Sinking Fund Methods That Actually Work, Plus The Hidden Cost of AI Data Centers
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What is the main topic discussed in this episode?
You know them, you love them, and after we did a whole segment on them, you wanted more. So let's talk again about your questions about sinking funds. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. Later this episode, some follow-up questions to the episode we did on how to utilize savings buckets. But first, our weekly Money News Roundup, where we break down the latest in the world of finance to help you be smarter with your money. Today, our news colleague Ana Hilchowski joins us to talk about data centers. They were once the kind of project every town was vying for with the promise of tax revenue, jobs, and a foothold in the AI economic boom.
But lately, towns are pulling back the welcome mats as local opposition to new facilities and their potential costs spreads. Ana is going to unpack why towns are pushing back against data centers. Ana, welcome back.
Thanks, Sean. It appears that people are not so excited about becoming neighbors with data centers, especially the very biggest data centers known as hyperscale facilities. In June, HeatMap released a poll that found 70 percent of Americans oppose a data center being built near their homes. Now, HeatMap did the same poll in October of last year, and that number was 42 percent.
Wow. OK, so that's a very big change in a pretty short amount of time.
Yeah, it is. And I got to say, after all the research I've done on data centers, I can't really blame them. That spike illustrates how quickly backlash is spreading. I'd like to add that the swing is nonpartisan. So this has become an issue for people all over the political spectrum.
So it's nice to find something that we can all agree on in this country. Let's start with the big picture. Why are so many Americans suddenly turning against data centers?
People are starting to get the sense that they'll be footing a bill that they never agreed to. And those costs are not only financial, but quality of life related as well.
Speaking of bills, electricity is often the first cause that people bring up. Why are data centers pushing utility rates higher?
How are communities reacting to new hyperscale AI data centers nearby?
Because these facilities require an enormous, constant supply of power. There's a meta facility under construction in Wyoming that's expected to eventually consume 10 gigawatts. And there's another one in Ohio funded by the Department of Energy that would consume the same. Now, for context, one gigawatt is enough to power roughly one million homes. So 10 gigawatts is the equivalent of 10 million homes. When that kind of demand gets added to an aging electrical grid, utilities have to upkeep and even expand infrastructure. And a lot of that cost is going to get passed to ratepayers. I'd like to add that when I say ratepayers, that may include people who live nowhere near the facility itself. One of my sources for a recent story I wrote on this topic lives in Baltimore, and he said that he's seen his electricity bill rise because of data centers 60 miles away in northern Virginia, which is known as Data Center Alley.
And that's simply because they're on the same regional grid.
So this is not just a local Virginia issue anymore?
No. Nationally, data centers accounted for under 6% of U.S. electricity use today. But last week, Bloomberg NEF published a projection that shows data centers could comprise one-fifth of the entire U.S. electricity consumption by 2035. So this cost pressure is going to spread well beyond the current hotspots.
Geez. So who would actually end up paying for grid upgrades these facilities require?
In most cases, it's a shared cost. And that's exactly why it's so controversial. Dominion Energy, the major utility that serves northern Virginia, has announced plans to spend $8 billion expanding its infrastructure. And Virginia ratepayers are expected to cover more than half of that.
So electricity isn't the only utility that folks are concerned about. Water is another big one, too, right?
Yeah, cooling all those servers takes a lot of water.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:00–1:52
2
How are communities reacting to new hyperscale AI data centers nearby?
1:52–6:32
3
Why are data centers driving up regional electricity rates and who pays for grid upgrades?
6:32–13:48
4
How much water do data centers use and what are the local water-supply risks?
13:48–17:17
5
What noise and health impacts have residents reported from hyperscale data centers?
17:17–22:15
6
Do data centers raise local property values or reduce long-term economic benefits?
22:15–30:06
7
What policy responses and moratoriums are towns using to push back on data centers?
30:06–30:42
Speakers
3 identifiedMore from NerdWallet's Smart Money Podcast
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