AI Data Centers: Sustainable Solutions for a Growing Crisis

TL;DR

AI's thirst for power & water is sparking a crisis. From new laws in Oregon to community pushback & tech innovations, states are fighting back. #VentureStep #SustainableAI #Tech

INTRODUCTION

What if the cloud provider powering your favorite apps was draining your city of its water and straining the power grid? ¹This isn't a hypothetical question; it's the reality communities across the country are facing as the AI boom drives an insatiable demand for massive data centers. ²These facilities consume mind-boggling amounts of energy and water, leading to skyrocketing utility bills for residents and significant environmental concerns. ³³³

In this episode of Venture Step, host Dalton Anderson moves past the problems outlined in our previous discussion and dives deep into the solutions. ⁴⁴⁴Following up on the episode "How AI Data Centers Are Draining Power, Water, & Patience," this conversation focuses on the proactive measures being taken to mitigate the negative impacts of this technological gold rush. ⁵⁵⁵

Dalton explores a multi-faceted approach to creating a more sustainable future for data centers, covering the new wave of state legislation, the power of community-led resistance, and the promising technological advancements that could change the game. ⁶⁶⁶⁶From Oregon's landmark "Power Act" to Nvidia's hyper-efficient chips, this episode charts a path forward, seeking a balance between technological progress and community well-being. ⁷⁷

KEY TAKEAWAYS

• Proactive Legislation is Key: States like Oregon are leading the way with new laws that reclassify data centers as high-usage energy consumers, forcing them into long-term contracts and preventing them from passing infrastructure costs onto residents. ⁸⁸⁸
• Community Activism Drives Change: Local communities are successfully fighting back against disruptive data center construction through stricter zoning laws, public awareness campaigns, and even outright bans to protect their neighborhoods from noise and pollution. ⁹⁹⁹
• The Economic Promise Can Be Deceptive: Despite promising tax revenue and job creation, many states are theorized to be losing money on data center deals due to generous tax incentives, while residents bear the cost of strained public resources. ¹⁰¹⁰¹⁰
• Technological Innovation Offers Hope: Companies are pursuing solutions like using non-potable water for cooling, direct-to-chip cooling, and creating vastly more energy-efficient GPUs like Nvidia's Blackwell, which promises a significant reduction in energy usage. ^{1111111111111111}
• Transparency is Non-Negotiable: Many data center deals are conducted behind closed doors with NDAs covering their power and water usage, leading to community distrust. ^121212121212 A shift towards transparency and localized benefits is crucial for a sustainable path forward.

FULL CONVERSATION

Dalton: Welcome to Venture Step podcast, where we discuss entrepreneurship, industry trends, and the occasional book review. ¹³What if your favorite app's cloud provider was draining your city of water? ¹⁴That was a topic covered in our last episode. ¹⁵The water and power usage in these AI data centers are enormous and mind-boggling. ¹⁶This episode, we're going to talk about some of the solutions to the problem. ¹⁷

Dalton: If you need more background or are curious about the issues, I would really encourage you to listen to the previous episode. ¹⁸That episode discusses the issues of the data centers, the water usage, and some other things going on with pollution. ¹⁹This episode will discuss some of the solutions that states and communities have come up with, as well as technology solutions as things become more advanced. ²⁰The first part will cover legislative and regulatory solutions. ²¹Then we'll move towards community-led resistance and zoning, which is really led by the community after seeing some of the just horrific videos on Facebook and YouTube. ²²They're saying, "That is not happening here." ²³And I don't blame them, because it doesn't look too fun, especially if that's your home. ²⁴

How States Are Legislating Data Center Power Usage

Dalton: I talked about it in the last episode that Georgia was pushing for a bill that has since stalled, and they're going to push for it next year. ²⁵What Georgia wanted was to bar rate increases because of data centers. ²⁶The data center usage is taking up a lot of the supply. ²⁷Imagine data centers are taking up 40% of a pizza pie. ²⁸Since the data centers are classified as small businesses, there isn't a distinct difference in rate increases. ²⁹So small businesses and residents are getting charged because of the strain on infrastructure and the predicted usage of infrastructure. ³⁰

Dalton: If a company projects its energy usage and then doesn't need that much, the utility company is stuck with all this infrastructure they built out. ³¹The capital outlay of infrastructure is quite expensive, and if the projected usage doesn't meet that, they're stuck with this extra capacity that no one's using. ³²So that causes quite a bit of issues. ³³ The Georgia bill stalled. They're going to try again next year. ³⁴The people voting on the bill were all being paid by the utility companies. ³⁵It wasn't that much, like $10,000, $5,000, or $1,000, but I guess it could influence your decision. ³⁶

Oregon's Power Act: A Model for Regulation?

Dalton: There is some good stuff. So Oregon passed the Power Act, House Bill 3546. ³⁷It reclassifies energy usage for data centers or high-usage companies. ³⁸Their threshold was anything over 20 megawatts, which is quite a bit. ³⁹That's anywhere from 13,000 to 40,000 homes; a common estimate is 20,000 homes. ⁴⁰So it's a small town. ⁴¹Another thing they included was long-term contracts. ⁴²You had to commit to a 10-year contract if you were going to use that much energy. ⁴³They want to make sure you're committed because they're going to have to build out infrastructure for you. ⁴⁴ So that was a positive. I think that's a great bill to pass. ⁴⁵

Dalton: Minnesota has legislation that grants explicit authority to the Public Utilities Commission to reject or accept special tariffs on energy supply deals for data centers. ⁴⁶So basically, any deal a data center wants in Minnesota has to get approved. ⁴⁷I think that one's okay, but I don't know if it's as rock-solid as Oregon's plan. ⁴⁸

Ohio's Plan: Making Data Centers Pay for Infrastructure

Dalton: Ohio's is pretty good as well, though it hasn't been completely approved. ⁴⁹AEP Ohio, a major utility company, proposed a couple of things. ⁵⁰They wanted to charge data centers 90% of peak usage instead of 60%. ⁵¹Previously, they were charging 60% of peak usage. ⁵²So if your peak usage was 100 megawatts, they are now going to charge for 90, even if you didn't consistently use 90 megawatts. ^53535353I think that's kind of fair because if your power usage is fluctuating quite a bit, like when you're training data models for months, you're using an absurd amount of energy. ⁵⁴

Dalton: That can cause blackouts within the community and a lot of strain on the infrastructure. ⁵⁵The next thing was they have to provide long-term contracts. ⁵⁶And they also need to pay for the enhanced infrastructure that the utility needs. ⁵⁷That was to prevent ordinary folks like myself from having to pay for these data centers being created without really getting any of the benefit. ⁵⁸They're trying to prevent that by making them commit to long-term contracts and charging 90% of peak, which would push data centers to have more consistent energy usage. ⁵⁹

Are States Losing Money on Data Center Deals?

Dalton: One thing that I thought was interesting was that 36 states provided tax incentives. ⁶⁰Originally I thought that converting unused land into a data center was profitable for the state. ⁶¹But when you dig a little deeper, it's theorized by analysts and lawyers that many states are actually losing money on these data center deals. ⁶²

It is theorized that many of the states are actually losing money on these data center deals. ⁶³

Dalton: Plus you have all the issues with the community being upset and the strain on your water and energy usage. ⁶⁴The energy and water usage has just blown out of the water, up 40-50% year over year. ⁶⁵I think these towns are quite concerned and also states aren't getting the revenue that they thought. ⁶⁶The math is not mathing for them. ⁶⁷

Dalton: A dozen states plan to introduce bills related to preventing data centers from driving up utility costs for normal customers. ⁶⁸As you may have heard last episode, I talked about the family in rural Georgia whose energy bill nearly doubled, a 90% increase. ^69696969This is what they're trying to prevent, but Georgia's bill failed. ⁷⁰

The Rise of Community-Led Resistance and Zoning Fights

Dalton: Other states are also getting pushed pretty hard, and the local communities are doing the pushing. ⁷¹I think one group in Fairfax County, Northern Virginia, really pushed hard on creating stricter zoning guidelines. ⁷²As I mentioned in the last episode, these data centers are really close to residential areas, like 300 or 400 feet. ⁷³And it's industrial use. ⁷⁴Any place that's using multiple megawatts of power that can power a whole town is not something that goes near a playground. ⁷⁵It's caused many issues, not only with noise but also pollution. ⁷⁶

I think it's kind of weird where I would position these data centers as the new Walmart... Walmart comes around and just dynamites the whole thing and just undercuts everybody intentionally. ^77777777

Dalton: In Fairfax County, they provided new zoning. ⁷⁸There are now setback rules and new classifications so they can't be so close to residential buildings. ⁷⁹A town in Missouri did an outright ban. ⁸⁰And in Indiana, residents had "no data center" signage everywhere. ⁸¹These data centers are normally in rural towns where there's availability of land, but often not much availability of power or water. ⁸²The big companies promise hundreds of millions in construction and jobs, but then a small to medium-sized data center only hires about 40 full-time employees. ^83838383The buildings don't look good, they're disruptive, the lights are always on, and the states don't even break even on the tax incentives. ⁸⁴

The Hidden Pollution Problem: Diesel Turbines in Your Backyard

Dalton: People are getting sick because these data centers don't have enough power. ⁸⁵⁸⁵The grid literally can't provide enough power for them, so they're seeking power elsewhere. ⁸⁶⁸⁶The main way you can really turn on power quick is with a gas or diesel turbine. ⁸⁷So these data centers are running these massive side power plants in their backyard. ⁸⁸⁸⁸They've got 20 or 30 turbines running nonstop to help power these enhanced training clusters. ⁸⁹

People are getting sick because of these data centers... they're running these massive power, basically side power plants... in their backyard. ^90909090

Dalton: That caused quite a bit of pollution and people were getting sick. ⁹¹People are pretty pissed. ⁹²Later on, they're running all those turbines and people are getting really sick and dying. ⁹³ That's no good.

Why Are Data Center Deals So Secretive?

Dalton: I wasn't aware of this, but these deals were pretty hush-hush. ⁹⁴⁹⁴I was surprised how hush-hush the Tesla deal was that I talked about in the last episode, where the town didn't even know they had the data center going on. ⁹⁵The only reason they found out was Elon was talking about it on X. ⁹⁶I was also surprised that other deals are pretty similar where they didn't have to disclose their water or power usage. ⁹⁷⁹⁷It was all NDA. ⁹⁸

I was surprised how hush hush the deals are... They didn't have to disclose their water usage. They didn't have to disclose their power usage. It was all NDA. ^99999999

Dalton: So when customers' bills increased and they asked why, the response was, "I can't tell you." ¹⁰⁰There's a story of a Google data center using local groundwater and completely draining it until locals found out. ¹⁰¹There's just all sorts of shady stuff going on with these deals, all behind closed doors. ¹⁰²It provides more frustration because the people hired to represent them aren't representing them. ¹⁰³

Technological Solutions: From Efficient Chips to Zero-Water Cooling

Dalton: This leads us to the tech advancements. ¹⁰⁴Some of which, I think honestly, a lot of these aren't going to work. ¹⁰⁵There's this direct-to-chip cooling mechanism where it cools the chip directly. ¹⁰⁶And Microsoft is running a pilot program for zero-water cooling where they had a small data center fully submerged in the water. ¹⁰⁷There are obviously issues with that, like infrastructure and accessibility. ¹⁰⁸

Dalton: What makes sense is not using potable water, but using non-potable water, so just reclaimed wastewater. ¹⁰⁹Amazon made a commitment that by 2030, they wanted the majority of their data centers to be using non-potable water. ^110110110110Google has made similar commitments. ¹¹¹I think one of the main pieces would be to make the chips more efficient. ¹¹²Nvidia is claiming that they are 20 to 30% more efficient with Blackwell systems. ¹¹³They also claim a 2000X reduction in energy usage for training over the past 10 years. ¹¹⁴The Blackwell Ultra GPU is reported to be 25X more efficient than traditional CPUs for certain AI and high-performance computing workloads. ¹¹⁵It's got to get more efficient for it to even make sense long-term. ¹¹⁶

Balancing the Economic Burden on Local Communities

Dalton: From what I have seen, I think there are economic gains, but if mismanaged, these data centers really just take over your town. ¹¹⁷It seems like a good deal where a big company is going to spend $400 million, but they're not really hiring that many people, maybe 40 for a small-medium facility. ^118118118118The benefits need to be more localized. ¹¹⁹

If the community is gonna have to deal with all this BS, then they need to get a lot of the benefits. ¹²⁰

Dalton: If you're going to put a massive data center in my town and my prices are going to increase, what about a stipend? ¹²¹I would love a stipend. ¹²²The benefits need to be more localized than they are at the moment because people are taking all the pain. ¹²³

Finding a Smarter Path Forward

Dalton: Right now, they have requirements on the usage of power and water, but it seems like these companies are in such a rush to get it done that they'll do whatever it takes. ¹²⁴They'll take from the local groundwater, doing massive damage. ¹²⁵If they need to, they'll purchase diesel turbines and pollute the local area. ¹²⁶You've got to push the right way. ¹²⁷If you're going to add all this power, you've got to do some kind of clean energy approach or reduce the pollution. ¹²⁸And if you're going to use water, you've got to be smart about that. ¹²⁹

Dalton: These towns are too small to have a voice, so they're kind of just getting pushed around. ¹³⁰But they're making progress on the regulations. ¹³¹Oregon's Power Act is very strong, and what is being proposed by Ohio is very strong. ¹³²Georgia's bill stalled, but they're going after it again next year. ¹³³So there's a big opportunity here to make things right. ¹³⁴

We just rethought that rethink the whole thing because right now it's just broken. The system is completely broken. ¹³⁵

Dalton: The current approach isn't working for quite a few states, so something needs to be changed. ¹³⁶But anyways, appreciate you listening to this episode. ¹³⁷I am glad to be back. ¹³⁸Wherever you are in this world, good afternoon, good evening, good morning. ¹³⁹Have a great day. ¹⁴⁰Thank you for listening, and talk to you next week. ¹⁴¹

RESOURCES MENTIONED

• AEP Ohio
• Amazon
• Google
• Microsoft
• Nvidia
• Nvidia Blackwell GPU
• Oregon House Bill 3546 (The Power Act)
• SpaceX
• Tesla
• X (formerly Twitter)
• XAI

INDEX OF CONCEPTS

AEP Ohio, AI data centers, Amazon, Atlanta, Blackwell architecture, Blackwell Ultra GPU, Dalton Anderson, diesel turbines, direct-to-chip cooling, Elon Musk, Fairfax County, gas turbines, Georgia, Google, House Bill 3546, HPC workloads, Microsoft, Minnesota, Missouri, New Jersey, New York, non-potable water, Northern Virginia, Nvidia, Ohio, Oregon, The Power Act, SpaceX, Tesla, Walmart, X, XAI, zero-water cooling