What Wasn’t Discussed at Pennsylvania’s AI Summit

On July 15, U.S. Senator Dave McCormick hosted a Pennsylvania Energy and Innovation Summit. It featured an announcement of $90 billion in investments in data centers and energy production and lots of cheerleading for AI, natural gas—even coal!—and permitting reform.

I haven’t seen such enthusiasm for new technology since hydraulic fracturing.

A few issues were largely glossed over.

The first, unsurprisingly given the participants, is climate change. While there was a nod to CCUS, it was drowned out by the announcement of at least at least six new natural gas power plants and a Google power purchase agreement from two Pennsylvania hydroelectric plants that will effectively reduce the amount of clean energy on the grid. Greenhouse gas emissions will rise from AI development in Pennsylvania, and people and the environment will be harmed.

There were many mentions of competition with China, but not of the fact that China is swamping the U.S. in the solar power race. With all the talk of the need for speed in AI development, the backlog on new gas turbines and large power transformers was downplayed. No one acknowledged that solar plus battery storage can be built twice as fast as gas plants—while having comparable reliability values.

The real head-scratcher is that I didn’t hear much discussion about the costs of electricity. The AI industry is shackling itself to increasingly expensive power. The cost of new gas plants has tripled since 2022. Tariffs on steel and copper will make gas plant construction and equipment even more expensive. Natural gas prices currently are up almost 40% from a year ago.

On top of that, the recently passed Federal reconciliation bill will raise Pennsylvania electricity costs by a projected 8% over the next four years. LNG exports will raise domestic natural gas prices by at least 30% by 2050, further increasing electricity costs. 

The supply of chips for all this development is apparently a foregone conclusion. But a new analysis finds that projected U.S. data center growth “cannot be met by global chip supply.”

Speakers were focused on clearing the regulatory way for AI and “all-of-the-above” energy sources to power it. Apparently, that doesn’t extend to anything but gas in the interconnection queue. On the day of the summit, 83% of the generation languishing in the PJM queue was comprised of quick-to-build solar and storage.

Pennsylvania offers a sales tax exemption for data center equipment that could cost Pennsylvania hundreds of millions of dollars in tax revenue. There was no discussion of requiring planned load flexibility in exchange in order to avoid reliability problems. But there was hype for a proposed energy siting board that has met opposition for, among other things, including unaccountable private sector board members.

The day before the summit, legislators announced a proposal to make Pennsylvania a “regulatory sandbox” for AI, data centers and other “emerging technologies”. It joins bills to expedite permitting, create a special authority to streamline permitting, and create an AI development tax credit and examine “regulatory barriers”.

Meanwhile, as the New York Times has reported, data centers can require millions of gallons of water a day for cooling. Data centers could surpass the oil and gas industry’s consumptive water use in Pennsylvania very quickly. The potential impacts to groundwater, surface water, ecosystems—and 3.5 million Pennsylvanians who rely on private water wells—has not been discussed, and certainly has not been planned for.

Beyond creating construction jobs, the potential economic benefits of an AI industry in Pennsylvania are questionable. Hype brings risks, and history shows that an AI bandwagon can run roughshod over people and the environment. A balanced policy approach to growing AI that considers communities, ratepayers, taxpayers, public health, climate, and natural resources is urgently needed.

NOTE: This post was edited to clarify the characterization of the potential economic benefits of data center development.

John Quigley

Senior Fellow

John Quigley is a senior fellow at the Kleinman Center and previously served on the Center’s Advisory Board. He served as Secretary of the PA Department of Environmental Protection and of the PA Department of Conservation and Natural Resources.