Electricity

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Electricity by itself was not invented, but rather discovered and harnessed. The understanding and use of electricity is the result of contributions from many scientists over centuries. One of the first significant practical applications of electricity was the electric telegraph. Samuel Morse and other inventors developed systems that allowed for long-distance communication using electrical signals. The first successful demonstration of a telegraph was in 1837, and the first commercial telegraph line was completed in 1844 between Washington, D.C., and Baltimore, Maryland. One can not imagine a world without electricity. In the hype of Artificial Intelligence (AI) electricity or rather the need for plenty of it is currently causing some second wave investments.  

The almost overnight surge in electricity demand from data centers is now outstripping the available power supply in many parts of the world. That dynamic is leading to years-long waits for businesses to access the grid as well as growing concerns of outages and price increases for those living in the densest data center markets. In the United States, data centers are projected to consume 8% of the total power by 2030, up from 3% in 2022, according to Goldman Sachs. This represents an unprecedented increase in electricity demand, unseen in a generation. If operating continuously, these data centers have the capacity to consume a combined 508 terawatt hours (TWh) of electricity annually, exceeding the total annual electricity production of countries such as Italy or Australia. Globally, by 2034, energy consumption by data centers is expected to surpass 1,580 TWh, equivalent to the current electricity usage of the entire nation of India.

Leading cloud service providers, Amazon, Microsoft, and Alphabet's Google, have set ambitious targets to power their data centers entirely with green energy—Amazon by next year, and Google and Microsoft by 2030. All three companies are developing technologies to reduce power consumption and balance grid demand more efficiently. These efforts include improving the efficiency of chips and servers, optimizing equipment layouts to minimize cooling requirements, and shifting loads to areas where green energy is more available. However, some industry leaders, such as OpenAI CEO Sam Altman, argue that a significant energy breakthrough, likely from nuclear power, is essential to meet these goals. Both Microsoft and Amazon are investing in nuclear energy, with Amazon recently acquiring a nuclear-powered data center in Pennsylvania and expressing openness to further investments in this area. Microsoft recently acknowledged that its AI expansion is threatening its longstanding goal to achieve carbon negativity by 2030.

The increasing demand for data centers, coupled with substantial investments by power companies such as Dominion in new substations, transmission lines, and other infrastructure, is expected to drive up energy prices for consumers, experts say. The costs of these upgrades are typically distributed among all electricity customers in a region, appearing as a line item on monthly utility bills. Goldman Sachs estimates that U.S. utility companies will need to invest approximately $50 billion in new power generation capacity to support data centers, which will increase both wholesale energy and retail rates. This is causing delays in the deployment of AI and simultaneously increasing inflation.

Chat GPT queries are 6-10 times as power intensive as traditional google searches. Modern data centers often contain thousands of Nvidia Corp.'s highly sought-after H100 chips, which are central to the generative AI revolution. Each H100 chip consumes up to 700 watts of power, nearly eight times the energy required by a typical 60-inch flat-screen TV.

Electricity costs including grid improvements are divided among each customer class, from residential to industrial, based on how much it actually costs to serve each, according to a Dominion representative. As a result, residential customers have seen their share of transmission costs drop in recent years while data centers have seen their portion rise.