Charlie Cooke argued yesterday that there is no rational reason to oppose the construction of data centers, which make this website and all others like it possible. I wholeheartedly agree that we should allow more data centers to be built and that our doing so is essential to the development of artificial intelligence. Governments should not be free to decide which investments are “bad” and therefore impermissible.
Yet Charlie left out the most important reason that data centers are opposed, and not just by complainers on the internet but by normal Americans who don’t usually think much about tech policy: electricity bills.
Millions of people are concerned that the boom in AI data centers is straining the electrical grid and raising prices, as these centers demand large amounts of power to operate. These fears are not unfounded. The share of U.S. electricity consumed by data centers is expected to triple by 2030, from 4 percent to 12 percent. Total demand for power may grow by 25 percent in that time.
Without a commensurate increase in supply — which is unlikely given the nation’s anemic and overlapping permitting systems — households will have to pay more in utility costs, since they will be competing with data centers for scarce power whenever they flip on a light switch. In some areas with high concentrations of data centers, such as in Virginia, wholesale electricity prices have already surged.
Now, the effect of data centers on electricity prices is likely overstated. Most rate increases over the past several years were caused by general inflation, not higher demand from AI. But the risk of stretching an aging grid is real, and so long as voters associate data centers with pricier energy, the industry has a political problem that could jeopardize its expansion. Free-market defenders of data centers need an answer to compete with bans and moratoriums.
The long-term solution is to produce more electricity of all kinds, especially from natural gas and, hopefully, nuclear. In the short term, no one has thought of a better idea than Senator Tom Cotton (R., Ark.) with his proposed DATA Act of 2026.
The federal government, through the Federal Energy Regulatory Commission, regulates the transmission of electricity. Cotton’s bill would exempt all standalone electricity sources isolated from the electrical grid from its regulations. That would allow data centers and other energy-intensive facilities to build their own generators and transmission lines without costly federal oversight, rather than drawing power from the grid and bidding against ratepayers.
This approach would encourage data-center companies to supply their own energy, not with subsidies or mandates, but with selective deregulation. The exemption would apply only if the system remains completely disconnected from the grid. Model legislation by the conservative group ALEC (The American Legislative Exchange Council) would do something similar, exempting islanded energy projects from state regulations.
Ideally, the regulatory burden on electrical generation and transmission would be alleviated across the board, not just for off-grid projects. Households and businesses could always use more power, regardless of new demand. But giving data centers a regulatory escape hatch is a great place to start. More urgently, it could provide the industry with much-needed political cover if AI companies accept Cotton’s invitation to power themselves.