POLITICO Tech Podcast Summary

Episode Title: How Trump's AI Ambitions are at Odds with a Wonky Energy Agency
Host: Nirmal Maliko
Guest: Kathryn Morehouse, Politico Energy Reporter
Release Date: January 31, 2025

Introduction

In this episode of POLITICO Tech, host Nirmal Maliko delves into the intricate relationship between President Donald Trump's ambitions in artificial intelligence (AI) and the Federal Energy Regulatory Commission (FERC). The discussion centers on Trump's proposal to have data centers connect directly to power plants, bypassing the national power grid, and the potential regulatory hurdles this plan faces.

Trump's AI Ambitions and Direct Data Center Connections

President Donald Trump has advocated for a direct connection between data centers and power plants. The rationale behind this proposal is to ensure that AI-driven data centers receive a consistent and reliable power supply, mitigating concerns over power outages that could disrupt operations. By establishing a direct link, data centers would have dedicated access to electricity, enhancing their operational stability.

Kathryn Morehouse explains, “If the tech industry doesn't have power, they're not making money. So access to 24/7 Electricity is crucial” (04:30).

This arrangement is perceived as beneficial for both the tech and energy sectors. Tech companies gain a guaranteed power source, essential for their 24/7 operations, while power providers can secure a steady revenue stream by offering premium, dedicated power services to these data centers.

FERC's Role and Previous Decisions

FERC, or the Federal Energy Regulatory Commission, oversees the reliability and efficiency of the U.S. power grid. Their mandate includes ensuring that the power system operates reliably, safely, and economically. In the context of AI and data centers, FERC regulates agreements that could impact ratepayers and grid reliability.

Last fall, FERC faced a pivotal case where Talon Energy sought permission to increase power capacity delivered directly to an Amazon Web Services (AWS) data center. FERC rejected this proposal in a surprising decision by a minority of commissioners, highlighting concerns over grid reliability and consumer impact.

Kathryn Morehouse notes, “That decision was a bit of a surprise to folks in the industry” (06:00). This rejection underscored FERC’s cautious stance on direct power agreements that could siphon significant energy away from the national grid, potentially leading to higher costs and reduced reliability for ordinary consumers.

FERC Chair Mark Christie's Stance

With the appointment of Commissioner Mark Christie as the new chair of FERC, the agency's direction has garnered attention. Christie, a Republican appointed by Trump, emphasizes consumer protection and has a background as a state regulator in Virginia.

Kathryn Morehouse describes Christie, “He is primarily concerned with protecting the consumer. It guides every decision he makes” (08:43). Christie's regulatory philosophy often puts him at odds with other Republicans on FERC who favor more market-driven approaches. His focus on ensuring that power agreements do not disadvantage ratepayers positions him as a key figure in the ongoing debate over direct data center connections.

Christie has expressed significant concerns about colocation—the direct linking of data centers to power plants—highlighting its potential to disrupt the broader power system and increase costs for consumers.

Potential Conflict Between Trump and FERC

The alignment between President Trump and FERC under Chair Christie appears strained. While both parties express concerns over power supply adequacy, their approaches differ. Trump advocates for rapid expansion of power infrastructure to support burgeoning AI and data center demands. However, FERC, led by Christie, is cautious about approving arrangements that could compromise grid reliability and burden consumers.

Kathryn Morehouse explains, “If the administration can't get these plants built at the same pace that we are building data centers, then there will be pressure on FERC” (10:03). This scenario suggests a potential conflict where Trump’s push for AI infrastructure may clash with FERC’s regulatory safeguards designed to protect the national power grid and consumer interests.

Impact of Deepseek's Energy-Efficient AI Model

Adding another layer to the debate, the release of Deepseek's new AI model, which significantly reduces energy consumption, has implications for power demand projections. If AI technologies become more energy-efficient, the anticipated surge in power demand from data centers may not materialize as expected.

Kathryn Morehouse highlights, “Deepseek’s innovation has the potential to really shake up how AI develops and whether the power industry needs as rapid of a response as they've been assuming” (13:03). This development could alleviate some pressure on the power grid, challenging the urgency of Trump's proposals and influencing FERC's regulatory priorities.

Future Outlook and Conclusions

FERC is unlikely to provide immediate resolutions to the direct connection issues between data centers and power plants. The regulatory process is expected to be gradual, involving ongoing technical evaluations and stakeholder consultations.

Kathryn Morehouse states, “It really will be a bit more of a slow burn on the regulatory side” (14:09). The outcome of this regulatory deliberation will have significant implications for the global race to dominate AI and data center growth, balancing technological advancement with sustainable and reliable energy infrastructure.

Moreover, the broader energy transition towards cleaner sources adds complexity to the situation, as FERC must navigate the dual challenges of supporting AI growth while advancing the nation’s energy policy goals.

Notable Quotes

• Kathryn Morehouse: “If the tech industry doesn't have power, they're not making money. So access to 24/7 Electricity is crucial” (04:30).

• Kathryn Morehouse: “That decision was a bit of a surprise to folks in the industry” (06:00).

• Kathryn Morehouse: “He is primarily concerned with protecting the consumer” (08:43).

• Kathryn Morehouse: “If the administration can't get these plants built at the same pace that we are building data centers, then there will be pressure on FERC” (10:03).

• Kathryn Morehouse: “Deepseek’s innovation has the potential to really shake up how AI develops and whether the power industry needs as rapid of a response as they've been assuming” (13:03).

• Kathryn Morehouse: “It really will be a bit more of a slow burn on the regulatory side” (14:09).

Conclusion

This episode of POLITICO Tech sheds light on the complex interplay between AI advancements, energy infrastructure, and regulatory frameworks. President Trump's push for direct data center power connections faces significant regulatory scrutiny from FERC, led by Chairman Mark Christie, who prioritizes consumer protection and grid reliability. The emergence of more energy-efficient AI models, like Deepseek's, adds further uncertainty to the future landscape. As the U.S. navigates its position in the global AI race, the resolution of these energy policy challenges will be pivotal in shaping the nation's technological and economic trajectory.