Certificates without Electrons? Theory and Evidence on Impacts from AI-Driven Power Demand
Data centers now account for 4.4% of United States electricity demand, yet the grid-level effectiveness of the renewable energy certificates (RECs) and power purchase agreements (PPAs) hyperscalers use to claim carbon neutrality remains unclear. We develop a game-theoretic model in which a data center operator chooses among RECs, PPAs, and behind-the-meter colocation while generators make entry decisions under endogenous financing costs. The model identifies a timing wedge -- the mismatch between consumption and credited renewable generation -- as a central mechanism through which AI demand degrades reliability, raises prices, and increases emissions even when RECs cover 100% of annual co...
| Authors | Dana Golden, Aruna Balasubramanian, Niranjan Balasubramanian |
|---|---|
| Primary category | econ.EM |
| Published | 30 May 2026 |
| Last updated at source | 2 August 2026 |
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