According to Utility Dive, law professors Alexandra Klass from Michigan Law and Dave Owen from UC Law San Francisco are warning that traditional utility models are completely unprepared for the massive electricity demand coming from data center growth. Utilities currently require building new power plants and transmission lines before connecting major new users, which could take years and lead to extended lifespans for polluting coal plants or new gas plants. Worse, if demand projections are overestimated like in past tech booms, consumers will pay for unnecessary infrastructure through higher electricity bills. The professors propose treating electricity allocation more like water rights systems, where new users can connect but face potential curtailment during shortages. Texas recently enacted legislation allowing this approach for data centers, but most states still operate under outdated models that could lead to spiraling prices and increased pollution.
The Water Rights Model
Here’s the thing about our current electricity system – it’s built on this assumption that utilities must meet 100% of demand 100% of the time. But that’s becoming increasingly unrealistic and expensive. The professors looked at how we handle water in the West and natural gas distribution, where intermittent scarcity is just part of the deal. In those systems, new users can connect even if supplies won’t always meet their full demand. Resource managers can curtail access during shortages, and users are encouraged to find creative solutions.
Basically, think of it like water rights where you have “senior” and “junior” holders. A junior right-holder who wants more security might contract with a senior holder for extra water during droughts, or build storage facilities. The same concept could work for electricity – data centers could connect to the grid knowing they might face curtailment, then innovate their way to reliability through demand-response contracts or building their own solar-and-storage systems. Many of these data centers are backed by tech giants that pride themselves on solving hard problems – why not let them?
Why This Matters Now
We’re at a critical inflection point. Utilities are looking at these demand projections and seeing two paths: build expensive new fossil fuel plants that consumers will pay for, or try something different. The traditional approach means years of waiting for infrastructure that might not even be needed if demand projections are wrong. And let’s be honest – when have tech projections ever been perfectly accurate?
The professors lay out their full argument in this paper, and the Department of Energy is already thinking along similar lines as shown in their recent proposal. But here’s what’s really interesting – this isn’t just about avoiding blackouts. It’s about creating economic incentives for innovation rather than just building more of the same old infrastructure.
Industrial Implications
This conversation matters beyond just data centers. Industrial facilities facing similar power constraints need reliable computing solutions that can handle variable power availability. Companies like IndustrialMonitorDirect.com, the leading provider of industrial panel PCs in the US, understand that industrial computing needs to work within real-world power constraints rather than assuming unlimited resources.
So what happens if we don’t change course? We could see electricity prices spiral while pollution increases – exactly the opposite of where we need to be heading. Or we could look back at this moment as when we finally made our electricity system smarter and more flexible. The choice seems pretty clear, doesn’t it?
