AI may get throttled, and not by regulation

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Nov 18, 2005
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The increase in capital costs are probably hitting tech companies too. Research is expensive.
 
The by-product of that electricity consumption is heat, and lots of it. There could be ways to use that heat for other purposes, such as heating pools or office buildings.

I wonder if a person could setup an at-home AI machine and sells its services to big corporations? Using the waste heat for space heating. That was popular with the college dorm crowd here with bitcoin, they'd setup miners in their dorms while shutting off the furnace, using "free" electricity to make a few dollars and heat their dorms at the same time.

 
I think this is a real issue but every new project, be it manufacturing or computing, they all need electricity. I don’t see decentralized AI as a viable option. AI will become very hardware specific. I’m convinced our current leadership, generally speaking, is not capable of reacting or planning ahead at the pace of the changes that are afoot. That have barely managed to keep our infrastructure in operational condition at current expansion rates.

I have not seen actual compute numbers. Are we talking the size of current top 10 supercomputers? 10x 100x? Those get built and have power. So are just talking about the sheer number of power consuming AI centers. As some point it will get more efficient and not just the hardware. I’m not super concerned. There is money to be made so I’m sure they will get built and turned on. The tax incentives for these businesses do concern me.
 
As usual, grid power and availability is very complex subject. State PUCs break up power into two types (and multiple subtypes) interruptible and non-interruptible during "normal" conditions. The grid goes across state lines and at one point the country was carved up into regions run by Independent System Operators (ISOs), they dont generate the power, they make sure the system is in balance and power goes where its needs to. They follow an agreed upon set of rules including for when things are not normal. Consumers and most government and non-government emergency facilities pay a premium for uninterruptible power. The utility is bound to supply power to the customer if the grid is up and capable of supplying it. Utilities pay a premium to suppliers to meet that non interruptible demand, they also have access to a fleet of "peakers" with on site fuel (usually kerosene) to meet the non-interruptible demands in an emergency. Actual emergency facilities like hospitals are required by state and federal law to have on site emergency generation with on site fuel for some duration of a grid outage. They can and do call in temporary generators and have fuel sourcing contracts to cover the anticipated duration of an outage. Once there is an emergency, even non interruptible customers can get browned or blacked out dependent on the extent of the emergency and what the rule book says. This works in 47 states but Texas long ago decided to skip non interruptible classification and go with the "golden rule", he who is willing to pay the most gets the power and screw those who cannot afford it. It keeps power prices cheap during normal periods but on occasion during emergencies the consumers get screwed or live without power until the system gets back in balance. This keeps power prices cheap during normal times and the state normally bail out the industry folks who lobby them while the consumers get nothing.

Industry including bit coin miners and AI have a couple choices, they can generate their own, buy interruptible power from the grid if they can afford it or pay a huge premium on every KWh they use if a PUC allows them to access non interruptible power. ISOs are paid to predict both types of power demand and typically the headlines read "future power shortage projected" rarely does it say "future interruptible power shortage projected". There will never be a shortage of interruptible power in non emergency conditions, supply and demand will kick in and the price will keep going up until the supply meets the demand. This balancing happens every 15 minutes and during high power demand periods the normal $20 to $50 a MWh wholesale price can go to $1,000 a MWhr or more. Many firms buying power have to make a choice, buy power at a price where they will lose money or shut down. Economically that is bad as a shut down plant requires few employees. Bob Kraft (of Patriot fame)owns a couple of papermills and I was at one of them with on site generation, when short term power rates go up, they shut down the mill and do maintenance. One of the managers told us, Bob could care less how he makes the money he just wants to make as much as possible and he can make more selling power to the grid than making paper they do it.

AI and bit coiners are going to scream they need more power and the power companies want to supply it even if they are just getting paid a transmission fee. States and localities want power to be there to attract these plants but ultimately someone has to pay to build the power plant. Many states long ago had the utilities make a choice, build power plants or distribute it but not both. In those states they need to have private developers build the plants and private developers are only going to do so if they are making money and protected from risk. Banks and investors see the climate change risk and in many cases they refuse to lend money on new fossil fuel plants as they are worried that the developer will go out of business and the banks will end up owning an asset that is worthless except for scrap. That happened during the natural gas "bubble" about 15 years ago, and banks have long memories. Even utilties in states that are still allowed to build plants are hesitant to build new power plants. The traditional approach was the utility built the power plant on their own balance sheet covered with bonds and then when the plant came on line the ratepayers would pay off the cost to build the plant through the rate. If the plant did not get built, the utility might end up having to eat the cost of the investment. My local utility went bankrupt building two nuclear power plants, one that was nearly complete did not get started up and the eventually abandoned due to public policy shifts. The Washington State Public Power system (AKA Whoops) ended up having several partially completed plant projects shut down during the same public policy shifts. On big projects like the new Georgia nuclear plants the utilities now require Construction In Progress (CIP) payments from the ratepayers which are highly unpopular.

My guess is at some point there will be public debate on having the consumer ratepayer pay for new power plants that are benefitting industry be it AI or blockchain. The lobbyists will be out and I expect in many states the consumer will lose. Without accounting for carbon intensity, gas fired power is the clear winner, its capital cost is cheap and its quick compared to any other source. If carbon is figured in then the rules change although currently the latest scam is buy credits from timberland owners in rural areas to manage their land to store carbon. Those credits are then used to offset the carbon from new fossil power plants.
 
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My guess is at some point there will be public debate on having the consumer ratepayer pay for new power plants that are benefitting industry be it AI or blockchain. The lobbyists will be out and I expect in many states the consumer will lose. Without accounting for carbon intensity, gas fired power is the clear winner, its capital cost is cheap and its quick compared to any other source. If carbon is figured in then the rules change although currently the latest scam is buy credits from timberland owners in rural areas to manage their land to store carbon. Those credits are then used to offset the carbon from new fossil power plants.
Bingo, I was thinking the same thing and see some major consumer fights coming.
 
Bingo, I was thinking the same thing and see some major consumer fights coming.
And by consumer fight here in NC that means the the rate commission that is appointed mostly by the legislature get to decide. The public is nearly powerless.
 
One factor here that needs to be considered is "carbon leakage" that would occur if regulations in developed nations push AI to jurisdictions with little or no regulation.

AI computation centers for the most part can be situated anywhere on the globe with a suitable Internet connection. Wherever regulations and power costs are most advantageous.

I see Quebec and Norway being 2 major centers for AI with their low hydro electric power costs.
 
There are already old power plants that were shut down or ready to shut down that are running because they signed a deal with bitcoiners. China had a lot of those deals out there but banned them.