A KPMG report reveals that data center developers and large tech firms are willing to pay substantially higher electricity costs, even double their current spending, to address the growing power shortages fueled by the AI boom. This reflects a "grow at all costs" mentality in the industry.
Over half of hyperscale tenants and data center developers surveyed indicated willingness to pay up to 50% more for electricity, with 14% prepared to pay double for low-carbon options. Power pricing, previously a major site selection factor, is now less of a priority.
The industry is exploring innovative solutions like on-site power generation and joint ventures with utilities to secure power quickly. This includes the adoption of previously cost-prohibitive technologies like hydrogen fuel cells.
The AI-driven surge in data center development is expected to double the sector's global electricity consumption in five years. While data center firms show high willingness to pay more, collaboration with utilities is lagging. Only 36% of hyperscalers and developers are keen on joint ventures, compared to 62% of utilities. This collaboration is crucial to navigate the challenges and avoid stranded assets and rising costs.
This increased willingness to pay is leading to data center projects in regions previously deemed too expensive, such as Southern California and Massachusetts. Utilities are also implementing upfront fee structures for grid connections, though this doesn't seem to deter hyperscalers.