Above, AI uber-critic Ed Zitron interviewed by ABC News.
Zitron has been a sharp dissenting voice in the recent storm of apocalyptic ideations following the so-called Hugging Face attack, where AI agents escaped containment and broke into corporate computer systems.
Zitron’s sharpest warnings, however, are on the financial side. In a new post, he has some lacerating prose spiked with concerning data.
Ed Zitron – Hater’s Guide to AI Debt:
To reiterate what I’ve been saying for a while, big tech has a few issues with the AI buildout:
- AI chips are extremely expensive.
- AI data centers take a great deal of time to build and energize.
- AI services are expensive to run.
- AI services do not appear to generate much revenue.
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OK, given the legit questions about AI finances and the possibility of a bubble that bursts, some of the most progressive approaches to permitting Data Centers have set tough financial standards for developers to meet.
Newest example is that agreement made between the State of Michigan and Google, in regard to a proposed new Data center in southeast Michigan, near Detroit Metro airport.
Michigan Public Service Commission:
“The protections the Michigan Public Service Commission (MSPC) enacted today in approving these contracts will ensure that other customers aren’t subsidizing this large addition to the state’s energy grid,” MPSC Chair Dan Scripps said. “Furthermore, the range of resources identified to serve the customer — and the fact that Google will pay the full costs of these resources — helps ensure we can add this significant load while maintaining grid scale reliability and continuing progress towards the state’s clean energy goals.”
Continuing ratepayer protections that have been highlighted as some of the strongest in the country, the Commission approved DTE Electric’s PSA with Google that includes:
- A contract length of 20 years, compared to 5-year contracts normally required under DTE Electric’s large-load D11 rate. This reduces the risk of stranded infrastructure costs were a data center to leave before costs to serve it are paid.
- A minimum billing demand of 80%, compared to 50%-65% in the general D11 rate. This means Google will have to pay a minimum of 80% of the contracted electric use, even if its actual use is lower.
- An early termination payment requiring Google to ultimately pay for at least 15 years of minimum monthly charges, ensuring that the costs to serve the project are fully recovered from Google even if it cancels the project early.
- Credit and collateral requirements to cover costs in the event Google were to cease operating the data center sooner than planned.
In addition, the agreement calls for Google to provide up to 1,600 megawatts (MW) of renewable energy and 480 MW of battery energy storage to serve the data center. That is similar to a previous agreement between the MPSC and Oracle, for a data center in nearby Saline Township, near Ann Arbor, which calls for 1.4 GW of battery storage, equivalent to the total demand of the facility, to be paid for by Oracle, and operated by DTE at locations around the state.
This “Bring Your Own New Clean Energy” (the fortunate acronym is BYONCE) approach is being followed in Minnesota and Oregon, states that, like Michigan, have aggressive climate goals. The message is, “If you want to play here, these are the rules”, so far at least. The massive gas powered generators that are the source of the biggest complaints about Data Centers – noise, pollution, and water use – are negated in this model.
There have been suggestions that additional large Data Centers would need to consider more gas buildout, but hard to see how that could fly under the climate goals, and moreover, challenging simply given the realities of the energy landscape. Solar, wind and batteries are literally the only near-term solutions in the cupboard, for an industry that values speed above all else.
This is an added dimension of community benefits, since those batteries, or renewable projects in the case of Google, will be spread across rural areas around the state, bringing decades of revenue to needy and underfunded areas at no capital cost to the ratepayers, as well as desperately needed income to farmers hard hit by war and tariffs.
The MPSC also notes that “.. approval of the data center special contracts will result in a $1.7 billion benefit,” according to DTE, “.. reducing costs to other customers over the 20-year life of the contract as Google pays for fixed costs that benefit the entire grid.”
Question is, given the unprecedented scale of the financial challenges the AI industry has mapped out – are protections like these going to be enough?
MSNOW’s Chris Hayes, who has been posting a series of interviews with Zitron and a host of other AI observers, has this takeaway.