{"id":369374,"date":"2025-12-25T13:32:16","date_gmt":"2025-12-25T13:32:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/369374\/"},"modified":"2025-12-25T13:32:16","modified_gmt":"2025-12-25T13:32:16","slug":"demand-from-data-center-boom-raises-electricity-bills","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/369374\/","title":{"rendered":"Demand from data center boom raises electricity bills"},"content":{"rendered":"

Affordability is the key buzzword ahead of the 2026 midterm elections, and no cost-of-living concern has risen to the top of the political agenda like rising electricity prices. The Trump administration and Congress are trying to reform the electrical grid to increase the supply of power to meet soaring demand. Yet the different parties cannot agree on what\u2019s causing the problem, the sources of energy to pursue, or how to overhaul the permitting process to allow more construction. This Washington Examiner series will look at the policy and politics of the grid. The first entry covered the roles played<\/a> by renewable energy projects and retirements of fossil fuels. The second looked at the need for greater transmission<\/a>. This third story addresses the demand caused by data centers and artificial intelligence.
The rapid growth of energy-intensive technologies is driving up energy demand in the United States, and with no signs of slowing, it threatens to push electricity prices higher for households.<\/p>\n

The surge in energy demand is being fueled by the rapid expansion of data centers, artificial intelligence, electrification, and the reshoring of manufacturing, all of which have been linked to climbing electricity prices. <\/p>\n

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An Energy Department report<\/a> last year found that data centers consumed about 4.4% of total U.S. electricity in 2023. That share is projected to rise to 6.7% to 12% by 2028. The growth of data centers is expected only to accelerate, as the Trump administration has made it a priority<\/a> to build out data centers.<\/p>\n

As demand has increased, electricity prices have continued to outpace inflation. According to the latest Bureau of Labor Statistics consumer price index, electricity prices rose 6.9% for the year ending in November, faster than overall inflation, which stood at 2.7%.<\/p>\n

Joseph Majkut, director of the Center for Strategic and International Studies\u2019s Energy Security and Climate Change Program, told the Washington Examiner that electricity rates could increase from the wave of incoming load from data centers. Prices are tied to a number of factors, he cautioned, including the supplies that go into building the grid, such as transformers and transmissions. But the massive rise in demand could prove determinative.<\/p>\n

\u201cWe need to make part of the policy challenge, and part of the challenge in front of regulators, utilities, and national policy makers, is ensuring that we\u2019ve got a system that can be built to meet that new demand without adversely affecting all rate payers,\u201d Majkut said.<\/p>\n

Still, some in the Trump administration who support the expansion of data centers argue that rising demand can help to lower prices by helping to finance the construction of more supply and then smoothing out demand over the course of the day or week.<\/p>\n

Energy Secretary Chris Wright told the Washington Examiner earlier this month that data centers are the \u201cbest mechanism we have to reduce electricity prices.\u201d He said adding more load to the grid could lower the average price per unit of electricity.<\/p>\n

\u201cThe red states that have governed in a sort of business-friendly way, where data centers were mostly built \u2014 those are the places that don\u2019t have big electricity rises,\u201d Wright said. \u201cThe states that have made it hard to build new capacity there, and therefore their demand hasn\u2019t grown or has even shrunk. Those are the places with the fastest electricity rise.\u201d<\/p>\n

\u201cDemand growth is your friend,\u201d he added.<\/p>\n

States such as Texas and California have seen a weaker impact of data centers on rising electricity prices. CNBC<\/a> reported that Texas, which has a high concentration of data centers, saw prices increase by about 4% year-over-year in August, which is lower than the national average. Then, in California, which has the third-most data centers, prices increased about 1% in August 2024 compared with the prior year, far below the average nationwide hike.<\/p>\n

However, CNBC noted that in at least three states with a high number of data centers, electric bills climbed much faster than the national average in August. For example, prices surged by 13% in Virginia, 16% in Illinois, and 12% in Ohio.<\/p>\n

An Edison Electric Institute spokesperson told the Washington Examiner via email that there are massive private investments tied to new large-load projects. The spokesperson said there are nearly 60 data centers and other large-load projects underway within electric company service territories, representing more than $650 billion in private investment and more than 27 gigawatts of new electricity demand.\u00a0<\/p>\n

\u201cWhen major new customers come online, they help spread fixed costs across a wider customer base\u2014driving down electricity prices for everyone,\u201d the EEI spokesperson said.\u00a0<\/p>\n

However, those in the data center industry said connecting to the grid remains a major challenge. Cy McNeill, director of federal affairs for the Data Center Coalition, said energy is the group\u2019s top priority, but infrastructure can delay projects connecting to the grid.<\/p>\n

\u200bMcNeill said a data center could be built in about 18 to 24 months, but it may take some facilities four to seven years to be energized, thanks to difficulties getting permits.<\/p>\n

\u200b\u201cThere are certain policies that the federal government is looking at, whether it\u2019s related to permitting reform, or others that we think can have a real impact on making sure that energy infrastructure is built out in a timely manner,\u201d McNeill said.<\/p>\n

\u200bCoalition members are looking at a range of energy solutions, including renewable energy, but the primary focus is on what can get \u201cconnected to the grid quickly,\u201d McNeill said.<\/p>\n

Recently, there has been public pushback against data center construction, specifically in rural areas. Sen. Bernie Sanders (I-VT) called for a moratorium<\/a> on data center construction, citing the projects\u2019 impact on emissions and utility bills.<\/p>\n

A recent study<\/a> from Lawrence Berkeley National Laboratory found that state-level load growth between 2019 and 2024 tended to reduce average retail electricity prices. However, the study noted that it is unclear whether the trend would hold up due to nationwide load growth.<\/p>\n

Energy experts say meeting rising demand from data centers and other large-load applications will require a broad mix of power sources.<\/p>\n

David Hill, executive vice president of the Bipartisan Policy Center\u2019s Energy Program, told the Washington Examiner that the power system needs a variety of energy sources to meet current demand.<\/p>\n

\u201cThe power system is called a system for a reason,\u201d Hill said. \u201cIt\u2019s a system. You need different things that have different attributes and have different qualities about them.\u201d<\/p>\n

Hill said wind and solar could play a critical role, but dispatchable sources, such as natural gas, are needed when renewable generation is unavailable. The Trump administration has favored fossil fuel generation and has made moves to block the growth of renewable energy sources, specifically wind.<\/p>\n

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Affordability has emerged as a key concern among voters as households face higher electric and heating costs. Hill said it is \u201ccrystal clear\u201d that electricity affordability was a problem in the gubernatorial elections<\/a> in Virginia and New Jersey last month.<\/p>\n

Hill said permitting reform could be a way to address those concerns to ensure that energy generation can be built and connected to the grid in a timely manner. Lawmakers this past year have been negotiating a permitting bill<\/a> that would reform the National Environmental Policy Act, which requires federal agencies to evaluate the environmental impacts of projects. Those projects could include transmission lines, data centers, oil and gas, and even renewable energy projects.<\/p>\n