- Data centers are facing pushback from citizens over power usage and rising energy costs
- Google is trying to solve the problem by bringing its own power while Microsoft is promising to pay up for grid upgrades
- Applied Digital argued there's another way to do things
Power supply has become a critical issue for data center developers. Not only do they need to find sites capable of quenching a data center’s monster appetite, but they’re increasingly fighting to quell local opposition to their expansion plans. So, what’s a hyperscaler with big data center expansion plans to do?
If you’re Google, the answer is to become your own energy supplier.
In late December, the company scooped up energy infrastructure company Intersect for a cool $4.75 billion. The acquisition follows a 2024 partnership deal between Google and Intersect aimed at co-locating data centers and “clean” energy generation sites. Google said the move “enables the buildout of data center infrastructure without passing on costs to grid customers.”
The purchase only includes assets in development as part of that collaboration, including a facility under construction in Haskell County, Texas. Intersect’s other assets, including operational assets in Texas and those in development in California, will bought out by existing investors and run as a separate company.
By taking electricity generation — and “clean” energy generation at that — into its own hands, Google is killing two birds with one stone. First, it gets to skip the years-long wait times that data center developers are facing for energy supply. Rather than wooing and waiting for utilities to build pricey power generation and transmission facilities, Google instead has gained greater control over the pace at which new electricity generation is added.
Google brings the PR and the power
Second, Google just added a powerful PR tool to its arsenal.
Rising power costs are commonly cited as a key concern among local residents who don’t want data centers coming to town. By bringing it’s own “clean” power generation with it, Google has armed itself with a fairly convincing short-term counterargument to help secure the approvals needed to initiate new developments. It has also bought itself a longer-term defense if electricity costs do eventually rise in the communities where it operates.
Those costs will definitely rise, according to Applied Digital’s CEO Wes Cummins. That’s just a natural consequence of the inflationary effects of the past several years rippling through infrastructure with long replacement cycles, he recently told Fierce.
A utility is not going to replace their transformers, turbines or other components every year. But when they do need a repair or upgrade, that equipment will inevitably be more expensive than it was in the past. Those costs will slowly start to flow through to rates, regardless of whether a data center comes to town or not.
Microsoft wants to 'pay its own way'
In some ways, Cummins argued, data centers have nothing to do with rising electricity rates. In other ways, though, they very much do. Data centers drive a need for new power generation and transmission infrastructure — and a lot of it.
In a note to investors last month, J.Gold Associates said a single AI data center running 100,000 GPUs at 70% utilization draws as much power in a single day as 150,000 average households do in an entire year.
This is where Microsoft’s approach to the energy problem comes into play. The tech giant says it wants to foot the bill for its own electricity usage. Earlier this week, Microsoft Vice Chair and President Brad Smith posted a blog promising the company would “pay our own way to ensure data centers don’t increase your electricity prices.”
Specifically, it pledged to “pay utility rates that are high enough to cover our electricity costs” and “collaborate with utilities on plans to add the electricity we will need.”
The electricity element was just one in a series of promises Microsoft made as part of its “Community-First AI Infrastructure” initiative, the others being focused on water use, tax contributions, job creation and AI upskilling.
“We believe that it’s both unfair and politically unrealistic for our industry to ask the public to shoulder added electricity costs for AI. Instead, we believe the long-term success of AI infrastructure requires that tech companies pay their own way for the electricity costs they create,” Smith wrote.
He continued: “We’ll ask utilities and public commissions to set our rates high enough to cover the electricity costs for our datacenters. This includes the costs of adding and using the electricity infrastructure needed for the datacenters we build, own and operate.”
A gaping hole in the plan
Microsoft is promising to support something that was already happening whether hyperscalers are on board or not.
In recent months, Dominion Energy in Virginia, Evergy in Kansas and Missouri, AEP in Ohio, Georgia Power in Georgia, and two utilities in Michigan all introduced new rate tiers specific to large-load customers to help insulate residential rate payers from infrastructure upgrade costs associated with data centers. Utility regulators in Pennsylvania are looking to do the same.
And while it’s a smart move to generate positive PR in the face of data center backlash, there’s a gaping hole in Microsoft’s plan that will expose it to scrutiny longer-term: accountability. Microsoft isn’t accountable to anyone but itself to fulfill its promises, which means that its community-first AI approach — much like hyperscalers’ suddenly sidelined sustainability goals — could fall by the wayside when no one’s looking.
Speaking of sustainability, Microsoft noted in its 2025 sustainability report that its energy use skyrocketed 168% and its emissions rose 23.4% in its fiscal year 2024 compared to its 2019 baseline, due to AI and cloud expansions. Google’s emissions, meanwhile, jumped 51% from 2019 to 2024, noted its own 2025 sustainability report.
Where is the happy medium?
All of this begs the question of whether there’s a happy medium between what Google is doing and Microsoft’s approach.
To hear Applied Digital’s Cummins tell it, the happy medium involves tapping into stranded power sources and covering the capital expenses required to do that. By doing so, data centers can get the power they need without increasing electricity costs for residents. He pointed to Applied Digital’s campus in Ellendale, North Dakota, as an example.
Applied Digital claimed in government testimony that its Ellendale facility directly resulted in Montana-Dakota Utilities being able to return $5.4 million to rate payers in 2023 and $14 million to rate payers in 2024. Speaking with the Devil’s Lake Journal last month, an MDU executive verified the data center has helped save rate payers money.
“This is all about where you locate these facilities and how you locate them,” Cummins told Fierce. “If you do it correctly…you can create this really nice benefit [for the community]. Just sticking another one in NoVA [Northern Virginia] or sticking another one in Dallas, that’s not going to give you the same benefit.”
Cummins added that proper siting and community consideration will be key in dampening the blame that will be placed data centers when electricity prices inevitably rise due to the aforementioned inflationary effects.
“There are so many wannabe developers that run around and try to do whatever they can to try to get something online,” Cummins concluded. “I hope everyone does it the right way because we’re kind of all in this together from a public perception perspective. We need to do well in the industry and do things the right way so that we don’t have all this blowback.”