Why AI Data Centers Cannot Turn Off
Patrick McKenzie explains why GPU depreciation forces AI data centers to run 24/7, unlike Bitcoin miners that profit from grid demand response.
Why SoftBank paid me 17 yen to skip the air conditioning
With Patrick McKenzie · Sunday, November 1, 2026
Patrick McKenzie analyzes the structural mechanics and economics of power grids, reading and updating his essay 'Markets in Power.' He explains how generation supply and instantaneous demand must balance continuously across baseload, intermediate, and peaker plants. McKenzie details how virtual power plants and demand response operate, why Bitcoin miners like Riot make money by curtailing load during grid stress, and why AI data centers behave as baseload consumers due to heavy chip depreciation costs.
Key takeaways
- Data centers consume between 5% and 10% of total electricity in the United States, and multi-trillion dollar infrastructure build-outs will drive a massive share of marginal grid growth. Read more →
- Bitcoin miner Riot Platforms pocketed tens of millions of dollars from Texas grid operator ERCOT during the 2022 grid crisis by shutting down operations. Read more →
- Electricity travels at near light speed, requiring supply and demand to match continuously because almost all power is consumed at the exact moment it is generated. Read more →
- Thirty years ago, utility billing required a person to drive to your building, read a mechanical meter, subtract the previous month's number, and mail a bill for the difference. Read more →
- Stranded power plants occur when an industrial customer closes down, leaving a fully capitalized generator with zero local buyers for its electricity. Read more →
5 articles from this episode
Why Texas Paid Bitcoin Miners Tens of Millions to Stop Working
Patrick McKenzie explains how Riot made millions selling power back to ERCOT during the 2022 heat wave by acting as an interruptible dumpload.
Patrick McKenzie on Power Grids: Why Dynamic Load Dictates Costs
Patrick McKenzie explains the economics of baseload, peaker plants, and why AI data centers cannot afford to shut down when power spikes.
Patrick McKenzie: Smart Meters Cut Utility Truck Rolls by 99%
Patrick McKenzie explains how smart meters eliminated 99% of utility truck rolls and turned dumb power grids into real-time demand response networks.
How CoreWeave Turned Stranded Power Into AI Compute
Patrick McKenzie explains how CoreWeave converted crypto mining contracts and stranded power plants into high-margin AI infrastructure.
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