Yes, this is often a big surprise. You can test out some disk-heavy app locally on your laptop and observe decent performance, and then have your day completely ruined when you provision a slice of an NVMe SSD instance type (like, i4i.2xlarge) and discover you're only paying for SATA SSD performance.
Spin up an E2 VM in Google Cloud and there's a good chance you'll get a nearly 9 year Broadwell architecture chip running your workload!
From Google's perspective, if the hardware is paid for, still reliable, and they can still make money on it, they can put new hardware in new racks rather than replacing the old hardware. This suggests Google's DC's aren't space constrained but I'm not surprised after looking at a few via satellite images!
I don't think this is true, because the old chips don't use more power outright[1][2][3]. In fact in many cases new chips use more power due to the higher core density. The new chips are way more efficient because they do more work per watt, but like I said in my previous comment you aren't paying for a unit of work. The billing model for the cloud providers is that of a rental: you pay per minute for the instance.
There's complexity here like being able to pack more "instances" (VM's) onto a physical host with the higher core count machines, but simply saying the new hardware is cheaper to run I don't think is clear cut.
[1]: https://cloud.google.com/compute/docs/cpu-platforms#intel_pr...
[2]: https://www.intel.com/content/www/us/en/products/sku/93792/i...
[3]: https://www.intel.com/content/www/us/en/products/sku/231746/...