Amazon data centers are generating enough revenue to cover their costs and, in some cases, are even driving down utility costs for other ratepayers, a report from Energy + Environmental Economics (E3) has found.

E3’s report, which was commissioned by Amazon, analyzed the utility impact of specific Amazon data centers and how electricity rates can be designed to serve the growing workload from data centers.

The energy consulting firm looked at this in the context of whether existing rate designs are protecting ratepayers from cost increases.

E3’s case studies found that the data centers examined “are not burdening other ratepayers with their costs, rather they provide a benefit.”

According to E3, the Amazon data centers examined are projected to generate $33,000/MW of surplus value in 2025.

“Assuming a typical data center is 100MW, this implies $3.4 million in value per facility that utilities can use to reduce rates for other ratepayers,” the report said.

The report argued that these findings show data centers are not being subsidized by other utility customers, and that existing rate policies are “effectively preventing cost-shifts on an individual data center basis.”

E3’s case studies covered four utility areas: Pacific Gas & Electric (California), Umatilla Electric Cooperative (Oregon), Dominion Energy (Virginia), and Entergy (Mississippi). It compared Amazon's projected utility revenue from its data centers with the estimated utility cost to serve the facility.

Grid modernization

E3’s report also identified a number of areas where Amazon is contributing to grid modernization, for example, at the Baldy Mesa solar and battery storage site, where Amazon-powered machine learning models are “used to predict optimal times for the battery to charge and discharge energy back to the grid.”

In a separate blog quoting the E3 report, Amazon claimed that its investments “support the modernization of energy infrastructure that powers its data centers and the surrounding community.”

Amazon also said that it was investing in sustainable energy, with funding for more than 600 solar and wind projects globally.

“When Amazon funds new solar panels and wind farms, that energy gets added to the power grid that serves everyone in the area, including homes, businesses, and our data centers,” the blog said.

“Across the four states explored in the study, we’re adding approximately 4.2GW of firm carbon-free energy to power grids, which is enough to power more than a million US homes. We’re also investing billions into emerging technologies like small modular nuclear reactors to help provide reliable, carbon-free electricity for our data centers.”

Amazon said it would continue to monitor its impact and adapt its approach to support the communities in which it operates.

Rapid growth could still drive utility rate increases

Across all cases, E3 reported that the data centers covered their costs, but it conceded that its findings here were consistent with its work in an independent report produced by the Virginia Joint Legislative Audit and Review Commission (JLARC) last year.

That report found that rapid load growth could affect existing rate structures and market constructs over time, requiring changes to rate design and cost allocation methods to keep pace with changing system costs.

JLARC claimed that, at least in Virginia, unconstrained data center growth would make it “very difficult” to scale the power generation and transmission infrastructure needed to power them.

According to JLARC, new power and transmission infrastructure could increase system costs for all customers, with increases of between $14 and $37 monthly by 2040, independent of inflation, in order to meet the significant costs of scaling power infrastructure.

In the latest report from E3, the consulting firm said: “While large customers have not historically increased costs for others, the cumulative effects of rapid load growth will test existing rate structures and market constructs over time.”

“In markets experiencing the fastest macro-level demand growth, rate design and cost allocation methods will need to evolve more quickly to keep pace with changing system costs. That is a broader policy and societal issue, versus the narrower issues associated with rate design and cost allocation, especially at the facility level.”

It concluded: “Ultimately, continued innovation, through updated tariffs, transparent cost recovery, and new approaches to market design and planning and contracting will be key to ensuring utilities and markets can meet rising demand while maintaining fair outcomes for all customers.”