How Trump's AI ambitions are at odds with a wonky energy agency

Summary

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.

Transcript

[Dave]

Oh, such a clutch off season pickup, Dave. I was worried we'd bring back the same team. I meant those blackout motorized shades. Lines.com made it crazy affordable to replace our old blinds. Hard to install? No, it's easy. I installed these and then got some from my mom. She talked to a design consultant for free and scheduled a professional measure and install hall of fame, son. They're the number one online retailer of custom window coverings in the world. Blinds.com is the goat shop.

[Advertisement Voice]

Blinds.com right now and get up to 45% off select styles plus a professional measure. Rules and restrictions may apply.

[Nirmal Maliko]

Hey, this is Politico Tech. I'm your guest host Nirmal Maliko, filling in for Stephen overlea. It's Friday, January 31st. AI companies are pushing Washington to provide more reliable power for their data centers. And President Donald Trump has made his preferred solution pretty clear. Trump wants data centers to connect directly to power plants instead of getting electricity through the nation's power grid. In theory, that arrangement is seemingly a win win for the tech and energy industries. Data centers don't have to worry as much about power outages and power plant providers can charge a premium. But Trump's solution does face an obstacle from a pretty wonky energy agency, the Federal Energy Regulatory Commission. We in the energy world call it ferc. And it may not be well known in the tech world, but but the agency essentially makes sure that America's power grid is reliable, safe, and economically efficient. Now, according to Politico Energy reporter Kathryn Morehouse, Trump's AI energy ambitions and FERC could be at odds. And that tension comes as Trump and America's tech industry are urgently trying to win the global AI and data center race. Yet at the same time, the US Is facing a looming power supply shortage in the next decade. So today, Cat and I get into why Donald Trump's AI plans may have a FERC problem. Here's our conversation. All right. So, Kat, I know we're usually on the Politico Energy podcast, but we are here now on Politico Tech. So I guess welcome to both of us. I'm excited to be here with you.

[Kathryn Morehouse]

Yeah, great to be here. I think this is technically my second inaugural tech podcast appearance, but this is the first time as a guest, so I'm excited.

[Nirmal Maliko]

Excellent, Excellent. So you did this great story about how President Donald Trump essentially wants power plants to hook up directly to data centers. That's part one of your story. So let's just start with that. First, can you explain the president's position here and how this could be, you know, in theory, a win win for the tech world and the energy world.

[Kathryn Morehouse]

Yeah. So this all came from a speech the President gave at the World Economic Forum. And in that speech, he discussed a actually quite wonky energy issue known as colocation, which made my ears perk up a little bit. And basically what that concerns is this growing issue that I think both of our podcasts have probably discussed at length, which is how do we provide enough power to meet demand from these data centers that are popping up all over the country and require a tremendous amount of electricity? And so what he called for was these data centers should hook up directly to power plants. Specifically, he called out coal plants, said they should be hooking up to coal. If they do that, they don't have to worry about potential energy shortfalls or other disruptions on the wider grid, because basically these data centers would have their own private generator. It would be a massive industrial size generator that usually powers hundreds of thousands of homes, but it's still essentially just a big generator in the data center's backyard that it could have full time access to. And it's something that the tech and power industry has been discussing for a while because it's really seen as a win win for both. If the tech industry doesn't have power, they're not making money. So access to 24. 7 Electricity is crucial Central to their business model, which is why we're hearing so much about it. And it's also a huge win for power providers because they get to tap into this massive growing source of electricity and build out the infrastructure needed and make money off that and charge a premium for this kind of direct access service that that these tech companies are eyeing as well. So it's something that both sectors are really excited about and the President endorsed it.

[Nirmal Maliko]

Yeah, no, this definitely sounds like a win win in theory, but you're reporting that the catch here for Trump and the tech and energy industries is that a relatively unknown energy agency to this podcast maybe could have a problem with his plan. That would be ferc, the Federal Energy Regulatory Commission. So can you introduce us to ferc? Like, what is it and what is their role in this context of AI and data centers?

[Kathryn Morehouse]

For those who don't know ferc, an overview is that they play a really critical role here because their basic job is to oversee the reliability of, again, the bulk power system, which is just the massive power grid. And what that means is just making sure that at a high level, the system is working as it's supposed to. That it's not. Not overcharging customers for the power that they're getting and that it's keeping the lights on as much as possible. That's kind of a broad umbrella of their responsibilities. But the relevant piece here for power providers and for data center developers and for deals between those two entities is that there are a number of rules for CAs in place to basically ensure the Commission has oversight over any changes in power agreements that could impact ratepayers or impact the reliability of the power system. And this, frankly, could impact both. Specifically, this colocation issue came up for the commission in a case last fall where a power provider, Talon Energy, asked FERC if it could increase the amount of capacity that it was directly sending to an Amazon Web Services provider data center. And FERC rejected that proposal. And it was actually kind of an unusual order in the sense that the commission's minority, two Republicans, said no, and two of the commission's Democrats didn't weigh in. At least one of them, on the advice of Ethics Council, because of her most recent employer was involved in the proceeding. And then finally, chairman at the time under President Biden, Willie Phillips, issued a scathing dissent, arguing that the contract should have been approved. So again, this was kind of a narrow issue, but it really kind of blew up FERC's wider stance on this and made it really clear where these different commissioners stood. And the decision overall was a bit of a surprise to folks in the industry. Industry who are. And kind of made them tap the brakes a bit, those who are considering making similar requests at the Commission. But I should also say that it came as a relief to a lot of consumer advocates and state regulators who are really concerned that the growth of these kinds of agreements could hurt customers and grid reliability. Because basically what you're talking about here is, you know, taking the amount of power that is on the grid and pulling off a solid chunk of it, that again, could be used to power hundreds of thousands of homes and providing that solely to a large industrial data center customer, all of a sudden, that crunches the supply side and makes costs higher for customers, as well as potentially causing reliability problems. So if adopted at a wider scale, there are a lot of concerns from states and consumer advocates on this. And that really came to a head at FERC this fall. And it's going to be an issue that FERC continues to weigh heavily.

[Nirmal Maliko]

Yeah, you mentioned that this decision was laid out in the fall. I know. FERC actually looks different now. The new chair of FERC is Republican Commissioner Mark Christie. You, of course, know him well. He's the one who now really sets the agenda for ferc. So what should we know about him as a regulator and what has he said about all of this? And have the commissioner's kind of opinions changed since then at all?

[Kathryn Morehouse]

Yeah, so it was, as you said, Chair Christie and Commissioner Lindsey, see another Republican, former Solicitor General of West Virginia, issued the decision to reject this contract here. And Christie is a new chair of the commission and a really interesting regulator. He was tapped by Trump to leave FERC in January. And, and Christie is someone who is always thinking about the consumer first. Nirmal, we interviewed him on the PO the Energy podcast. So you saw this firsthand. He just without a doubt, is primarily concerned with protecting the consumer. It guides every decision he makes. He was a state regulator in Virginia for 17 years. And that just is really the cornerstone of his regulatory philosophy at the commission.

[Nirmal Maliko]

Definitely, definitely.

[Kathryn Morehouse]

And that's actually put him, you know, that might sound like, oh, of course every commissioner should put the consumer first. But that's actually put him at odds sometimes with other Republicans on the commission because he really is more willing to slap utilities on the wrist or hold power providers to account to make sure that consumers are getting the best deal. Deal. You know, there are incentives, for instance, that FERC approves that he has questioned whether they should be giving them out. And a lot of more pro markets type Republicans or might disagree with him on that. And that brings us to this talon case in the issue of co location. Christie overall has described this as a gargantuan issue that FERC needs to address because of its huge implications for reliability and electricity bills for the average household. And even though, like I mentioned, this was a pretty narrow legal decision, Christie actually issued a separate statement outlining why this represents broader concerns that he has about colocation and about how that could impact customer rates and customer bills. And he basically called for, you know, let's make sure that we do this right so that we're not hurting ratepayers and that we're not doing anything to jeopardize the reliability of the wider power system.

[Ryan Reynolds]

Hey there, Ryan Reynolds here. It's a new year and you know what that means. No, not the diet resolutions. A way for us all to try and do a little bit better than we did last year. And my resolution, unlike big wireless, is to not be a raging and raise the price of wireless on you every chance I get. Give it a [e-mail] switch $45 upfront.

[Advertisement Voice]

Payment required equivalent to $15 per month. Month new customers on first 3 month plan only taxes and fees. Extra speed slower above 40 gigabytes on unlimited. See mintmobile.com for details.

[Nirmal Maliko]

So it sounds like the chair of FERC and President Trump may not be super well aligned here. So is there a chance that this becomes a real tension point between the Trump administration and ferc, this independent agency?

[Kathryn Morehouse]

Yeah, and I think that's a great question. And I think here is a good spot to take a big step back and think back to, you know, the much broader issues that are facing the grid right now, because it really is just so much bigger than this kind of niche issue of co location. And there actually is a bit more nuance to this issue. So I think that Trump and Christie's alignment here will really be predicated on whether the administration can do the other thing that it's promised, which is to get more power plants built quickly. This is something Chairman Christie has been a big advocate for because he is really concerned about growing warnings from grid operators and reliability authorities that the rapid retirement of uneconomic coal plants, combined with rising demand for power and a slow process for bringing more power generation onto the system, that all could spell a reliability problem in the next decade. And that ultimately means that we end up paying more for a less reliable grid. So he has been very concerned about this. And Trump is also concerned about this, and in his world economic speech called for building more power plants more quickly. That's something that FERC will probably embrace because on its face, adding more power to the system while demand is rising just means less risk of undersupply. But the key question there is, can the administration actually get these plants built at the same pace that we are building data centers, which is quite quickly? And if it can't, then will there be pressure on FERC to make sure that these data centers can get access to power quickly, even if it's at the expense of normal everyday rate players. So I think that's where, you know, depending on how that process shakes out, depending on if we really can build more power plants, that will have a big impact on how concerned FERC is about these potential colocation deals and about the wider impacts to ratepayers in the grid.

[Nirmal Maliko]

Yeah, no, that would definitely be something to watch out for. And I have to ask, you know, in related news, the tech world was rocked recently by the release of this new AI model from the Chinese company Deepseek. I'm sure you've seen it. And one of Deepseek's big breakthroughs is that it requires a lot less energy to run. So how could that, you know, shake up this debate?

[Kathryn Morehouse]

Totally. I mean, this is a huge shakeup already for the debate over the power system. A lot of our assumptions on power demand growth have been supercharged by AI and the data center industry. And if that industry ends up needing less power or it ends up overseas, then demand just will not rise as high as expected. And in fact, from an economic perspective, you actually want to be really careful and not overbuild power plants because all of a sudden then utilities won't be making as much on power prices and ratepayers might be stuck helping them recover the costs of those expensive plants that ultimately weren't needed. And we saw, we've already seen the impacts in stocks from some of the country's biggest independent power producers. Those, they've been riding on this sort of AI high and they've already taken a hit because investors are starting to see, oh, this demand thing that we've taken as, as gospel truth might not pan out the way power companies expected. So I mean, definitely this deep seek innovation has the potential to really shake up how AI develops and whether the power industry needs as rapid of response as they've been assuming.

[Nirmal Maliko]

Yeah, totally. A lot to look out for here and kind of just, you know, now wrapping up. When are we expecting FERC to sort out this power plant data center issue? And we've talked about it a little bit, obviously, but what are the stakes here for both the tech world and the fossil fuel companies? I mean, we're seemingly in this global AI and data center race that you just mentioned that both the president and the tech world don't want to lose. But there are real energy constraints.

[Kathryn Morehouse]

Yeah, I mean, unfortunately, FERC won't just be. There's not a specific timeline for FERC to just, you know, snap its fingers, sort things out. There's not a single, I shouldn't say there's not, but it's hard to imagine there's just a single thing that they'll be able to do to snap their fingers and say, okay, we figured it out, We've untangled this web. This is how everyone will benefit. You know, they've had technical conferences, they have several proceedings in front of them right now. And I think it's going to continue to be kind of this, this chip away at this issue. And, and we'll continue to, you know, the commissioners will continue to learn about the issue and will continue to learn how they view the issue. Staff will continue digging into it. So, so it really will be, unfortunately, doesn't sound super satisfying, but it, it really will be a bit more of a, of a slow burn on the regulatory side. But in the bigger picture, this is an issue that has massive implications for the race to dominate AI and, and data center growth across the world. Access to reliable power, like I said, is the lifeblood for that industry. But the power industry is in the middle of its own problems and its own massive transition to cleaner energy. And so adding the pressure of needing to support and safeguard this potentially massive new industry is a high burden and one without any easy answers.

[Nirmal Maliko]

Yeah, I mean, well, we'll have to check back in with you when this slow burn does lead to some answers. Kat, thank you for joining Politico Tech. Really appreciate the conversation.

[Kathryn Morehouse]

Yeah, thanks so much for having me. Great to be here.

[Nirmal Maliko]

That's all for today's Politico Tech. If you enjoy Politico Tech, which I'm sure you do, please recommend it to a friend or a colleague. And be sure to subscribe on Apple, Spotify or wherever you get your podcast. And if you want to hear more from me, subscribe to Politico Energy. Music in our show comes from the mysterious Breakmaster Cylinder. Our managing producer is Annie Reiss, and our editors are Steve Heuser, Daniela Cheslow, and Luisa Savage. I'm Nirmal Malakal and we'll see you back here on Monday.