Donald Trump is worried about the data center. In particular, he is concerned about their effects on the already expensive electricity market in the United States. Will Americans’ resentment of rapidly rising energy costs derail his party’s November election ambitions?
The US President’s concern is evident from two actions in recent weeks. On January 13, Trump and the chairman of Microsoft jointly announced that the tech giant would pay more for its datacenters, pay full property taxes and accept neither tax cuts nor electricity rate breaks in the cities where it operates datacenters.
“We are the ‘hottest’ country in the world, and number one in AI. Data centers are the key to that boom, and keep Americans free and safe, but, the big technology companies that build them have to ‘pay their way,’” Trump wrote on Truth Social. “Thank you, and congratulations to Microsoft.”
On January 16, Trump and governors of northeastern US states directed the country’s largest power grid operator to hold emergency reliability power auctions by September. bloomberg. The move could force tech giants to pay to build new power plants, requiring them to bid on the future reliability of the electricity they receive from the grid.
“I never want Americans to have to pay higher electricity bills because of data centers,” Trump said.
OpenAI followed Microsoft’s lead with an announcement on January 20. The company is committed to “paying your way on energy, so that our operations do not increase your electricity prices”. The company is part of the Stargate collaboration between the AI industry and the Trump administration to invest $500 billion in AI infrastructure.
Trump is emphasizing the problem of rapidly increasing electricity demand. He promised Americans that he would cut their electricity bills in half. But as the Guardian reported shortly after Trump and Microsoft’s joint proclamation, there is little chance he will follow through on that pledge. At the same time that AI is increasing demand for electricity, the administration is blocking renewable energy projects, with Trump calling them a “scam” and “fraud,” but was determined to provide electricity to millions of American homes instead of pushing for the expansion of drilling for gas and oil. The administration’s orders to close aging coal plants and restart foreign exports of liquefied natural gas could further increase costs for domestic consumers.
Electricity prices play into larger concerns about the cost of living in the US, an issue that has Trump’s party on the back foot in the run-up to congressional elections in November.
As always with technology news, Elon Musk is part of the story. On January 15, the US Environmental Protection Agency (EPA) ruled that Musk’s company XAI was illegally running methane-powered generators at its Memphis facility. The decision sets a precedent for tech companies looking to generate more power than they can get from the grid: You can’t simply bring in a backup generator, like a homeowner does when experiencing regular power outages. You have to buy nuclear power plants like Meta, Microsoft, Google and Amazon. Musk and XAI have not commented.
European governments are similarly facing the limits that their resources pose on the potential growth of datacenters, which have a limitless appetite. In Germany, which boasts the most datacenters in Europe, high energy prices hinder growth. Like Trump, Chancellor Friedrich Merz is also in favor of building more datacenters, but he has taken a stance contrary to the US President’s agreement with Microsoft. In novemberMeraz’s ruling party agreed to subsidize heavy industrial use of electricity until 2028 and reduce grid tariffs for consumers and businesses. One key difference from the US: Datacenters in Germany are required to get half their electricity from renewable sources. Germans are skeptical of the tech industry’s ability to comply with the requirement, leading to general concerns about the expansion of datacenter construction. The survey was published in October.
In the UK, home to the second highest number of datacentres in Europe, construction of new facilities is increasing, and energy costs are rising. Electricity rates in the UK are already several times higher than in the US and among the highest in the world, and this increase creates serious problems for a population that has been struggling with a cost of living crisis for many years. Despite the growing problem, the Department of Science, Innovation and Technology Proposed Electricity rebates will be offered to datacenters in so-called “AI development zones” in November to encourage investment and development.
A nearby example comes to mind: in neighboring Ireland, datacenter electricity use will surpass that of all urban households in 2024. The pressure on the grid has caused costs for everyday Irish people to rise significantly, so much so that the Irish government imposed a ban on new datacenters connecting to Dublin’s power grid in 2021. This measure effectively banned new construction in the city and its surrounding area. It ended in December.
The next stop in the datacenter boom are locations with various types of resource limitations. Trump and the tech giant have committed to building one of the world’s largest datacenters in the United Arab Emirates and several other facilities in the Gulf states. Energy is cheap in the region, but datacenters require billions of liters of water to cool them. scarce. Microsoft, Amazon and Meta have similarly announced $17 billion investments in data centers in India, where power availability is much less reliable than in the US or Europe. A portion of the promised cash may be needed to finance the modernization of the grid, or, as has happened in the city of Mumbai, local governments may keep older infrastructure in use longer than intended, worsening pollution.
