Pulling the plug on our next industrial revolution | Hour 3

What's going on? Thank you so much for listening to this podcast. It is heard live every day from noon to three on WBT Radio in Charlotte. And if you want exclusive content like invitations to events, the weekly live stream, my daily show prep with all of the links, become a patron, go to vpeteclendershow dot com. Make sure you hit the subscribe button, get every episode for free, write to your smartphone or tablet, and again, thank you so much for your support. So what happens when a data center comes to a small town. You'll never guess what happens next unless you guess lots of jobs, lots of tax revenue, spillover benefits to local businesses like hotels and restaurants, discounts on electric bills, and grants for teachers. Because that is what happened in Ellendale, North Dakota. The San Francisco Chronicle wrote a piece called how Silicon Valley data centers are reshaping rural America, written by Emily Haven, talking about Ellendale, North Dakota. The town of eleven hundred people, It's hardly a tourist attraction. Its faded center includes boarded up buildings, an old grain elevator and a dilapidated opera house. But good luck trying to book a hotel room or find a place to rent in one hundred mile radius. Ellendale's new tenant, Polaris Forge one, an eleven billion dollar data center that, when completed, we'll encompass about two and a half million square feet and deliver four hundred megawatts of computing power, enough to run hundreds of thousands of homes, which, by the way, this is a separate thing. Like this comparison to the power of homes is misleading. It's like, why are you comparing an industrial use to homes? Shouldn't you be comparing it to other industrial uses? Hm, well, that doesn't give you the bigger number. Swarming trucks carry more than two thousand workers to the construction site, which is active twenty four hours a day, six days a week. It's illuminated at night by immense floodlights. A nearby bitcoin mining facility emits a low, persistent hum. Welcome to the new American Frontier. By the way, do you remember when Donald Trump talked about bringing manufacturing and reindustrialization of America. Remember when he was talking about all of that stuff. Behold the data centers like the The economic impact that this boom is having is like darn near unprecedented. Artificial intelligence and the data centers that power it are the latest chapter in a familiar American story about industry, railroads, oil, coal, data center construction. They provide high paying, working class jobs in economically strapped communities, even as they take a toll on workers' bodies and sully natural resources in California, remember this is the San Francisco Chronicle. In California, Democrats have reaped the financial bounty of AI and cheered AI office leases while largely decrying the data centers that sustain them as costly, extractive and polluting. And that's easy to do when the facilities are not in your backyard. There's a quote in here from a retired mental health counselor named Deborah Elhard. She has lived in Ellendale since nineteen seventy four, and she said, the people who are saying, oh, INTI years, our town's not going to look anything like it does now, Well for fifty years it's been going downhill, So what do you want it to look like? This is a key point Peter Hassen makes. Peter Hassen, formerly of the Washington Free Beacon, Fox News Senior editor, Daily Caller investigative editor. He says, it genuinely makes me so mad. Nobody is doing anything for these towns. Nobody has tried to do anything for these towns, and god knows how long every technological innovation has left them further and further in the dust. And then finally, the biggest technological innovation of them all is going to give these towns a shot, maybe not a perfect shot, but the first shot they've had in a long time, and the best one they're ever going to get, and the dumbest people on Earth are trying to scare them into turning it down. In Ellendale, Polaris Forge one project. It's being built by Applied Digital. They've been there since twenty twenty two. They were the ones that did the bitcoin facility. CEO Westcummins said the town has a perfect setup for large scale data centers. Cold winters mean fewer resources necessary to cool servers, and Ellendale had existing substations where the company could tap into excess energy from North Dakota's wind farms. Under state law, utilities have to share some of that revenue with ratepayers, which resulted in a two hundred and fifty dollars drop in electric bills for the average household. Quote. Small communities are always left behind with technology, and now they get to be at the forefront. He said. He grew up on an Idaho farm. Common said Applied Digital prioritizes being a good neighbor. It uses a closed loop water system to protect the local water supply, so the water's just being recycled basically. It also requested the data center be annexed into city limits to increase the local tax base. Pre data center, the mayor of Ellendale said the town collected about four hundred thousand dollars in annual sales tax revenue four hundred k in seven months. This year, it has so far reaped three point five million dollars in sales tax. The mayor estimates Ellendale's taxable property value will go from three point five million to thirty five million, so a ten x increase. Ellendale can now afford to repave its streets, renovate its senior center, finance a new public safety complex, establish walking trails, and refurbish its historic opera house. The superintendent of the schools said, Applied Digital grants allowed the district to buy new computers, purchase an ice machine for the teacher's lounge, and finance a playground renovation. Right. So again there are no solutions. There are only trade offs, said Thomas soul Right. There are trade offs. People looking at only one side of the equation saying we have to hald all of this stuff, block everything, no more data centers than all of this are denying all of these other benefits. But there are trade offs. You have an influx of workers right, means an increase in traffic pressure on the housing supply. You got heavy flows of trucks that going to tear up the roads as heavy trucks do. Apply Digital partnered with the state bank and a construction company to finance the construction of more than fifty homes to build. The housing crunch is then affecting nearby communities, so rents have gone up because of all of the supply of tenants that are looking to work on the construction. State data shows the city's hotels reported a thirty one percent increase in taxable sales, restaurants reported a nearly seven percent increase, gas stations a three percent increase, and are looking at two hundred to four hundred jobs created at the data center, permanent jobs created, and it's driving up the wages of all of these workers, all the people that are building it. And people want to kill this thing. Well not the people in the town. All right. For over a year now you've heard me talking about Create a Video. Great local company in mint Hill that has helped more than two million families preserve their memories by turning old photos, VHS tapes, film reels and slides into lasting keepsakes. Now creative videos helping families and groups create brand new memories while they're traveling. 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Check out group travel Videos dot com. That's group travel Videos dot com. Or call seven oh four. Eight four six seventy eight seventy extension two oh six. And when you do that ask for Katie. But Pete, can I just email? Well, yes you can. You can email Katie Katie at group travel videos dot com. Group travel videos from old memories to new adventures, preserving life's moments for a lifetime. From the text line, Scott says, not sure where I stand on data centers yet, but I have seen several articles showing that Chinese propaganda is leading a lot of the disinformation about them because they want to control all of them and not have them based here where they have no influence. That is correct. I've got information on that element of this story as well, which is not to say that there aren't legitimate concerns about a particular project in a location, right, And since I started seeing the opposition organizing against the data centers, like I reject the false choices, right, And that's so much of this stuff is framed as such that I either have to you know, ban them or just let them run hogwild. Like, no, if you've got a problem with a facility that's being built near you, And by the way, I have a facility, like one of the biggest in the state is being built in West Mecklenburg, right down the street from me. So I've got people in my neighborhood Facebook group that are posting anti data center stuff and it's like and I just like, I'm looking at their arguments and like, your arguments are not based in reality though, And as we've been discussing, right, there are legitimate concerns. If you're putting in a facility and it's right up next to some neighborhood, then yeah, you're going to have an impact on that neighborhood, just as any facility, any kind of industrial facility or manufacturing facility would have on that neighborhood. That is a zoning issue, and you can do things at the zoning approval level to mitigate the impacts, or you can deny the rezoning. Right. This is from a fellow by the name of Nick Carter says, with some very minor exceptions, the data center build out is happening in red states, historically some purple, but looking forward it's basically all of the Republican led states. The data center question is entirely a red on red issue. It's impossible to build in blue states where power is expensive, hence no one is even planning to build there. This might be why the left is poisoning the well on data centers. They don't have anything at stake, They have nothing to gain, nothing to lose. They can run the Greta Thunberg how dare you fracking? Playbook, because that's what this is. This is fracking all over again. Remember all the outrage, all the opposition about fracking. The right must avoid being useful idiots for the Left and China by all means. Debate the merit of the data center build out, but don't fall into the slopulist trap of being against them because everybody else is, or because the left manufacturers consent via the press or NGOs. The left is not participating in the DC build out, the data center build out, they should not have a seat at the table. Assume that they will try to play spoiler to ruin what is a massive reindustrialization opportunity in America's heartland, creating skilled jobs that have been missing for so long. It's entirely rational for the left to ruin this for red America. Don't let them. Regarding the comparison on the homes, there's a writer, Clara the Urbanist, and she says, every data center story says it uses something like, oh as much power as one hundred thousand homes, Like it's a scandal. An aluminum smelter pulls five times that much, and it's why airplanes are cheap. Measuring industry in homes is how you train a country to believe building things is a crime. Right. So again, it's always interesting to me all the people that say they are for progress get really opposed to progress. This at the City Journal by Sean Reagan. As data centers have sprung up across the country to power the AI boom, many Americans have begun to worry about what they will do to electricity bills. A recent Harvard pull found that two thirds of Americans believe that building a new data center nearby will raise local electricity prices. The worry is already fueling a backlash. Lawmakers in more than thirty states have introduced over three hundred data center bills this year, including outright construction moratoriums, many prompted by concerns over electricity prices. The concern is understandable. The industry's rapid growth has coincided with an increase in residential electricity prices in many parts of the country. Data centers are notoriously power hungry, consuming nearly five percent of all US electricity in twenty twenty four. More demand typically means higher prices. However, a series of new studies suggests the AI's energy demands need not raise household electricity bills. In fact, so far they have not. If anything, data centers have placed modest downward pressure on retail sales retail rates. Large new loads often lower rates for everyone by spreading the electrical grids enormous fixed costs across a broader customer base. Think substations, power generation facilities, right, polls lines. Those are the fixed costs. Right. So there's actually downward pressure now because you're spreading it. Out from the text line seven oh four number says, you keep talking about the data with data centers, but what about the science along with the data center? That science and data The only Steve says, the only significant issue with data centers is the load on the power grid. If they provide their own power, we should have them all over the place. Right, Well, this is what I'm saying, is like, that's a future issue when the load becomes overloaded. But we are not there yet. And this guy, Sean Reagan explains it as it is. I've got multiple piece I'm not gonna be able to get to them all today, but this will be the first of a recurring series in defense of data centers. And that's not to say that they should be put everywhere in everyone's backyards or anything like that. But the local control, the local decisions about rezoning and where to cite them and all of that. Keep that at the local level. And if you're going to ban them, if you're a town that's going to ban them, you're depriving your town of a massive influx of money, skills, people. Right, this is a boom. Data center construction can be a boom for a lot of these small towns that have been dying and ignored for decades. Mitch says something similar here with the make data center self reliant with small nuclear reactors. It's in the works already, they are, there are options available. You've got some of these guys, some of these companies are already partnering with energy you know, construction to build their own on site energy production facilities, which I'm fine with. That's totally fine. But so back to Reagan's piece here, large new loads often lower rates for everybody because they spread the electrical grids fixed costs across a broader customer base. As data centers continue to expand, the real question is whether regulators will allow enough new generation and grid investment to meet rising demand while ensuring that data centers, not rate payers, pay for the infrastructure their growth require. Which, by the way, that's happening. You got you got one over in well, the one near me, the one in West Charlotte. The data center developer Digital Realty Trust, which is in the process of building one of North Carolina's largest data centers off of Moore's Chapel Road in Southwest Charlotte. They're helping Duke Energy build a multimillion dollar substation near the airport to power the data center. Okay, so. The substation would be about four miles west of the Charlotte Douglas International Airport. It'll be owned, constructed, and operated by Duke Energy, but the developer is going to pay for the energy, infrastructure costs related to the substation and the data center. Price take somewhere around fifty three million dollars, and think about the crews needed to build that. Think about the purchasing of all of the transformers and all the equipment and everything that goes involved in building a substation that Duke is not paying for and the rate payers won't pay for it. This company is paying for it. Have data centers raised your electric bill? That's the question that a new working paper by ASA Watton and Jeffrey Blandford from the Electric Power Research Institute along with John Bistline of Watershed. They looked at this question and their answer is no. Data centers pushed residential rates modestly down between twenty fifteen and twenty twenty four. After accounting for the possibility that developers simply chose states where electricity was already likely to remain cheap. The authors estimate that doubling a state's data center capacity caused residential rates to fall about three and a half percent. You double your data center capacity, and your rates drop. The average American lived in a state where data center capacity did double actually more than that, one hundred and sixty percent growth just over the last five years, leaving rates roughly six percent lower than they otherwise would have been. Then there's another paper from Columbia University Center on Global Energy Policy looks at all of the literature and finds that recent price increases were driven not by demand from new users like data centers, but by a host of other factors. These include hardening of the grid right making the more secure, making the grid more secure, disaster recovery, volatile fuel prices, and regulatory mandates. States with greater load growth generally saw smaller price increases or even declines. Another analysis from Lawrence Berkeley National Labs reached a similar conclusion. How does more demand lead to lower prices? He says, retail electricity does not function like an ordinary competitive market. Utilities are regulated monopolies whose rates are set to recover average costs. Most of those costs are fixed. They don't change polls, wires, substations, power plants. They got to be paid for regardless of how much electricity customers use. When a large customer like a data center, plugs in, those costs are spread across more kilowatt hours. That reduces the average cost of supplying each one. Does that make sense? Data centers are unusually large and steady customers. That allows a utility to sell more power through infrastructure that it has already built, meaning that it collects more revenue while lowering the average cost per kilowatt hour. This is how the American grid worked for most of the twentieth century, when demand grew year after year while real electricity prices fell. So if the data centers haven't been raising residential bills, what has. Well, here's a hint. Do you know where the largest price increases in electricity rates occurred? The West Coast and the Northeast. What do you think led to those price increases in those areas? State policies have made electricity more expensive to produce and to deliver. You got renewable mandates right that require utilities to procure growing shares of wind and solar. Net metering programs, shifting grid costs from rooftop solar owners onto other customers. Carbon pricing programs add further costs to fossil fuel generation. Together, these policies have added substantially to rates in many of the states where electricity prices have risen sharply. So policy and also you know demonization of nuclear prompting New York to close down Indian Point for example, and they celebrated, just like Germany celebrated the mothballing of its nuclear reactors, and then they had to buy a whole bunch of energy from Russia at increased costs. The answer is, generate more electricity. We have the grid to support it, but we won't forever, so you have to build more to progress or progress if you will. From the text line, kevy keV says, this is the exact same issues when back in the early two thousands with cell phone towers, people did not want them going up everywhere. But look how many people rely on their cell phones daily. If we didn't have them in the service would not be so great. Now. I know eventually it's going to switch and probably be serviced through satellites. This is a face that has to a phase that has to happen with technology. If you don't like it, then get rid of your tech and go back to landline phones and encyclopedias. Andy, It's funny how all of these pinheads that screen power issues will be a problem caused by data centers are also driving evs and pushing others to do the same. Stanley says, I'll simplify it even further for you as to why energy prices have risen by a higher percentage in the northeast and western West Coast Democrats. Yeah, these are Democrat policies. That's what has driven electric costs. Electricity costs so high, and that's why these data centers are not really being built anymore in those blue states. It's too expensive. Other policies compound the increases. The sharpest increases are found in states that have pursued the country's most aggressive climate policies, not those with the most data centers. According to the Electric Power Research Institute study that I cited earlier, they note that while data centers thus far have not driven price increases, supply constraints so the amount of power that we generate right like, we could see a problem down the road because we are constraining our own supply of power. We are doing this to ourselves again, Like so many things, this is a choice we don't have to make. These choices. Supply constraints could reverse the effect in the years ahead. The last decade's data center growth occurred while the grid still had slack still at extra right, the coming AI buildout will require new grid capacity at a time when key equipment like transformers and gas turbines face multi year lead times and backlogs. If regulators prevent supply from responding to the new demand, prices will rise. But that's an argument for making it easier to build, not for banning the data centers who want to pay for it. It's also an argument for policies that make large loads carry their own weight. And this is already happening, right. I oppose any kind of subsidies for these data centers, but I oppose subsidies for all the private industries. Like whenever the governor gets up there and cuts the big ribbon with the ridiculously oversized scissors, saying, oh, we're giving this company all these millions of dollars to come to our state, like, I oppose all of this stuff. So there's been a rolling back of you know, electricity subsidies to the data centers to get them built in certain locations. That all of this stuff is now falling away. You guys got to pay your own way. You're paying your own way on all of this. You've got the money, you can afford it. Okay, these big companies, they can afford to pay the going rate, or you can build your own electric generation apparatus. Data centers do not inherently cause higher electricity prices. The evidence so far suggests the opposite. They have lowered them. They've lowered household bills. Whether the AI build out benfits or burdens rate payers will depend on whether regulators allow electricity supply to grow with demand and ensure that data centers, rather than existing customers, pay for the new infrastructure that they require. Right, so, once again, government is the problem, like we are hamstringing ourselves. Related to this, one of the most overlooked aspects is how markets respond to these constraints, whether they are existing, they're regulatory, or they are new. With demand for data centers, growing, firms are not just investing in the servers, the chips, the electricity, right, they're investing in workforce development via skilled trades training. That's not the result of a government mandate either. It's the result of the free market market incentives. Too much of this debate assumes that every challenge needs some sort of regulatory solution. Markets are already responding. They can do so faster than the government. Rising demand for this infrastructure is leading to more data centers, more electricity generation, more transmission, and yes, more skilled workers. In other words, the market is doing what it always does, and it will keep doing it if we let it again. This is in defense of data centers being built, not banned. This is not in defense of a badly designed project going in a place that it shouldn't be located. That is a zoning issue. This is why when Charlotte was debating and implementing its one hundred and fifty day moratorium, I said at the time, I am not necessarily opposed to a moratorium. If the goal is to develop a framework, If the goal is to ban data centers, then I am opposed. We should not be banning them. They generate a ton of money and a ton of workforce development, and is it part of a reindustrialization of the country. So no, I'm not opposed to it. All right, that'll do it for this episode. Thank you so much for listening. I could not do the show without your support and the support of the businesses that advertise on the podcast, so if you'd like, please support them too and tell them you heard it here. You can also become a patron at my Patreon page or go to dpetecleanershow dot com. Again, thank you so much for listening, and don't break anything while I'm gone.