EDITORIAL: ‘Confusing consumption with scarcity’

It’s a reliable rule of thumb that virtually every progressive intervention in the economy requires one or more additional interventions to address the unintended consequences triggered by the original intervention. Higher electricity prices represent the most recent example of this truism.

This month, Sen. Elizabeth Warren, D-Ivory Tower, announced that she and a handful of her left-wing colleagues were opening an investigation into “big tech data centers” for “driving up” energy costs for consumers. The probe cited “alarming reports that tech companies are passing on the costs of building and operating their data centers to ordinary Americans as AI data centers’ energy usage has caused residential electricity bills to skyrocket in nearby communities,” according to Sen. Warren and two 0ther Democrats.

The theory is apparently that data centers, which house computer systems that drive the internet and artificial intelligence, raise demand for electricity and thus increase the price of power for everyone else. In fact, higher demand will usually push prices down. A Lawrence Berkeley National Laboratory examination of data from 2019 to 2024 “found that states with higher electricity demand growth generally experienced smaller increases in retail prices. In some cases, prices declined outright,” Marc Oestrich of reason.com reports.

Sen. Warren and friends have it wrong. “The investigation’s central assumption — that more electricity use must mean higher bills — confuses consumption with scarcity,” Mr. Oestrich notes. “Prices rise only when supply can’t respond.”

And that is precisely what has happened in many jurisdictions. Progressives such as Sen. Warren have spent years making it more difficult for traditional energy suppliers to do business. Renewable mandates — such as Nevada’s 50 percent renewable portfolio standard — make the situation worse in terms of supply and pricing. An aging grid doesn’t help. But efforts to update or expand infrastructure are typically met with resistance from the usual green suspects.

“Data centers aren’t driving up costs,” Drew Maloney, chief executive of the Edison Institute, told The Wall Street Journal this week. “A lot of times it’s the state policies that are driving the cost.”

It’s no surprise that residents of California — which has become openly hostile toward energy development and has imposed some of the strictest renewable requirements in the nation — have endured a 35 percent inflation-adjusted increase in electricity prices.

“Policymakers are scapegoating demand to avoid reckoning with the consequences of their own decisions,” Mr, Oestrich observes.

Sen. Warren is a smart woman. But blaming data centers for high energy is a transparent effort to deflect from the real problem: Progressive policies have predictably led to consumer pain.