Will GOP Food Fight Break Out Over AI Regulation, Affecting Data Center Buildout?

Written by John Egan for IIR News (Sugar Land, Texas)

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Summary

Sharp differences among Republican elected officials on artificial intelligence (AI) could add fresh uncertainties over Big Tech's plans for AI, and with it, electric companies' plans to build new energy assets.

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Data Centers Highlighted in New Forecast on Electric Load Growth

Grid Strategies L.L.C. (Washington, D.C.) last month issued its annual report on projected load growth by electricity companies, a roll-up of near-term load forecasts that utilities and grid managers submitted to the Federal Energy Regulatory Commission (FERC).

That report showed projected summertime peak electric demand to 2030 was up six-fold, to 166 gigawatts (GW), over the scant growth, 24 GW, that the group predicted in its first five-year projection, released in 2022. In the new report, data centers accounted for about 55% of the forecasted load growth to 2030, about 90 GW, the firm said in its report, "Power Demand Forecasts Revised Up for Third Year Running, Led by Data Centers."

Click on the image at right to see how this year's projection from Grid Strategies compared to prior years' projections.

Electricity usage is forecast to grow by an average of 5.7% per year over the next five years, with peak demand rising at a 3.7% annual rate, the report said. For years prior to the U.S. data center arms race, electric utilities recorded load growth rates of 1% or less.

Click on the image at right for a Grid Strategies chart showing which sectors are leading the drive for new electric generating capacity.

The Grid Strategies report joins a flood of other reports projecting an unprecedented surge in data center construction and its impact on electricity providers. Big Tech firms have announced more than $400 billion in AI-related spending this year, most of which is expected to take place in the U.S. Earlier this year, consultant McKinsey & Company (New York, New York) issued a report on the global growth of data centers, "The Cost of Compute: A $7 Trillion Race to Scale Data Centers." That report projected that more than $4 trillion would go toward computing-hardware investments by 2030, with the balance going toward areas such as real estate and power infrastructure.

But, like others who track data center project development, the Grid Strategies report injected a note of caution around how many planned facilities would actually get built, which could directly affect electric load-growth forecasts and planned electric company capital expenditure (capex). "Data center market analysts indicate that data center growth is unlikely to require much more than 65 GW through 2030," the report said, suggesting FERC load forecasts overstate data center-driven load growth by 40%.

IIR Tracking Over $1 Trillion in Planned Data Centers

Industrial Info is tracking 1,766 data center capital projects under development in the U.S. with a planned construction kickoff date between January 2025 and December 2027. The total investment value (TIV) of these projects is slightly over $1 trillion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can view a list of detailed project reports.

The states with the largest dollar value of planned data center construction projects are Texas, Virginia, Georgia and Arizona. Industrial Info does not expect all of those planned data center construction projects to be built according to their schedules.

The electric demand created by large loads such as data centers, advanced manufacturing, mining and oil & gas operations has caused utilities across the country to raise their planned capex for new generation, transmission and distribution assets to help meet projected load growth.

Republicans in Washington, D.C. Not in Unison on AI

President Donald Trump has spoken frequently about the need to "win the war" with China over AI. In two separate bills earlier this year, the president tried to include a section giving the federal government the right to preempt state authority to regulate AI. But Congressional push-back caused the administration to remove those sections from the president's tax and spending bill and the military budget authorization, Politico reported.

That led Trump to issue an executive order December 11 asserting federal preemption authority over states when it comes to most matters affecting AI. The order said for the U.S. to achieve a leadership position in AI, "companies must be free to innovate without cumbersome regulation. But excessive state regulation thwarts this imperative. First, state-by-state regulation by definition creates a patchwork of 50 different regulatory regimes that makes compliance more challenging, particularly for start-ups."

Among other things state laws "sometimes impermissibly regulate beyond state borders, impinging on interstate commerce," the order said.

It was this last point that had some legal observers scratch their head. The Constitution grants Congress, not the executive branch, the power to regulate interstate commerce, including the power to prevent or overturn state actions that impair it.

The Politico article said Democrats' recent electoral victories, propelled by an "affordability" message, are resonating far beyond the Washington, D.C. Beltway. In an uncertain economy, a growing number of people are asking hard questions about future electricity price increases that will result, in part, from construction of data centers.

The article said, "Republicans on Capitol Hill who have championed the tech industry's race to dominate artificial intelligence are confronting a growing political obstacle: voters angry over the soaring energy demands and utility costs tied to the data centers."

The article cited Republican Senator Josh Hawley (Missouri), Florida Governor Ron DeSantis, outgoing Representative Marjorie Taylor Greene (Georgia) and others who are questioning Trump's AI state preemption drive.

The split, currently simmering, may erupt into a full-on food fight if more Capitol Hill Republicans oppose their GOP president, and potentially join Congressional Democrats in enacting an alternative to the president's AI executive order.

Often, politics comes down to timing. In recent polls, voters gave Trump low scores on the economy. Several polls have revealed an electorate increasingly worried about paying for electricity, particularly if electric prices rise because of data centers.

Key Takeaways

• President Donald Trump issued an executive order December 11 asserting federal preemption over states when it comes to regulating AI.
• A small band of GOP lawmakers have pushed back against the president's assertion of federal preemption authority on AI.
• The U.S. Constitution grants Congress the exclusive authority to regulate interstate commerce.
• Should momentum build for congressional action, this could inject added uncertainty over plans to build data centers as well as electricity companies' planned capital spending.

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About IIR News
IIR News (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).