Data Centers, Transmission Upgrades, and the Hidden Cost of Electricity

Data centers are driving a surge of new power lines and grid upgrades across the Mid-Atlantic, but who pays for these expansions? This episode traces utility planning, customer rate impacts, and policy debates around data-center connections. Through a Fairfax, Virginia case study and regulator perspectives, the show highlights how transmission projects to serve data centers can raise electricity bills for households, while solar and wind projects face similar connection costs. The discussion also considers potential policy reforms that could require data centers to pay upfront for grid upgrades rather than spreading fixed costs across all ratepayers, shaping the future economics of AI infrastructure.

Overview

Shortwave investigates how the rapid build-out of data centers is reshaping the electrical grid. The episode centers on transmission planning documents, the scale of upgrades, and the rising visibility of data-center connections in power markets across several states, with a focus on Virginia.

Data Centers and Grid Demand

As data centers proliferate, they demand reliable, expanded transmission networks to move electricity from wind and solar farms to large consumption sites. A key point from Mike Jacobs of the Union of Concerned Scientists is that there is no such thing as a free power line, because the costs are folded into customer rates. The show walks through state planning documents that reveal dozens of projects intended to serve data centers, illustrating the growing footprint of digital infrastructure on the grid. The scale is substantial, with plans across Virginia and neighboring states totaling many billions of dollars in investments.

"There is no such thing as a free power line" - Mike Jacobs, Union of Concerned Scientists

Case Study: Fairfax, Virginia

To bring the story to life, the program visits a site in Fairfax near an old warehouse and a U-Haul center slated to host a data center and a new substation. The plan includes 120-foot-tall transmission poles and a new delivery point, with project costs estimated around $40 million. Dominion Energy describes the upgrade as improving reliability for the broader community, not just the data center, yet the data center’s demand is the primary driver for the expansion.

In interviews, Dominion representatives emphasize that while the lines serve data centers, they also strengthen the grid for hospitals, schools, and residents. The tension lies in who pays for these upgrades and how the costs are allocated within regulated rate structures.

Costs to Consumers and the Regulatory Framework

The episode explains that electric utilities operate as regulated monopolies. Regulators approve the rates utilities can charge to cover construction and operation costs while allowing some profit. When utilities invest in new transmission for data centers, those costs can flow into customer bills via rate increases. The data-center-driven wave is still unfolding, and estimates of the impact vary widely, from modest increases to substantial bills for households in areas where lines and substations are built primarily to serve large data facilities.

Ohio and Pennsylvania offer a precedent, with utilities proposing rate increases tied to fixed costs shared by all customers, which means data-center customers effectively subsidize the data-center business model. The question raised is whether data centers should pay for their own connections upfront, a model already used for solar and wind farms.

"All the consumers of Virginia are subsidizing the business plans of these data center companies" - Mike Jacobs, Union of Concerned Scientists

Policy Debates and Reform Possibilities

The policy discussion centers on aligning infrastructure costs with the entities that trigger them. A solar project Cassius Blue in Southern Virginia demonstrates the current model: the solar developer must pay for grid upgrades to connect, whereas data centers are subsidized through consumer bills. The show notes that a federal rule proposed by the Trump administration would require new data centers to cover their grid-connection costs, but such policy remains uncertain due to state-regulator jurisdictions and political dynamics.

"Data centers should have to pay upfront for the power lines they need just like solar farms" - Mike Jacobs, Union of Concerned Scientists

Outlook for AI Infrastructure and Energy Policy

The episode concludes with the sense that the policy landscape could shift as data centers face increasing opposition from communities and regulators. If data centers bear the upfront costs for transmission upgrades, ratepayer impacts could be mitigated, and the grid could gain clearer signals about the true costs of supporting AI-scale computing. The result could be a more equitable and transparent framework for funding grid reliability in an era of expanding digital infrastructure, with potential implications for climate goals, energy pricing, and technology deployment strategies.

"We got a nice little fight unfolding over this very problem" - Mike Jacobs, Union of Concerned Scientists