Utilities are in the crosshairs of the data center backlash

Episode Summary

Executive Summary: The episode examines the bipartisan backlash against data centers and rising power costs, arguing the fight is really about trust in utilities, governors, and institutions. The hosts also dissect PJM’s reopened interconnection queue and conclude that demand growth, not queues alone, will reshape planning. A reported Indiana case study shows how local resentment, utility distrust, and weak public engagement are fueling opposition.

Main Topics: PJM interconnection queue and the return of gas (Priority: 5/5): The hosts debate PJM’s reopened queue, noting that many renewable projects fell out while gas now dominates. They argue the queue is less informative than actual deployment, financing, and offtake risk. Governors under pressure from data center backlash (Priority: 5/5): Discussion centers on Governor Josh Shapiro’s public letter to utilities, which reflects how governors who once courted AI investment are now trying to manage voter anger over costs and infrastructure. Utility distrust and broken regulation (Priority: 5/5): The conversation frames the crisis as a long-running failure of utility regulation, IRPs, rate design, and public trust, with governors and PSCs often lacking the expertise to manage fast-changing load growth. Gridlock, populism, and institutional mistrust (Priority: 4/5): The hosts argue that distrust of institutions—utilities, governors, tech firms, and environmental groups—has created political gridlock, limiting coherent policy responses and making outcomes harder to predict. Indiana case study: Lake County and Project Shirley (Priority: 5/5): Latitude reporter Mae Alsup explains how a proposed $5 billion, 500 MW data center in Lake County reflects broader national tensions: high bills, labor disputes, land-use conflict, and skepticism toward NIPSCO. Who bears the risk: ratepayers, shareholders, or customers? (Priority: 4/5): The episode explores utility-owned generation vehicles like NIPSCO’s Genco and debates whether these structures properly ring-fence risk or could leave ratepayers exposed if data center demand fails to materialize. Need for demand flexibility and distributed resources (Priority: 4/5): The hosts argue that utilities will ultimately need batteries, VPPs, behind-the-meter resources, and flexible load to avoid outages, because traditional central-station buildouts are too slow for today’s demand growth.

Key Arguments: PJM’s queue data may be less important than whether projects are actually financeable and have real offtake agreements; gas-heavy queue participation does not guarantee gas plants get built. Renewable projects dropped out partly because the new process and market conditions make financing harder, while developers now wait for better terms or later in the planning cycle. Shapiro’s letter is mostly a demand for basic good regulation: proper rate design, customer-value analysis, and utility accountability. Governors are caught between affordability, economic development, and environmental goals; whichever path they choose, they risk alienating one of their key constituencies. Utility distrust is central: consumers believe utilities prioritize shareholders, bills are rising, and public confidence in the old utility model is eroding. The current system was built for slower load growth; AI/data centers create a new planning reality where long-term certainty is unavailable but infrastructure must still be built quickly. Local opposition often comes from communities with long histories of fighting unwanted industrial projects, not just from pure anti-data-center sentiment. A major near-term solution is demand flexibility: batteries, VPPs, distributed generation, and behind-the-meter backup can reduce strain faster than central buildouts.

Data Points: PJM backlog size: nearly 3,000 projects - The queue was shut down in 2022 because the backlog had become unworkable. Renewables share of old PJM backlog: two-thirds - Two-thirds of the nearly 3,000 queued projects were renewables before the redesign. Gas share in reopened PJM queue: nearly half of capacity - When the queue reopened in spring, natural gas dominated submissions. Annual excess capacity payments in PJM: $16 billion a year - Jigger cites this as money paid to existing generators, underscoring the cost burden on ratepayers. Capacity payment target mentioned by hosts: about $3 billion - Jigger says governors want capacity payments reduced from $16 billion toward roughly $3 billion. Projected new capacity needed: 10,000–15,000 megawatts - Jigger argues this amount of new supply is needed to reduce PJM’s cost burden. Pennsylvania planned data centers: $100 billion - Mentioned as the scale of data center investment Shapiro previously helped attract. Indiana project size: $5 billion - The Sentinel Data Centers proposal in Lake County. Indiana project load: 500 megawatts - The proposed Lake County data center would consume 500 MW. Lake County township population: 1,700 people - The project is proposed for a small township on agricultural land. NIPSCO rate pain: bills doubled or tripled - Residents described sharp recent increases in electricity bills. Data center load growth planning horizon: 3–4 years - Speakers repeatedly say much of the planned capital wants energization within the next few years. States considering rollback of incentives: 28 of 38 - The intro says 28 of 38 states with tax incentives are weighing rollbacks. State political exposure: 36 governors - Jigger notes 36 governors are running for reelection or election this year. Data centers using evaporative cooling: 50% - Cited as evidence that many data centers still use older cooling designs. Battery prices cited: $14,500 - Jigger mentions an EG4 60-kWh battery price as evidence of falling storage costs.

Pivotal Quotes: "There is a massive political realignment happening in America. It's not over healthcare or climate change or the war in Iran, it's over data centers." — Stephen Lacey: Opening framing of the episode’s central thesis about data-center politics. "70 to 80% of what he asked for in that letter is just called good rate regulation." — Caroline Golan: Her reaction to Governor Shapiro’s letter to utilities. "My fear is actual violence." — Jigger Shah: He warns that distrust, inequality, AI disruption, and political vitriol could escalate beyond gridlock.

Implications: Data-center opposition is becoming a durable political force. Utilities and governors will need faster, clearer rate design and more transparent community engagement, while developers must offer real local benefits and flexible load solutions or face delays, moratoriums, and growing unrest.