Deregulation, Not Data Centers, Broke the Grid
Electricity bills are rising, and data centers are getting the blame. But for 50 years, the American grid absorbed loads this large while real prices fell. The difference between then and now? Deregulated markets.
Data centers show how deregulated electricity markets risk pitting growth against affordability. Decarbonizing will require decades of load growth — which the grid once absorbed as real prices fell. Regulated power delivered both before and can again. (David Paul Morris / Bloomberg)
The public attribution of blame for rising electricity costs is half right. Data centers are indeed driving the first sustained surge in American electricity demand in more than a generation. But the historical record shows that electricity demand — what the industry calls “load” — has grown this quickly before without pushing prices up. What is different this time is not the load itself but the fact that it is landing on deregulated electricity markets that were never built to absorb growth.
Today, about a third of US retail electricity sales are in deregulated markets; the rest are served by traditional regulated utilities. That institutional variation — the same load growth running through two different market structures at the same time — is why economists can compare the bills.
A Century of Growth With Falling Prices
From an electricity perspective, aluminum smelters were the world’s first data centers. Aluminum is sometimes called “solid electricity” because of how electricity-intensive it is to produce: the metal is extracted from alumina through an electrolytic process. More than two hundred primary smelters operate worldwide today, drawing about 4 percent of global electricity — more than double the roughly 1.5 percent that data centers consume.
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