By Travis Fisher

Something strange is happening in American energy policy. U.S. Sen. Elizabeth Warren (D-Mass.) and Florida Gov. Ron DeSantis (R) are worried about the same thing: energy-guzzling data centers. Likewise, Sens. Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) both seem to want an abrupt pause on new artificial intelligence.

Although the Trump administration favors artificial intelligence and data centers, many of the industry’s biggest detractors are sure to run for president in two years. And some states, including New York, are considering statewide bans on new data centers. Local opposition has long been a thorn in the side of data center development and is growing.

A clear political threat to the industry is brewing within both major parties and at all levels of government. What the industry needs is a hedge against bipartisan political risk.

Major tech companies, including Microsoft, Google, and Amazon, have announced huge investments in generation assets. Meta announced in January that it would expand its nuclear power purchases by 6.6 GW. For reference, that’s more than three times the output of Hoover Dam.

These tech companies’ thirst for “juice” is apparent. But what if policymakers don’t want them on the grid?

In Sen. Warren’s recent announcement of an investigation, she and fellow lawmakers alleged that “American families bankroll the electricity costs of trillion-dollar tech companies.” In Florida, DeSantis and state lawmakers are proposing a new suite of regulations on data centers.

More than 230 groups — including environmental and consumer organizations — have called for a national moratorium on new data center construction. Dramatic headlines such as “AI Is Making Your Life More Expensive” are commonplace.

It matters little that the political alarm over data centers is misguided. In fact, Warren’s assertions may be the opposite of the truth. As Nick Myers of the Arizona Corporation Commission recently explained in RTO Insider, data centers “provide long-term, stable demand that may reduce the financial risk of utilities and lower their borrowing costs to the benefit of all customers.”

Researchers have found the “effect of sales growth on rates is highly situation-specific” and largely depends on how new costs are allocated among customer classes. At best, it’s a murky policy area that lends itself to political scapegoating.

So, what can the industry do to protect itself from a populist uprising? One alternative is to allow new industrial customers to develop or join a private, fully off-grid energy system. My colleague Glen Lyons and I call this idea Consumer-Regulated Electricity, or CRE.

Going one step further than typical “behind-the-meter” arrangements with generators, CRE would enable a new, islanded system with no physical connection to the regulated grid. A data center could join many others on an industrial campus powered by whatever resources make sense — solar, batteries, gas turbines, nuclear reactors, you name it — and operate without connection to the utility grid.

Importantly, the lack of a grid connection also means freedom from political meddling. A new proposal by Sen. Tom Cotton (R-Ark.), titled the DATA Act, would exempt large users from regulation by FERC. Operating on a separate electric grid means no risk of causing blackouts for American families and businesses. Hence, the onerous regulations that apply to the “bulk power system” need not apply to independent facilities.

Like the Trump administration, today’s FERC is supportive of data centers and their hunger for electricity. However, the industry should be prepared for a one-two punch of reduced independence at FERC and a new president who wants to cut off electricity supplies to data centers.

For example, Gov. DeSantis recently said, “We have a limited grid. You do not have enough grid capacity in the United States to do what they’re trying to do.” If efforts to expand the grid fail or move too slowly — which seems likely — then the pitchfork mob might come for data centers.

States also can help enable the CRE option and insulate households from rising costs or uncertainty created by data centers. New Hampshire has taken the leap, and Ohio and Utah have enabled private electricity systems.

More states are likely to follow suit now that the American Legislative Exchange Council has approved model legislation that would create a path for CRE in any state.

A common critique of CRE is this: “We need AI data centers to help pay for the grid.” Yes, the blackboard economics view of grid supply tells us that retail rates should fall for everyone as the total watt-hours on the grid increase and grid utilization improves. But in the real world, risks abound, and no one can guarantee the AI bubble will never burst.

Indeed, the highly uncertain risk to American families of a sharp increase in their utility bills to pay for infrastructure intended for a collapsed data center industry may be unacceptable to some policymakers.

Far from a “libertarian fantasy,” private grids already are being built, and the data center industry should view policy reforms like CRE as a practical way to hedge political risk. Even if the value seems far-fetched today, why not establish CRE reforms now in case of a future political emergency? Data centers are not the villain, but it may be impossible for them to win the debate in a hostile environment, and the industry would be wise to protect itself against political warfare.

Travis Fisher is director of Energy and Environmental Policy Studies at the Cato Institute.