Speed to Power: How Electricity Ratepayers Can Win the AI Race

Executive Summary

1. Why Are Electricity Prices Going Up?
   • Rising U.S. electricity rates, driven by several complex interconnected factors including inefficient capital expenditure and flawed public policy, have increased perceived energy insecurity for households, even if actual energy insecurity is not as common.
   • While large-scale data center demand would seem to strain the grid, these developments can reduce residential rates by spreading fixed utility costs across a larger consumer base, and underwrite significant upgrades and investment to the shared system that benefit other users.
   • To maximize benefits, policies should ensure an accurate, neutral, and fair analysis toward data center developers paying for necessary infrastructure.
2. The Need for Permitting Reform
   • The current permitting system causes significant delays and cancellations, resulting in higher energy costs and reduced reliability for consumers.
   • Effective reform requires comprehensive, bipartisan action to streamline reviews and reform the abuse of legal challenges to block projects.
   • Certainty must protect the viability of projects before, during, and after the permitting process.
   • Reform must respond to the urgency of accelerated planning and deployment of modernized transmission infrastructure to meet load growth, and with it economic and national security imperatives.
3. Increasing Competition and Aligning Incentives
   • State policy should prioritize wholesale and retail competition over monopoly structures to enhance grid reliability and affordability.
   • States should pursue reforms to address regulatory bottlenecks, eliminate costly market distortions, and increase flexibility.
   • Coordinated load forecasting can reduce the risk of costly overbuilds, prevent reliability shortfalls, and give investors the confidence to deploy capital where it is actually needed.
4. Unlocking Flexibility: Grid Centers as a Data Resource
   • Data centers can employ a diverse portfolio of operational and technical strategies to provide valuable services to the electric grid.
   • There are significant technical and regulatory obstacles to unlocking the full potential of large-load flexibility.
   • In the face of significant expansion of demand, flexibility options are an important tool in the toolbox, but not a silver bullet.
5. Thinking Outside the Grid: The Consumer Regulated Electricity Alternative
   • Policymakers should come to terms with this stark reality: meeting the demands of the data center era requires thinking outside the legacy grid.
   • Consumer Regulated Electricity would allow privately financed, physically islanded electric utilities to serve new, voluntary customers such as data centers or industrial facilities.
   • Instead of competing through subsidies or narrow tax provisions, states can allow private infrastructure to form freely, letting developers finance, build, and operate their own islanded power systems without drawing on public funds.
6. AI, Water Rights, and an Opportunity for Property Rights
   • Building data centers in water-scarce areas may raise public concern, but there is no legal mechanism for diverting water without first obtaining a water right.
   • The price of water in the West reflects the cost of delivery, not the scarcity of water. Stronger price signals would better incentivize consumers to reduce water use.
   • By focusing on lowering the cost of water transfer, politicians can avoid writing policy carveouts that might be specific to a time and place but become irrelevant in the future.

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