I wrote the following with Dr. Mijin Cha, Associate Professor of Environmental Studies at the University of California, Santa Cruz. Our views do not necessarily represent the views of the universities that employ us.
The Bipartisan American Affordability and Jobs Act (BAAJA) would accelerate data center buildout and not address the affordability crisis. BAAJA would reduce costs and delays associated with interconnecting data centers to both electricity grids and the natural gas pipeline networks that supply behind-the-meter generators. BAAJA would also remove opportunities that bedrock environmental laws currently provide for community input into data center siting decisions. BAAJA would not protect communities from data centers’ air pollution, noise, greenhouse gas emissions, or impacts on local water resources. By providing the executive branch with new mechanisms to durably exempt data centers from environmental regulations, BAAJA could worsen these impacts at existing data centers in addition to accelerating buildout of new data centers.
BAAJA Section 2107 attempts to protect Americans from subsidizing data centers through utility bills, but falls short in three important ways:
- First, Section 2107 pertains only to electricity. BAAJA would not protect natural gas ratepayers from utilities socializing costs associated with extending pipelines to data centers or increased wholesale natural gas prices driven by data center demand.
- Second, Section 2107(a) assigns the Federal Energy Regulatory Commission clear protocols and timelines only for addressing costs related to electricity transmission. Transmission makes up just 15 percent of retail electricity bills. For the other 85 percent, Section 2107(b) mostly outlines voluntary, state-led steps that do not guarantee ratepayer protection. Therefore, BAAJA’s ratepayer protections are only as strong as the state commissions that regulate monopoly utilities. This is a structural problem, as utilities have outsize influence over many state regulators and have strong profit incentives to keep grid expansion costs on their own rate bases.
- Third, to the extent that BAAJA would protect electricity ratepayers, the additional cost to data center developers could perversely incentivize them to forgo the grid and use inefficient, polluting behind-the-meter natural gas turbines instead. Nothing in BAAJA would prevent this.
Even in the most optimistic scenarios, BAAJA would not come close to addressing the affordability crisis. Resources for the Future and Rhodium Group estimate that BAAJA would reduce residential electricity bills by just $3 to $6 per month—and not for years. These savings would likely be indistinguishable from bill fluctuations driven by weather or inflation. Data centers also create few permanent jobs.
Americans roundly rejected data centers on November 3, voting against data centers in 40 out of 41 relevant ballot measures. In the wake of this historic election, rushing BAAJA through during a lame duck session would unnecessarily anger voters who oppose unchecked data center development, support local control over siting decisions, and value a clean, healthy environment.