The Information's TITV
00:02:36 · Akash Pasricha, Charles Hua
[00:02:36] S0: And what exactly, you know, is on the table here? Do we see projects get shelved outright? Is it just a pause here? I mean, like, what are the menu of things that could happen? [00:02:50] S1: Look, I think it's a very dynamic space. So it's hard to say, even for folks that have on the campaign trail said, I'm going to do this. I'm going to impose a temporary twelve month moratorium in terms of whether or not they actually follow through. But I think to your point, there is a full spectrum in range. For for some, it's a, let's, you know, pause. Let's get our ducks in in a row and figure out what are... What do we mean when we say data centers paying their fair share? How do we create the right electricity tariff structures and the rate structures to make that happen? For other folks, I think the skepticism runs a lot deeper than that, and and we might see some material market restrictions around new infrastructure development. I think the thing that makes this challenging to predict though is that it is a moving goalpost. There are folks even in as short of a... As as a one month period on the campaign trail leading up to the midterm elections where they suddenly needed to course correct and and and frankly put forth campaign commitments that they probably weren't that serious about putting forth. I think you talked about the Texas gubernatorial election where even governor Abbott essentially called for a moratorium. That's something that I think a lot of folks wouldn't have predicted six months ago, but it just shows how fast moving this issue space is.
00:04:00 · Akash Pasricha
[00:04:00] S0: Right. I mean, as it relates to Texas specifically, I'm thinking about all the big tech companies that have poured money into that state, and I can't remember exactly where it ranks now in terms of having the most data centers being built out, at least based on a gigawatts basis or a facility numbers basis. But as you look at all those projects, are there any particular projects that you think are particularly in flux right now? Any particular companies that you think we should be watching for announcements saying, Hey, we've paused on things?
00:04:38 · Charles Hua
[00:04:38] S1: Yeah. It's a good question. You know, I think when you laid out up top the markets that yesterday night saw pretty seismic results when you think Ohio, when you think Texas, when you think Georgia, just take those three states where you're seeing those are three of the fastest growing markets for data center development, for electricity demand growth. All three saw pretty dramatic outcomes that folks maybe weren't actually expecting. So I don't know that a singular project is at risk. In fact, I think that you could make an argument that the industry at a macro sense is facing some serious pressure. You know, Jefferies had had announced that in Texas, up to 13 gigawatts of data center projects might be at risk under a governor Hinojosa scenario. That's not just one project. That is an entire industry that has to deal with these potential headwinds coming in. Now the utility sector also is under serious pressure as a result of this. When you think about Southern Company representing the Southeast and Georgia, when you think about AEP representing Ohio, those stocks have taken a little bit of a hit this morning following last night's election results. But it's gonna be a real challenge where the grid is getting old. And even if there was not a single data center being built, the fact that our grid is aging very rapidly suggests that a lot of infrastructure spend will need to occur. But in this moment where a lot of folks are rightfully concerned about their utility bills going up and about spending on the grid going up, I do think it just creates this very constrained environment for new infrastructure development, and it's going to force a lot of policymakers to come to the drawing table with some practical solutions to get forth in the next few years.
00:06:19 · Akash Pasricha
[00:06:19] S0: And you talked about the aging grid. So, look, it remains to be seen what happens in terms of who continues their projects, what moratoriums continue, which ones go longer. Does this guarantee that the rising power cost issue is necessarily going to get better? Mean, what are the problems that this doesn't necessarily solve?
00:06:43 · Charles Hua
[00:06:43] S1: Yeah. Well, very few people fully grasp this, but the biggest drivers for why utility bills and electricity prices have gone up over the last five years really doesn't have to do with data centers. It has to do with a grid that's getting old that costs a lot of money to replace and repair and modernize and extreme weather events, whether it's hurricanes out West or... Excuse me, hurricanes in the Southeast or wildfires out West. That has taken a huge toll. And when you look at last year, utilities requested a record $31,000,000,000 in rate increases. That was double the previous year. A lot of their stated reasons for that was an aging grid. And when you look at the next five years, utilities are planning to spend $1,400,000,000,000 on capital expenditures over the next five years. That's 2,000 Hoover Dam's worth of spending. And that spending is not for data centers primarily. It is primarily to modernize and and make sure that our grid still functions as it is. So I think those are some of the underlying dynamics at play here. Now the thing about electricity prices is that there is a potential over these next four years for electricity prices to come down. And what it's gonna take is getting more juice out of our current grid infrastructure. We don't use our grid particularly efficiently, so there's a lot of headroom available on the system in many jurisdictions that utilities aren't incentivized to tap. But right now, I think under this heightened pressure around electricity prices, around data center development, and around a need to get more out of our grid, I do think that utilities will feel more heat to get as much juice out of the current system as they can.
00:08:18 · Akash Pasricha
[00:08:18] S0: Can I ask, in your conversations with all these stakeholders here on the ground, I mean, if if you look at the market movements this morning, the hyperscalers, Amazon, Google, Microsoft, they're all up this morning? Nebius and CoreWeave, the Neo Cloud companies, they're trading down. SpaceX is also down. And so I wonder if in your conversations, have expressed any kind of perspective that it matters who is building the data center. In other words, a hyperscaler building a data center in my neighborhood is very different than a younger neo cloud company. Maybe I might be more okay with that. And by the way, that's also given the factors you just mentioned, which is that maybe the rising energy prices are not necessarily only because of the data center. Is that a perspective that has come up at all for you?