Trump's Election Fears: How Data Centers Could Derail His Party's Ambitions

Donald Trump is expressing deep concerns about data centers and their impact on the U.S. electricity market. He fears that rising energy costs could fuel public resentment and jeopardize his party's chances in the upcoming November elections.

Trump's anxiety is evident in recent actions. On January 13, he and Microsoft's president announced that the tech giant would pay more for its data centers, including full property taxes and no electricity rate discounts in towns where they operate. Trump emphasized on Truth Social: "We are the 'HOTTEST' Country in the World, and Number One in AI. Data Centers are key to that boom, and keeping Americans FREE and SECURE but, the big Technology Companies who build them must 'pay their own way.'"

On January 16, Trump and governors in the northeastern U.S. directed the country's largest power grid operator to hold an emergency reliability power auction by September. This move could force tech giants to bid on future electricity reliability, potentially funding new power plants.

OpenAI followed suit on January 20, committing to "paying our own way on energy, so that our operations don't increase your electricity prices." The company is part of the Stargate collaboration with the Trump administration, investing $500 billion in AI infrastructure.

Trump is grappling with the challenge of rapidly rising electricity demand. He promised to slash Americans' electricity bills by half, but there's little prospect of delivering on that vow. While AI increases electricity demand, the administration is blocking renewable energy projects, calling them a "scam," and pushing for gas and oil expansion. Reversing the closure of ageing coal plants and restarting LNG exports could further raise costs for domestic consumers.

Power prices tie into larger cost-of-living concerns in the U.S., putting Trump's party on the defensive ahead of congressional elections.

Elon Musk is also involved in this story. On January 15, the EPA ruled that Musk's company xAI had illegally operated methane-powered generators at its Memphis facility. This sets a precedent: tech companies can't simply use backup generators; they may need to purchase nuclear power plants, as Meta, Microsoft, Google, and Amazon have done.

European governments face similar challenges. In Germany, high energy prices constrain data center growth. Chancellor Friedrich Merz favors constructing more data centers but has taken an opposite approach to Trump, agreeing to subsidize heavy industrial electricity use until 2028 and reduce grid fees. Data centers in Germany must source half their electricity from renewables, but public skepticism remains.

In the UK, with the second-highest number of data centers in Europe, construction is expanding amid rising energy costs. Electricity rates are already among the highest globally, worsening the cost-of-living crisis. Despite this, the government proposed electricity discounts for data centers in "AI growth zones" to encourage investment.

Ireland serves as a cautionary tale. Data centers' electricity use overtook that of all urban homes in 2024, straining the grid and raising costs. The Irish government imposed a ban on new data centers connecting to Dublin's power grid in 2021, which ended in December.

The data center boom is expanding to new regions. Trump and tech giants plan to build one of the world's largest data centers in the UAE and others in Gulf states, where energy is cheap but water is scarce for cooling. Microsoft, Amazon, and Meta have announced $17 billion in investments in India, where electricity reliability is lower, potentially requiring grid modernization or prolonging ageing infrastructure use.