Ask an expert: Are data centers driving up my electricity bills?

UNIVERSITY PARK, Pa. — Data center development has become a hot topic this summer. According to Hannah Wiseman, professor of law at Penn State Dickinson Law, homeowners may be in for a shock when they pay their power bills at the end of this month, and not just because of an uptick in air conditioning to stay cool during a record-breaking heatwave.

Wiseman recently authored a blog examining the impact that data centers are having on residential electricity prices across Pennsylvania. Electricity prices have been steadily rising over the last decade and show no signs of slowing down in the face of massive, football field-wide data centers or suffocating temperatures caused by a global El Niño, she found.

In the following Q&A, Wiseman discusses why these facilities use so much power, whether they fare worse in the summertime and what impacted communities or individuals can do to voice their concerns.

Q: What is a data center? Why do they use so much water and electricity?

Wiseman: A data center is basically a big warehouse full of racks of servers that use computer hardware to power cloud computing, multiplayer video games, online purchases and other digital activities. Additionally, they train artificial intelligence (AI) models, and use those models to answer our queries. When someone types in a query in most search engines, there's now typically an automatic AI result that pops up every time we search for an answer to a question. When we do that, though, we use a massive amount of electricity and water to both power and cool the center facilitating the search.

A growing number of them are called hyperscale data centers, often meaning they use 100 megawatts of electricity or more, although definitions can vary. One of these can use the same amount of electricity daily that a small or medium-sized city, around 80,000 houses, would use daily. More of these centers are being built each year, and this increase in electricity use means growing demand and, in turn, higher electricity prices.

Q: How do data centers affect the power bills of the communities surrounding them?

Wiseman: Our electricity comes from a broader maze of wires and generators that send electricity to us. You can think of the power grid on several scales: at a smaller scale, an electric utility company controls the wires delivering electricity between individual homes in several towns and cities, although many utilities serve a larger region within a state.

This smaller grid is usually served by one utility — if a data center is built in that utility's territory, the utility must raise its expenditures to fulfill the power needs. Adding consumers is often good because you spread out the costs of all the wires among more people, causing individual costs to go down. However, a data center uses so much electricity that the initial shock of having to upgrade the infrastructure to fill the demand is spread among all the consumers, causing prices to initially rise across the board.

On the other side, utilities must purchase electricity wholesale from a really big grid in the Pennsylvania Mid-Atlantic region, and those wholesale electricity prices are going up, as well, because of the increasing demand. So, utilities are having to pay more for the wholesale electricity they get, while also having to upgrade the smaller wires that serve their customers in their region. This combination is why we’re seeing both wholesale and consumer prices going up.

Q: Do data centers use more energy on hot days?

Wiseman: Cooling systems are necessary to keep servers from overheating, and account for much of data centers’ electricity use — these systems can be responsible for as much as 40% of a data center's total electricity use. As explained by my colleague Wangda Zuo, professor of architectural engineering at Penn State, in a recent article for The Conversation, centers are usually cooled to specific targets to prevent server damage. Cooling system electricity use varies substantially depending on the type of cooling system, such as evaporative versus closed loop systems.

As Zuo and others have observed, evaporative cooling towers consume, “millions of gallons of water per day.” The use of electricity and water in these facilities is non-negotiable, regardless of outside conditions. Without effective cooling, temperatures in the center would quickly rise to damaging levels and force the services powered by the centers offline. Some cooling systems use less water, but these often require more electricity.

As demand for electricity climbs during a heatwave — from data centers, other industrial and business facilities and homes — electricity bills increase across the grid.

Q: Are there any broader efforts to help control this price increase?

Wiseman: In one example, Pennsylvania Governor Josh Shapiro worked with the grid operator PJM to cap the wholesale prices utilities pay in an auction to get generating capacity. If these wholesale auction prices are high, they are passed on to consumers in Pennsylvania and other states within the PJM region, so they agreed to this cap in an effort to make sure that the prices consumers pay don't skyrocket. However, even with those price caps, when there is this much demand and not enough supply, we will still likely see higher prices.

Q: Is there anything communities can do? What else should they know or be aware of going forward?

Wiseman: Communities can inform people of the fact that every time they make an internet query or directly use AI, it is causing more demand. Consumers can also use search engines that do not include AI as a default. Consumers can also find options to generate some of their own electricity, such as installing rooftop solar panels, and can typically get free energy efficiency audits from their utility to identify ways for their home to use less electricity.

Just as importantly, communities can inform residents about getting involved in the decisions made at the state level. The utility that reigns in a state is regulated by what's called a public utility or public service commission, or in some states, the corporation commission. We have the important regulatory entity of the state commission, but there are also hundreds of bills being proposed in state legislatures around the country right now to help control these costs. Many of these bills require data centers to pay for the new infrastructure that they are demanding, rather than having the utility cover the cost and spread it among all the consumers.

As boring as it may seem, if people are concerned about rates, the most effective way to act is to pay attention to what their utility is doing and get involved at the state level. Most states now have e-filing, so you don't have to drive to your state capitol and get involved. You can file concerns through the internet, call your state legislators directly and watch many of the hearings online.