Stop FERCing with AI – and Power America’s Golden Age

Electricity prices are skyrocketing, jumping 33 percent from five years ago, significantly more than overall inflation. With Artificial Intelligence (AI) research and development expected to require vast amounts of electricity in the coming years, America has reached a critical crossroads requiring fundamental regulatory change.

The 33 percent price spike since January 2020 is reason enough for bold action. Electricity is essential for almost every sector of the economy and thus a key driver of rising prices. As one of life’s necessities, the higher costs are basically a regressive tax on America’s middle and working class.

To make good on President Trump’s promise of delivering American AI dominance and an innovation golden age, we need more power now.

We are currently in a classic supply-demand crunch brought on by supply bottlenecks in new plant capacity as older plants are closed due to age or environmental policy while the demand for electricity grows.

In addition to supply, the national electric grid, a complex circulatory system connecting power plants with businesses and homes, desperately needs investment to shore up its aging infrastructure. Regulators at the state and federal levels, including the Federal Energy Regulatory Commission (FERC), have moved too slowly, even with an AI revolution on the horizon.

AI requires data centers—airplane hangar-sized warehouses dotting the landscape in exurbs across the country. The computers powered by NVIDIA’s chips are themselves powered by the same electric grid that lights homes and, yes, electric cars.

According to the U.S. Department of Energy, data centers consumed 4.4 percent of total U.S. electricity in 2023 and will consume up to 12 percent by 2028. Large data centers, which are increasingly common, have power demands of 100 megawatts or more. That is enough power for 80,000 homes, or about 400,000 electric cars.

If policymakers muddle along, the consequences are dire for economic growth and America’s standard of living. Without improved energy infrastructure, the American-led AI breakthroughs would be throttled.

The grid would be strained even further, sending consumer and commercial energy prices higher and higher while increasing the likelihood of blackouts and brownouts. In addition to incurring additional costs, such events have serious public safety and health consequences—people die.

The solution to this looming crisis is not a new national industrial policy with bureaucrats in Washington dictating what power sources should be used, who gets new funds to repair the grid or build plants, etc. It is essential to encourage more generation for the country in general. New plants are needed everywhere and fast.

The ideal is to have dedicated generation facilities for data centers, that is, power facilities right next to them. This will alleviate existing power demands on the grid, lowering both prices and stress on the worn-down grid.

So let Big Tech go off-the-grid. Technology companies and other industrial and commercial enterprises should be allowed and even encouraged to invest in and build new plants, and to also be able to sell excess power to the public.

Various technologies from geothermal and mini-nuclear reactors, as well as more traditional power plants, could be adapted to meet the needs of these facilities. On January 23, Goldman Sachs reported that Big Tech companies signed new contracts for more than 10,000 megawatts of possible new nuclear capacity last year, with three new plants potentially online by 2030. All this means lower electricity prices and less stress on the grid.

But current regulations inhibit the construction and operation of many independent electricity facilities. The Federal Energy Regulatory Commission (FERC) and state and local utility regulators as well as environmental agencies have too often blocked these projects.

So, the FERC’s decision on February 20 to “launch a review” and study “co-location issues related to data centers” is a welcome step, although a modest and overdue one.

Shortsightedness on energy regulation will cost us and aid and abet China’s aggressive bid to overtake America’s lead on AI.

To combat that, Congress should study and adopt policies that streamline self-reliant energy infrastructure. But it should not be limited to federal policy—local and state regulators must get on board with off-the-grid AI energy reforms.

States and localities that do will make themselves more attractive for AI investments, bringing more jobs and sustained economic activity.

By freeing AI from the grid by slashing red tape, we can unleash the American golden age of prosperity driven by abundant energy and unrivaled innovation. We will also return electricity prices to more reasonable, historic levels, thereby benefiting all Americans.

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Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.