There’s no such thing as a free lunch. But lots of entities want to eat without paying a fair share or even considering the long-term costs for water and power supplies.
Throughout the Mountain West region and the United States at large, utilities are hiking prices on electric ratepayers. The cost of power jumped two times as fast as the overall cost of living in the past year, according to new federal data. And data centers are driving the spikes.
Reporter and western utility data junkie, Jonathan Thompson, recently compiled a list of price hikes and new demands coming from data centers at utilities in the Western U.S. that is worth a look. It’s also worth considering that NV Energy is seeking more rate increases. Rocky Mountain Power just increased rates and is fighting in court for more. Pacific Gas and Electric will likely continue its trend of increasing costs for ratepayers (and taxpayers). They are not alone by any stretch.
What about water? With demands for AI, cryptocurrency, and data centers increasing by the minute, we believe that our communities will be footing the bill in a variety of ways. Are we going to give up resilience and stability for bitcoin and AI? There will be more demand for aquifers, rivers, creeks, streams and ratepayer-backed infrastructure to meet the cooling needs of data centers and the power needs those operations depend upon — the majority of which currently run on fossil fuels.
When it’s all lumped together, what we see is more consumption and no meaningful conservation for water and power supplies. The nexus between the two utilities is hard to ignore.
There are direct and indirect notions of water and power use. Water is necessary for the extraction of natural gas or the minerals necessary for solar panels, windmills, and batteries, for example. Second, large quantities of water are necessary for the generation of fossil-fuel derived electrons at any powerplant. Then, of course, data centers themselves need large amounts of water for giant swamp cooler units that consume millions of gallons of water annually (at least for now). It is a big footprint.
We are watching what happens in states throughout the west on these matters. We are seeing good and bad. But here are a few ideas for more accountability.
1. Price design: Data centers — for AI, crypto or anything else — need their own price tier for electricity rates. And the tiers should vary, depending on the business. Data centers and crypto should not be lumped in with other big users because the trends warrant different echelons (i.e. crypto and data centers should be in categories of their own). The same can be said for water rates — especially when data centers or crypto operations are tapped into a municipal system. The Oregon legislature passed a measure to ensure data center and high-tech demands do not impact ratepayers. The effort creates a separate class for these burgeoning industries. Some utilities in Ohio are working on similar efforts.
The overall cost to our grid and available water supplies must be considered by utility regulators — with tiers specially for data centers and crypto. Also, states should take a hard look at the lucrative tax breaks in conjunction with the easy access to our public utilities until we can quantify long term benefits.
2. Strict limits on water: Water regulators cannot approve new appropriations in communities/aquifers/surface waters that are already strained. Nor should water regulators allow for data centers to export water from somewhere else to serve demand (This is a major threat near Reno and Pyramid Lake). Communities in Arizona, which are facing the largest share of Colorado River cuts, are waking up to this (see below).
3. Zoning: A Utah law blocked local governments from prohibiting crypto operations (See our op-ed in Deseret News). That’s right. Utah lawmakers who professes to love local control don’t actually practice what they preach. The law is unacceptable and should be repealed. Communities need more local control on these matters to set regulations that prevent noise, air, and water pollution. Communities should all be doing zoning first rather than what happened in Utah and what we saw the City of Reno do earlier this year. The city, behind closed doors, defined “data center” for zoning, via on-the-fly exceptions without public input, as an “administrative interpretive decision.” (See staff report). After an outcry there was a public process and ordinances put in place. Nevertheless, Phoenix officials recently set rules about where data centers can go and imposed other criteria relating to noise and location.
4. Full disclosure: We are seeing this issue pop up in Arizona and it could be a positive development for the public.
Tucson officials just rejected a data center proposal after public outcry over water and some backdoor dealings became public. An Amazon-affiliated entity got into non-disclosure agreements (NDA) with officials in Pima County and Tucson. But word got out and people were not happy. Indeed, there are reasons why a business would want a NDA. But we need officials to stand firm. No NDAs on these matters. Period.
Full disclosure would lead to better outcomes for communities. Transparency prompts the type of competition that could lead to real community benefits in return for companies adding new demands on water and power supplies if the data centers, or crypto in a worst case scenario, do get built. Most everyone understands that our lives on the internet depend on data centers. But place-based citing must be a relevant factor every time.
Next, monthly water and energy usage reports must be disclosed as a standard operating procedure. Sure, regulators can dig up the information. But those numbers are not easy to find for members of the public. We need access and transparency to the data about grid impacts and water use.
New technologies demand a new way of doing business. Let’s do that work in the name of disclosure.
CONCLUSION
These are just a few ideas that are popping up predicated on what we see happening. These concepts can be refined, vetted, and shared by the public for improvement. But the important thing is that we keep the conversation going. Other local groups are also thinking long and hard about these concepts. And we welcome anyone who wants to share their thoughts.
The marketplace of ideas never sells free lunches. But it can offer us reasonable and considerate ways to manage our collective appetites for natural resources.
