Power Grab Part 5: AI’s Impact on Utilities and the Future of Power Infrastructure
In past sessions, we looked at AI-driven load, key value propositions for AI, growth projections, large language model training issues, and possible impacts on wholesale power prices. In this section, we’ll review impacts on distribution utilities.
In competitive markets, the risk of poor economic outcomes is borne by shareholders. With vertically integrated utilities, financial impacts of decisions – good or bad - are passed on to ratepayers.
Let’s summarize.
AI data centers are huge.
They want power now.
Utilities are being asked to rapidly build supply and supporting infrastructure.
There is much uncertainty as to where and how AI will actually generate a profit, and whether LLMs can keep growing at current rates.
There is also much uncertainty concerning future electricity use. Rapidly growing use of liquid cooling, for example - putting servers in dielectric fluids - can dramatically reduce cooling loads. Then there are the chips. IBM in September announced a breakthrough in chip efficiency and market leader Nvidia continues to make gains here as well.
Utilities face requests to build gigawatts of new generation assets and transmission infrastructure with timeframes that may not line up with AI load being served. Gas plants, e.g., may have 30-40 year lifespans over which amortized.
If AI business models change and demand for those assets evaporates, then ratepayers will pay the consequence.
The AEP Ohio rate case highlights the issues around transmission. AE wants to manage risk, requesting large upfront financial commitments. The data companies are pushing back. Walmart and other end users are weighing in, since they, too, may be affected. New data load could crowd out other economic development, while increasing rates.
One study out this week suggests an increase of as much as 70 percent in the next decade.
Utility regulators will have to be informed in ways they’ve never had to in the past, instituting new safeguards, with tens or hundreds of billions of dollars of ratepayers’ money at stake.