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To
help make sense of
this moment, I spoke
with Marc Conte, a
Fordham University
economist whose
research explores the
environmental effects
of AI tools and data
centers. Fordham is in
the Bronx, New York,
where the state
government last week was the first in the country to adopt a
moratorium on data
center development.
Conte
said the race to
develop data centers
is being described by
the companies and the
Trump administration
as part of competition
between the United
States and China. He
thinks the more
consequential race is
between AI companies,
and they want to curry
favor with the
government to try to
gain an advantage.
The
companies “don’t have
time to follow the
standard procedures,”
Conte said. They also
may overstate the tax
benefits of data
centers to increase
the speed of project
approval.
“In
many ways, this is
like the quandary that
local municipalities,
who are desperate for
revenue, face when a
professional sports
team talks about
building a new arena,”
he said. “It’s pitched
as a huge influx of
future tax revenues.”
AI companies, like the
team owners, often ask
for a big tax rebate
in advance.
He
noted that many of the
largest developers are
using their lobbying
experience to try to
speed up the
construction process,
which might include
looking for shortcuts
and cozying up to
political leaders.
Tech
companies with AI
aspirations, such as
Meta and Microsoft,
contributed to funding
for the White House
ballroom and also have
been lobbying for
relief from
regulations, such as Section 404 of the Clean Water Act, because
developers don’t want
to be slowed down by
laws designed to
protect nearby
waterways.
This
isn’t going to endear
the companies to the
public.
“We
are seeing communities
realize that there are
a number of costs to
society that the firms
are not taking into
account, which may
require them to change
their behavior in
costly ways,” Conte
said. So, he sees a
possibility “for a
delay in the expansion
of AI that these firms
may not have
predicted.”
The
growth of data centers
is an opportunity for
renewable energy
companies, as it is
for anyone selling
electricity. But much
of the initial
investment is in
dirtier, less
efficient options that
can come online
faster, as Elon Musk
is doing with his notorious xAI developments in Tennessee and
Mississippi.
In
a briefing held on
Wednesday,
BloombergNEF analysts
explained how they are
assessing the
uncertainty that could
lead to gaps between
forecasts and actual
results.
Nathalie
Limandibhratha, a
co-author of this
week’s report,
displayed a slide
showing a gap of about
100 gigawatts between
forecasts from various
firms. For
perspective, the
country currently has
98 gigawatts of
nuclear power
capacity. This is
“quite significant
uncertainty,” she
said.
She
said public opposition
is a factor, but not a
major one so far, with
20 data centers
canceled this year
compared to a much
larger number that
continue to move
forward.
One
challenge is that the
majority of the new
project capacity is in
an early stage of
development, with few
details available.
Also, many of the
companies doing
projects have no
experience with
building data centers,
said Lloyd Arnold, a
co-author of the
report.
“That
doesn’t mean there
will be more
cancellations, but it
does raise execution
risks,” Arnold said.
It
will be telling to see
what these forecasts
look like a year from
now and two years from
now, when the effects
of public opposition
are clearer and AI
companies have had
more time to show how
their data center
investments can
generate profits.
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