The rapid construction of AI data centers is creating a huge surge in electricity demand. This strains existing power grids, leading to higher energy prices for consumers and businesses, which represents a significant and underappreciated inflationary pressure.

Contrary to popular belief, recent electricity price hikes are not yet driven by AI demand. Instead, they reflect a system that had already become less reliable due to the retirement of dispatchable coal power and increased dependence on intermittent renewables. The grid was already tight before the current demand wave hit.

Over the last 20 years in New England's restructured market, the primary driver of higher consumer electricity bills wasn't the cost of power itself, which fell 50% inflation-adjusted. Instead, the cost of transmission and delivery infrastructure skyrocketed by 900%, fundamentally shifting the composition of consumer bills.

The high costs of Georgia's recent Vogtle nuclear plant are often blamed on regulation. However, the primary drivers were project management and supply chain failures, like ordering the wrong rebar, which caused year-long delays due to a loss of institutional knowledge.

The restructuring of the U.S. electricity sector wasn't purely ideological. It was a direct response to regulated utilities making massive, incorrect bets on demand growth, building unneeded power plants, and causing prices to skyrocket for captive customers. Competition was introduced to shift this investment risk from consumers to private investors.

While physical equipment lead times are long, the real trigger for unlocking the power sector supply chain is Big Tech signing long-term Power Purchase Agreements (PPAs). These contracts provide the financial certainty needed for generators, manufacturers, and investors to commit capital and expand capacity. The industry is waiting for Big Tech to make these moves.

The economic model for renewable energy is the inverse of fossil fuels. While building wind or solar farms requires significant initial capital investment, their ongoing operational costs are minimal. This suggests that as Europe advances its green transition, its long-term energy cost competitiveness will dramatically improve.

The "cost-plus" regulatory model allows utilities to earn a guaranteed return on capital investments (CAPEX) but no margin on operational expenses (OPEX). This creates a powerful, often inefficient, incentive for utilities to solve every problem by building expensive new infrastructure, even when cheaper operational solutions exist.

Europe faces a critical conflict between its ambitious net-zero targets and its economic health. High energy costs and a heavy regulatory burden, designed without market realities in mind, are causing companies to close facilities or move investment to the U.S., forcing a difficult reassessment.