The electric grid and electricity rates have been in the news as the spread of data centers has caused a backlash, partly through fears that data-center power demands will shoot utility bills through the roof. What is not so well known is that the way power is delivered is changing, slowly but radically, in a way that will make it look less like a centralized system to deliver a commodity (like a public water works), and more like the internet, with multiple modules doing a variety of things and interacting in a dynamic marketplace.
In an article in the online publication The Dispatch, economist Lynne Kiesling describes these changes and poses two extreme alternative outcomes, one mostly good and one mostly bad. What will actually happen probably lies somewhere in between, but we should all be prepared for what is coming, because it will affect the delivery of what has become a basic necessity of modern civilization, and it also has significant ethical implications.
Kiesling begins by describing what she calls the "Edison bargain." Because traditional power plants became more efficient and economical the larger they were built, the model that worked took large plants and integrated them into centrally controlled systems that dominated a given geographic area. Because the system was inherently monopolistic—a customer in Manhattan couldn't just disconnect from Con Ed and call up Pacific Gas & Electric for imported power—it had to be regulated for the defense of the consumer. But in exchange for tolerating a regulated monopoly, the customer received predictable (and often legislated) rates and reliable service, while investors received a boring but predictable rate of return.
Developments in communications, computer networks, and power electronics over the past few decades have opened new fields of possibilities in electric power generation, transmission, and distribution. Gone are the old days when grid operators simply shoved power into the system and it came out all the big and little spigots at the other end. It is now possible to get huge amounts of millisecond-by-millisecond data on where power is going, who's demanding it, what parts of the grid are working sub-optimally, and how power can be sent and priced more intelligently than ever. Power generation is becoming much more distributed in smaller chunks with renewables such as wind and solar showing up. New storage means such as battery banks are making large-scale economic storage of electric energy possible for the first time, and that has a host of economic implications as well.
Kiesling sees the industry at a crossroads. The current regulatory and institutional environment is mostly a holdover from the past when centralized integration was the norm. In order to take advantage of the technological innovations that allow the grid to become a modular platform, new institutions and rules need to be devised to allow markets that will be both equitable and efficient—not always two things that go together, I should mention.
A modest step in this direction came with the deregulation era that made it possible for consumers to choose among several electric utilities offering different plans. But in the near future, you may be able to make money by allowing the batteries in your electric car or home battery-wall to be used to balance loads. You may save on air conditioning by allowing barely noticeable adjustments in your thermostat during a hot or cold day. These ideas and more have been tried on a local basis here and there, but Kiesling sees that if they become routine for everyone, along with newer ideas possibly not even thought of yet, the system will give rise to markets that will allow optimization that is simply not possible under the old integrated model.
How would this affect a hot-button issue such as the current fuss about data centers? The following is my personal speculation, not anything Kiesling said. But for what it's worth, anytime you break up a true monopoly and allow more competition, there is always the chance that prices will fall. Right now people are posing two stark alternatives for powering data centers: either let them connect to the already-overloaded "dumb" grid and watch utility rates soar, or make them build their own power plants entirely off the grid. With the market price signals allowed by the innovations that Kiesling describes, it's possible that in each region with its particular mix of large traditional generation sources, renewables, and possibly new micro- or mini-generation plants inspired by market opportunities, the optimum mix of production and consumption might emerge, rather than sticking to the two extreme alternatives.
That's just an example, but we are seeing now in electric utilities something that took place three or four decades ago in the telecommunications business. When the Bell monopoly was broken up, it took years for people and institutions to get used to having more than one choice of phone service. And it took the cellphone revolution—a technical innovation—to energize the process effectively. But once it did, the telecomm business was revolutionized in ways that no one imagined, for both good and ill. Whatever the problems we have with cellphones, I don't think many people want to go back to boxes tied to the wall with wires.
We will need to see something similar happen with the way electric utilities are regulated, and new types of firms and organizations will spring up to serve the new markets that will arise. Some of this will happen by itself, but some of it will have to be guided by governments. Fortunately, existing utility regulations are mostly on the state level now, so if we can keep changes as local as possible, in keeping with the principle of subsidiarity, we will have a better chance of seeing what works in a variety of experiments that can be adopted elsewhere if successful.
I taught a course in power engineering for a number of years, and I can see how we are only beginning to utilize the possibilities of turning what was just a monopoly commodity into something a lot more interesting, and I hope it will happen in a way that works for the greater public good, not just to the advantage of a few large corporations and individuals. But unless the public is at least aware of what's going on and understands the possibilities, we may go another route described by Kiesling: one in which utilities stay the integrated course and pass up the opportunities for better service through innovation.
Sources: Lynne Kiesling's article "A New Power Grid for a New Technological Era" appeared in the Dispatch Energy newsletter of The Dispatch on July 21, 2026 at https://thedispatch.com/newsletter/dispatch-energy/power-grid-system-digitalization-costs-edison/.
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