This past week, Bloomberg News published an analysis of energy prices around the country, specifically how they are being driven up by the use of Artificial Intelligence (AI) and the data centers necessary to enable it. Data centers require power—lots of it—and so, it appears that their construction and utilization are driving electricity prices sky-high.
A Bloomberg News analysis of wholesale electricity prices for tens of thousands of locations across the country reveals the effects of the AI boom on the power market with unprecedented granularity. The locations and prices were tracked and aggregated monthly by Grid Status, an energy data analytics platform. Bloomberg analyzed this data in relation to data center locations, from DC Byte, and found that electricity now costs as much as 267% more for a single month than it did five years ago in areas located near significant data center activity.
That’s a big jump in energy prices, and since data centers are expected to proliferate, it’s probably only the beginning. Based on Bloomberg’s analysis, electricity prices are likely to rise even further, even faster, over the next few years. This is bad news for consumers, for politicians, and even for those leading the AI revolution. After all, no one wants to be singled out as the sole reason that Americans are forced to choose between keeping the lights on and going on vacation…or retiring…or eating…or whatever. That’s an awful burden to bear.
Of course, Bloomberg being Bloomberg, this news analysis doesn’t exactly tell the whole story. Fortunately, Mario Loyola—a professor at Florida International University and a senior fellow at the Heritage Foundation—offered a corrective in the Wall Street Journal recently. He noted that “Electricity costs nearly three times as much in states with the strictest renewable-portfolio standards as in those with none,” and that “Demand from AI isn’t the problem—artificially constrained supply is.”
In response to the Bloomberg analysis, the good folks at ZeroHedge, the north star of contrarian financial and news analysis, reposted a chart of rising energy prices, as well as a tweet/X-post from August in which they predicted that “between exploding electricity bills and lack of jobs for grads, a new Luddite revolution is coming—they will be burning down data centers within a year….”
Far be it from me to go contrarian on the contrarians, but Loyola’s conclusions demonstrate that while ZeroHedge sees the problem and understands its seriousness, it also has the causation backwards. Again, “Demand from AI isn’t the problem—artificially constrained supply is.” Or to put it another way: the skyrocketing cost of electricity isn’t going to spark a Luddite revolution. Rather, it has been sparked by a Luddite revolution. The supply of energy in this country isn’t artificially constrained because we lack resources or opportunities to build out more capacity. It’s constrained because we, as a society, decided some sixty-plus years ago that we wanted to constrain the supply intentionally in order to assuage our collective guilt and “save” our planet from becoming unfathomably wealthy and able largely to end hunger and poverty as they’ve existed throughout human history.
Unlike David Hume, the architect of the Scottish Reformation, I don’t believe in a “science of man,” and I think that the pursuit thereof has caused far more trouble than it’s been worth. That said, I do think there are a very limited number of things that one can say for certain about man and the institutions he has built over the course of his few thousand years on earth, and among these are the following:
- Economic growth and technological progress are inseparably connected. One enables the other, which facilitates the other, which, in turn, produces the other, etc., etc., ad infinitum.
- Both economic growth and technological progress are contingent upon cheap and abundant energy.
The conditions that permitted England (and then, the rest of Great Britain) to industrialize rapidly, to become an economic giant, and quickly to evolve into the first modern global superpower were innumerable, but among the most important was the country’s quick and easy access to unusually large stores of coal. Likewise, the United States was transformed from a massive, predominantly rural and agricultural nation into an economic, military, and industrial powerhouse practically overnight, in significant part because of the easy access to the world’s largest stores of bituminous coal in its mid-Atlantic and Appalachian regions. The Soviet Union industrialized quickly—despite its embrace of a backward, economically illiterate ideology—because of its access to huge stores of coal and oil. Saudi Arabia is a global economic lynchpin, rather than an austere religious backwater, because of oil. And on and on it goes. Energy is—and always has been—one of the most significant drivers of… well… everything.
As Loyola points out, “China is also experiencing an AI data center boom, but its electricity is getting cheaper. While overregulation shuts down badly needed coal plants in the U.S., China is building them as fast as it can.”
In the West, the environmental movement (and its successor, the “sustainability” movement) has thrived mostly on “belief” rather than science. Although “scientific” in a broad sense (or scientistic, if you prefer), the larger environmentalist agenda has always been of dubious merit at best. Regarding energy, both the public and private sectors embraced agendas based almost exclusively on utopian promises, the practicability of which virtually no one in either camp was qualified to assess. These promises, which guaranteed results that were always literally unbelievable, were evaluated far less skeptically than they should have been and were adopted primarily in response to naïve and occasionally misanthropic political pressure.
I have long referred in print to Greta Thunberg as a millenarian or a modern-day Gnostic. I have also referred to her as a “turnip.” The point in any case is that she is a religious figure, the embodiment of a dark, postmodern spirituality that eschews God but nonetheless promises eternal (if earthly) salvation. She’s not a scientist or even, for that matter, a humanist. She and her ilk would gladly crack more than a few eggs to make their environmental omelet. They are the leaders of the contemporary Luddite revolution. They didn’t start the fire, of course—Rachel Carson did that. But they are the ones who enabled it to burn and loosed it upon the West to consume its economic potential.
Gen-Zers have every right to be angry. And next year, as electricity prices continue to soar and new, good jobs remain scarce, they will, as ZeroHedge predicts, probably be looking for someone to blame. If they really want to address their problems, though, they’ll blame the Luddites, not join them.