AI and the electricity blackout America needs
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The Washington Post’s latest coverage of the so-called “data center rebellion” highlights a trend building across America: communities rising up against server farms powering AI, cryptocurrency, and other data-intensive ventures.
At first glance, these stories read like classic NIMBYism. Residents don’t want their electricity bills to spike, their water supplies strained, or their landscapes transformed.
Can the rebellion be defused? Not on the current path.
These ruptures were not inevitable. They are symptoms of far deeper structural problems rooted in legacy approaches to infrastructure — approaches that tether data centers to coercive public utility price- and access-control models.
And this phenomenon is not limited to data centers. For more than a century, nearly all large-scale networks — not just electricity, but telecommunications and broadband, water and sewer, transportation, and now even emergent “smart cities” — have been shoehorned into the orbit of state and federal commissions, public utility entanglements, subsidies, public-private partnerships and outright government ownership. All of this is about as remote from free enterprise as can be imagined.
Call it political erectile dysfunction. The problem plaguing American infrastructure is not market failure, but failure to have markets characterized by voluntary, mutually beneficial exchange.
In the early 20th century, aside from (at times) rights-of-way themselves, private firms such as turnpikes and streetcars received little or no public support or subsidy. They negotiated franchises with city councils rather than receiving automatic grants that shut out competition. Later interventions, such as the Urban Mass Transit Act of 1964, displaced private transit with subsidies and public infrastructure.
Over time, entire sectors were sacrificed to regulatory control. Adaptation was prevented. Networks — from water systems to the power grid — were rendered obsolete by design, producing endless calls for “modernization” and encouraging doomed schemes like the Infrastructure Investment and Jobs Act’s subsidy-and-regulatory approach. In the process, voluntary, negotiated rights-of-way and private coordination were foreclosed.
Breaking down regulatory silos across sectors, abolishing the agencies that maintain them, and enabling innovation in new forms of network property rights are essential if infrastructure is to expand, adapt and endure. Infrastructure should evolve organically, not be frozen in isolated silos. Monopoly regulation under which we now toil never permitted — and never will permit — the necessary adaptation.
Allowing private incentives to align with public benefits is the key. That means rejecting takings and expropriations used to build new grids or force data centers onto unwilling communities. It also means negotiated easements with landowners — and even user ownership of resulting grids. Historically, streetcar operators paid landowners, offered perks such as free rides or preferential access, and in doing so stimulated real estate development and housing growth on city outskirts.
Mega-data centers are, in important ways, modern streetcars: privately owned enterprises seeking access to land, electricity, and connectivity. The challenge is to align those private incentives with landowner and community benefits.
Yet while data centers may be privately owned, their infrastructure needs — electricity, water, broadband — remain deeply entangled with regulated utilities. Communities fear that local grids will strain under demand, or that upgrade costs will be socialized across ratepayers or taxpayers, all while companies enjoy state-backed tax breaks, subsidies, and closed-door deals.
Historically, when colonists traveled up America’s rivers, they hit rocks — and that’s where they stopped and built their cities. Today, the cities themselves — and the vast armies of federal, state, and local regulatory commissions — have become the rocks, blocking private initiative and dealmaking.
The path forward is to realign incentives, compensate landowners directly, and disentangle infrastructure of all types from the coercive hand of the state — by chunks and by bits, wherever and whenever possible. One can envision mutually beneficial offers to landowners to site not only AI server infrastructure, but 5G cells, EV charging networks, overhead drone corridors, and even networked smart-city communities. All of this would extricate infrastructure from utility-centered, subsidy-driven approaches and allow landowner participation and profit-sharing — quieting regulators for a change. The very technologies these new infrastructures both represent and sustain expose the fallacies of old-school market failure and coordination claims.
Current legislative and regulatory options include Consumer Regulated Electricity (CRE), as described by Travis Fisher and Paige Lambermont, which would allow large power users — such as AI data centers — to “work with power suppliers independent of the existing power grid.” Alongside obvious necessities like CRE and aggressive permitting reform, several additional steps are essential if we are to enable fluid, transactive, and smart grids rather than ones doomed to decay.
Direct landowner compensation and value capture
Negotiated agreements like “beneficiary pays” but up to and including user ownership can allow property owners to share in the economic upside of AI data centers, EV charging networks, or 5G cell infrastructure, fiber deployment, water systems, transmission and distribution lines and more.
Disentangling private infrastructure from regulated utilities
New AI data centers, EV networks, energy projects and more can not only cover costs of connecting to grids but of building new private ones outright, avoiding cost socialization and allowing private actors to plan efficiently as well as be displaced when they fail. Private dealmakers and developers can approach landowners with voluntary, mutually beneficial contracts instead of internalizing today’s utility-centric models in order to begin testing voluntary engagements to align incentives, build community buy-in and reduce political backlash.
Abolish agencies, remove regulatory silos and unleash cross-network coordination
Agencies like FERC, FCC, and DOT fragment responsibility across electricity, broadband, water, and transportation, artificially isolating sectors that should coordinate. The resulting costs to the economy and society, perhaps in the trillions, come in the form of lost infrastructure, jobs and wealth. Tearing down these silos down can allow network industries to collaborate in ways now sacrificed to the hopeless administrative state model, internalize costs rather than externalize them and expand infrastructure in ways currently unimaginable.
Some current policy proposals gesture toward this network-liberation vision. Community benefits agreements are discussed as ways to mitigate harms and guarantee benefits, and certain local governments now tie data center tax revenues to community projects (though these risk enabling new regulatory and social-policy sprawl). Such measures stop short of actually liberating infrastructure itself. No one in a position of power is articulating the proposals necessary to dismantle the regulatory silos that prevent infrastructure from being organically planned and expanded across sectors.
In short, the current debate acknowledges local opposition but fails to confront the deeper misalignment of incentives, which can only be resolved by restoring property rights and gains from trade in cross-sectoral infrastructures, apart from government dominance.
There is much more to be said about separating infrastructure and state (some explorations are linked below). But as things stand, political erectile dysfunction ensures that neither communities nor companies can devise stable solutions — and everyone will continue to suffer.
The hodgepodge of utility-based regulatory silos is a failed model. Competitive, organic infrastructures that evolve without politicized “modernization” are necessary — and achievable only through free enterprise that empowers cross-network coordination among producers, consumers, and landowners.
If policymakers cling to utility-centered, subsidy-driven governance, they double down on the mistakes that produced today’s brittle infrastructure and alienated communities. Just as streetcar companies once aligned private incentives with community benefit, modern networks can be structured so that those who benefit also share in the costs — and those who might otherwise lose instead share in the rewards.
Landowners, neighbors, and developers should negotiate deals rather than be dictated to by utility monopolies or regulators.
America needs a blackout — but a blackout of new regulation and big-government infrastructure.
For more, see:
“The Techno-Libertarian Pivot: How Separation Of Tech And State Can Save Innovation,” Forbes
“Splinternets and Cyberspaces vs. Net Neutrality,” Technology Liberation Front
“Electricity Restructuring is No License for Central Planning,” (with Fred L. Smith Jr.), Public Utilities Fortnightly
“Powering Intelligence: Meeting AI’s Energy Needs in a Changing Electricity Landscape,” James Broughel and Paige Lambermont, Competitive Enterprise Institute
“Electric Avenues: Why ‘Open Access’ Can’t Compete,” Cato Institute