How Tech’s AI Boom Could Drive Up Small Business Costs

It’s broadly known that that rapid development and scaling of tech like cloud computing, artificial intelligence (AI), cryptocurrency mining, and even video streaming consume vast amounts of energy. Yet few small business owners — or heads of private households — are aware of how much their own electricity bills are increasing from electrical consumption of big data centers that big companies use to operate their power-guzzling platforms. As that enormous demand surges, the prices of dwindling power supplies for everyone else also soar. That expensive electrical link between small and large businesses became clearer this month, when regional grid operator PJM Interconnection announced the results of its annual auction to secure sufficient power capacity over the next year. The company said bids it received were 22 percent higher than in 2024 — a considerable increase, but nowhere near the 833 percent price surge it reported in 2023. But it still means companies and households in Washington D.C. and the 13 Midwest and Atlantic states PJM serves will likely see 1.5 percent to 5 percent jolts in their power bills over the next year, based on the calculations PJM uses to pass along cost increases. That may not sound like an enormous one-time rise, but it will come atop the 6 percent increase in U.S. electricity prices between January and June of this year, according to the Bureau of Labor Statistics. Worse still, those climbing energy costs — which President Donald Trump vowed to cut in half during his first year in office — are likely to continue increasing in coming years. The reason? In announcing the recent auction results, PJM executive vice president Stu Bresler explained, “the majority of the demand increase you saw was large loads and data center additions.” Neither the proliferation of those facilities, nor the enormous energy needs they have, are likely to abate any time soon. New data centers are being built almost constantly these days, enabling tech companies to prepare their energy-voracious AI apps to play bigger and increasingly diversified roles in business and life. As that multiplication continues, it will stoke demand for electricity, and along with that prices for it as supply and capacities reach their limits. It will also test the abilities of already overtaxed and in some cases antiquated electrical grids to keep up. “It literally tells you we are out of generation,” Sean Kelly, chief executive officer of power forecasting firm Amperon Holdings Inc. told Bloomberg after the auction. “It’s good for traders, it’s good for asset owners, it is not good for consumers.” That raw bargain for households and small business owners now facing higher energy prices turns out to be a pretty sweet deal for Google, Microsoft, Meta, Amazon, and other tech companies whose data centers are consuming all that electricity. As the sector pursues AI development and expansion, many of those corporations are building even more of the processing facilities, often with encouragement from local authorities. For example, Virginia already plays home to “Data Center Alley.” The construction of those 596-and-counting facilities near Ashburn was supported by the state, which granted their builders and users exemption from sales tax on all computing equipment used in them. Ohio, which PJM also serves, offers a similar tax exemption to encourage data center building. Many other states and localities across the U.S. are similarly bidding for the investments and jobs that big tech companies provide when building new centers. The problem is, those additional processing complexes — which are often as big as a football field, and also consume enormous volumes of water for cooling — are already testing the capacity limits of the nation’s aging, struggling electricity grid. The ongoing spread of AI and its increasing power demands will make that challenge exponentially harder. According to the World Economic Forum, energy consumption of emerging AI alone “is doubling roughly every 100 days.” That’s expected to grow fourfold as the tech transitions from developmental to operational phases. That additional draw on the grid may wind up create shortage trouble for many businesses and households — which between 2012 and 2022 suffered a 20 percent rise in power outages. Just as bad, the duration or those blackouts increased 46 percent over the same period. A recent Goldman Sachs study estimated AI will add 160 percent to generally rising U.S. energy demand through 2032. Earlier studies forecast annual growth of tech’s electricity consumption at between 13 percent to 15 percent through the end of the decade. That all comes as the Trump administration is moving to extend the lives of aging fossil fuel power plants, many of which are already functioning at maximum capacity. At the same time, he’s ended tax breaks and other incentives to companies developing or using solar, wind, and other renewable sources that could have taken up some of the slack. As a result, the combination of limited power facilities, an increasingly creaky grid, and the proliferation of AI applications and data centers enabling their use may translate into years of higher electricity bills for small business owners and households. Contributors of social platform Reddit’s subreddit on energy aren’t waiting for that to happen, and have begun protesting Big Tech sucking up what are already barely sufficient electricity supply. “AI power needs must be split from consumer and commercial needs and the Microsoft, Meta, Googles of the world need to pay for those (both setting up the infrastructure and operating it),” redditor nspy1011 said in response to the PJM auction. “Enough with privatizing profits and socializing costs/losses.” “Americans are going to get screwed because Trump stopped Biden’s tax credits for solar panel factories and wind turbine factories,” lamented Franklin_le_Tanklin. “Anyone who can’t survive off the grid with solar and battery is going to get destroyed in High electricity rates.” Some commentators, however, expect tech companies — and U.S. business ingenuity — to fix the same problem they’re now creating. “As the technology improve electricity demand will become more reasonable,” said Future_Helicopter970. “The hardware powering AI is performing faster every year, improving at a faster rate than Moore’s Law. These performance gains have been measured by outside groups, so it’s not just marketing hype. Specialized AI chips are doing better than general purpose chips.” BY BRUCE CRUMLEY @BRUCEC_INC