On the predictability of the effects of data centers electricity demand shocks

The paper shows that the entry of data centers in the electricity market leads to price and consumption effects observed in the real world that were quite predictable from a simple conceptual modelling exercise. The size of the associated welfare losses is sensitive to specific electricity market characteristics, explaining why they are often not comparable across regions or countries. In general, the historical users are likely to be worse off in the short run. They will recover their losses in the longer run, but only if the entrant finances its own capacity needs and if the data centers do not have excessive bargaining power. The differences in possible outcomes according to context suggests that one-size-fits-all policies to manage the shock across countries or regions will fail to mitigate undesirable effects in some contexts.