The Growing Costs of AI Infrastructure

Jonathan Siegel

The build-out of infrastructure supporting artificial intelligence is already manifesting in rising electric bills.

At PJM, the regional transmission organization serving around 67 million people from Illinois to the Mid-Atlantic, there has been a significant increase in the capacity clearing price—jumping almost ninefold in the July 2024 auction. This trend continued in subsequent auctions, with data-center demand estimated to account for approximately 40% of capacity-market revenues.

Impact on Consumers

As highlighted by PJM, the July 2025 auction may cause an increase of 1.5% to 5% on some customers’ bills beginning June 2026. Households without a say in these developments are witnessing rising costs to support infrastructure growth. This financial burden can lead to organized opposition against new projects, a factor often overlooked by allocators.

Weighing the Risks

Investors like myself are directly impacted by this infrastructure development. It’s essential to acknowledge the imbalance between the significant investments made and the costs burdened on local communities. Acknowledging this can lead to more prudent underwriting practices.

The electricity supply chain struggles to keep pace with rapidly increasing demand for power. Infrastructure updates take years, and on top of that, existing queues for grid interconnections average five years. These complexities pose substantial execution risks and significantly impact investment returns.

Consideration for Communities

Risk evaluation and underwriting must account for community needs. Developers often underestimate the local opposition’s significance. Communities have valid concerns. They observe their increased electricity costs while the benefits of the new data centers often do not stay local. An improved framework, providing benefits to nearby residents, can ease tensions.

For instance, some advocates are exploring models wherein data centers create a clean energy supply that offers protections and benefits to ratepayers. Projects that can assure community support tend to get built more smoothly.

The Right Questions for Investors

For those allocating investments in infrastructure projects, it’s crucial to ask specific questions:

1. Power: What is the project’s queue position, and what capacity has it secured?
2. Permitting: What is the path to local approval, and is there any opposition?
3. Water: What is the water source, and are the necessary permits in place?
4. Insurance: Can the asset provide a consistent operating profile?
5. Community: What exact benefits does the community receive?
6. Verification: Who has independently verified these claims?

Final Thoughts

There’s a palpable shift as capital constraints ease, but deliverability is becoming a primary concern. Allocators who treat power, water, permits, insurance, and community terms as measurable factors will likely identify viable projects early on. This discipline not only benefits investors but also promotes accountability and engagement with affected communities.

Jonathan Siegel is a managing partner of Altes Capital, focusing on impact investing in infrastructure. His insights stem from experience as an investor in this rapidly evolving sector, recognizing the importance of evaluating community impacts alongside traditional investment metrics.