here
Hot Topic
RJ Scaringe, Rivian CEO and founder, on the challenge of being competitive with China in EV technology
The U.S. reversal in policies that supported electric vehicles has led some carmakers to trim their lineups and slow plans. Isn’t that risky given China’s EV dominance?
In the long term, for sure. I’ve said it many times, but I think for the benefit of society, putting aside any sort of attention being paid to just the strength of a country, but from a societal, global citizen point of view, competition is a good thing. Choice is a good thing. If we are truly committed as a planet, which unfortunately we aren’t, to the idea of reducing our carbon footprint, choice is important.
How do you assess Rivian’s ability to compete globally with the Chinese?
When I look at China, I think it’s important to separate two very different topics that have different implications. The two topics are cost and technology. Cost gets a lot of attention, and it’s extremely important. I wish more people would talk about this. It’s very explainable. It’s not magic.
You have two major drivers that have allowed Chinese manufacturers to produce vehicles at a much lower cost than the rest of the world. It’s not that they’re built differently. … The two major differences are, first and foremost, across the entirety of the supply chain … all the way up through the manufacturer, you have extremely low costs of capital and often zero cost of capital. A lot of subsidies are provided–for land, plants and plant equipment. That’s completely different than the rest of the world. Certainly, I wish in the United States, if we decided to build a plant, the whole plant is paid for not as a loan, but is just paid for. That doesn’t exist. But that’s very much the way business is working in China. And it’s both at a federal level or the equivalent of a federal level and at a local level. Large provinces will make decisions to invest in and support their vehicle manufacturing business. So that’s number one, very low cost of capital.
The second is the extremely low cost of labor. Those are two very big differences. And when you compound them across the supply chain and across the raw material base all the way up through the vehicle, you end up with cost structures that look magical. But it isn’t magic, it’s just those two things compounding and the benefits of a stacked set of compounding benefits is what we see resulting in cars that are maybe half the price of what you would think they would cost.
The important thing to point out is that those two dynamics exist uniquely in China. They’re not transferable. So if you were to produce the exact same car in the United States that China’s manufacturers are producing in China, you don’t bring the low cost of labor to the United States. Your labor cost is maybe it’s 1% or 2% different depending on which state you put it in, but you’re going to be paying very much what Tesla or GM or Ford are paying for labor. And your cost of capital, unless the Chinese government is finding a way to funnel money over to you, is going to be very similar. So your CapEx, your cost of capital, doesn’t look very different.
What’s inconceivable to me on this point in the United States, now this may be a little different than Europe, it’s inconceivable to me that the U.S. government would allow Chinese vehicles to come in with those two very distinct benefits into the United States without tariffs.
Now the second point is technology. … I think the challenge that really exists is the tech, and for a lot of reasons that are similar to why Rivian and Tesla have a very different technology topology from every other Western manufacturer. You have similar dynamics that exist for a small subset of Chinese companies. … There are more than a hundred Chinese manufacturers, but only between five and 10 of them, more than five, less than 10, let’s call it, have very advanced technology platforms.
So you have two platforms outside China, and you’ve got more than five, less than 10 in China. I think every vehicle manufacturer in the world, if you want to continue to exist at scale, we are at this inflection point now where you can’t brute force your way through the old system. … In the fullness of time, by the mid-2030s, it’s inconceivable for a manufacturer not to move to a software-defined architecture. I think everybody’s going to make that transition and either do it themselves or do it through a licensing arrangement like what we did with Volkswagen Group or shrink. It’s one of those three choices. And that’s the part that I think is quite concerning for the auto industry because it hasn’t, as an industry, proven an ability to really lead in electronics design or software development.
What Else We’re Reading
Climate change to drive U.S. migration, change regional makeup (Seattle Times)
Drilling companies want to explore for hydrogen in Minnesota’s Iron Range (Minnesota Star Tribune)
Batteries are set to surge onto the U.S. grid. The transition to renewable energy — particularly solar — relies on energy storage (Canary Media)
Respectfully, Bill Gates should shut up. The tech billionaire used to be a fierce climate advocate (Slate)
U.S. Energy Department pushes regulators on connecting data centers to the grid faster (Reuters)
Elon Musk’s partisan politics cost Tesla over 1 million EV sales (Yale School of the Environment)
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