When it comes to the intersection of technology and government, the goal should always be to maximize the creation of technology and then use regulation to balance the needs of innovation and consumers. That’s why new legislation in Albany proposed by state Sen. Liz Krueger and Assemblymember Anna Kelles to ensure that AI data centers work for consumers is on the right track.
The bill seeks to balance the environmental and economic impact of new data centers with the opportunity they bring and ensure that New York is prepared to absorb them. The bill proposes a three year moratorium on permitting new data centers. If anything, I don’t know why new data centers should ever be allowed unless they can show that their existence will not result in tangibly higher energy or water costs for anyone else — and if they can, there’s no reason not to permit them, even now.
If every data center that’s planned came online, it would double the nation’s energy consumption. This is because the chips currently used to power AI are so incredibly energy intensive that when a data center becomes part of the grid, it requires massive amounts of electricity (and water for cooling) to function.
When demand for any product doubles and supply stays flat, prices double. For example, Dominion Energy forecasts that demand will rise by 79% in Northern Virginia. And a recent Bloomberg News analysis found that wholesale electricity prices have already more than doubled in markets near data centers.
Last year, Georgia Power estimated needing an additional $3.4 billion a year in higher rates from consumers due to new data center needs. 40% of Georgia’s Public Service Commission members then promptly lost reelection, thanks to voter outrage over being asked to subsidize some of the largest companies in the world. That’s just the tip of the political iceberg. The impact of data center related price increases, if left unchecked, could easily result in incumbents on both sides of the aisle being thrown out of office for years to come.
I don’t know a single voter who wants to pay more for electricity to help Sam Altman become a trillionaire. I don’t know a single elected official who wants to sacrifice their career for that either. And I don’t know a single challenger who wouldn’t use the issue to take out an incumbent.
Now, hyperscalers like OpenAI will undoubtedly frame the legislation as far left overreach and argue that any limitation on data centers as originally planned is a blow against all innovation. That’s just not true. Requiring that new data centers demonstrate no corresponding price increase on utility ratepayers before being issued the necessary permits and zoning approvals forces innovation.
There are clear technological solutions to the problem. Multiple forms of alternate compute already exist and more are being developed.
If data centers don’t want to use alternate forms of compute, they could also bring their own power instead by utilizing new ideas like micro-grid nuclear or hydrogen powered fuel cells and turbines that would allow for any type of compute without imposing significant negative externalities like higher energy costs on everyone else. I know this is possible because my fund, Tusk Ventures, interacts with scientists and entrepreneurs working on these types of ideas every single day.
Finding solutions that allow AI to flourish without hurting consumers is eminently doable. It’s the exact type of approach that government and tech should be working together to achieve. And with the right language and the right approach, it’s exactly what the Krueger/Kelles bill could ensure.
Tusk is a venture capitalist, political strategist and philanthropist.
