The rapid expansion of data centers, those massive facilities that fuel cloud computing, AI, and social media, is placing significant pressure on utilities to meet rising energy demands. As tech giants like Amazon, Google, Meta, and Microsoft increase their reliance on these data centers, the effects on electricity consumption are becoming increasingly clear.

In 2023, data centers represented nearly 4.5% of U.S. electricity use, with expectations that this figure will soar to 12% by 2028. Wisconsin, in particular, has seen a rise in data center proposals, including major projects from Microsoft and others in cities like Beaver Dam, Wisconsin Rapids, Port Washington, and Kenosha. Microsoft's $3.3 billion, 450-megawatt campus in Mount Pleasant is one such project, though its construction has been delayed twice since groundbreaking in 2023.

Ari Peskoe, Director of Harvard's Electricity Law Initiative, discusses the growing issue of how these data centers are affecting utility rates. “Our electricity use had been basically flat for the past 15 years, and now suddenly that’s projected to change pretty dramatically and pretty quickly. And it’s data center growth that’s really leading that charge,” Peskoe explained. He noted the immense energy demands these facilities place on the grid, with a single data center capable of using as much electricity as a large city. “There’s a facility in Louisiana that’s being built now that may be as much as two gigawatts. The city of New Orleans is one gigawatt,” he added.

In their push for these developments, states and utilities often offer incentives to attract Big Tech, including discounted power rates. However, these agreements are often kept secret, raising concerns about who ultimately bears the cost. Peskoe and his colleague Eliza Martin reviewed nearly 50 utility proceedings, uncovering how data centers could be benefiting from significant infrastructure investments, with utilities potentially passing the costs onto ratepayers.

“Utilities benefit from it a lot,” said Peskoe. “But we think that doesn’t really make sense when, in some cases, there are billions of dollars of infrastructure being built for a single wealthy consumer.”

As these projects ramp up, questions arise about whether the public will end up shouldering the burden. “There ought to be some mechanism to ensure that the potentially very expensive infrastructure being built for these facilities is not being paid for by the public, but by the data center,” Peskoe argued.

In some states, regulatory frameworks are starting to address these issues by pushing for more transparency. Peskoe suggests including data centers in rate-setting processes to ensure that they bear their fair share of infrastructure costs. “Let’s do a more public, transparent process that encourages and allows for more participation,” he said.

Peskoe also raised concerns about the environmental impact of the growing demand for energy. With natural gas plants often meeting the rising electricity needs of these facilities, meeting clean energy goals could become even more challenging. “It’s already a challenge to meet the goals as it is,” he said, emphasizing that the rapid expansion of data centers could undermine states' efforts to meet their clean energy targets.

Originally reported by Wisconsin Watch.