Key Points
- Energy experts say that AI data centers are increasing electricity demand and causing higher electricity prices for US households.
- People living in parts of the country, such as the West and the Northeast, have seen electricity prices rise faster than in other regions.
- The energy demand from data centers supporting artificial intelligence is expected to continue growing throughout this decade.
Data centers that power artificial intelligence are raising household electricity prices, and energy experts say prices may not drop anytime soon.
According to the latest data from the Energy Information Administration, residential electricity prices in September rose 7.4% to about 18 cents per kilowatt hour.
From 2013 to 2023, electricity prices rose at about the same rate as inflation, but an EIA forecast from May says they will likely rise faster than inflation through at least 2026. Some regions will be affected more than others.
Energy experts and economists say that data centers supporting AI projects, which consume a lot of electricity, are a major driver of rising prices.
These data centers are large buildings filled with computer servers and other equipment that run cloud computing, artificial intelligence, and other technologies.
The main reason prices are rising is that electricity demand, both current and expected, is growing faster than new supply.
The US Department of Energy estimated in December 2024 that a data center could use between 6.7% and 12% of all US electricity by 2028, up from 4.4% in 2023.
John Quigley, a senior fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy, said the data center frenzy is the main reason electricity prices are rising for households. They are pretty much the whole boat when it comes to increases in electricity demand, Quigley said.
It’s going to get worse, he said.
Affordability Is the Most Important Issue In Politics
Experts say that data centers are not the only reason electricity prices are rising. Escalating electricity prices can strain household budgets, undermine economic competitiveness, and hinder the electrification of energy systems, researchers at the Lawrence Berkeley National Laboratory wrote in a recent study.
Politicians are using the issue of rising electricity prices in U.S. households to gain support.
New Jersey Governor-elect Miki Sherrill, a Democrat, said Virginia Governor-elect Abigail Spanberger, also a Democrat, promised to cut electricity bills for people in their states. During her campaign, Spanberger said she wants to ensure data centers don’t pay more for energy than other businesses in Virginia.
While campaigning, President Donald Trump also promised to cut electricity prices in half within his first 18 months in office.
Importability remains the most salient issue in politics. Chris Krueger, a strategist at Washington Research Group, wrote in a research note on Tuesday.
Rising energy bills are pushing households deeper into debt. A recent analysis by the Century Foundation, a progressive think tank, found that rising energy bills are pushing households further into debt. LS has risen 32% since 2022, from $597 to $789, it found. Utilities include electricity and other costs such as gas and water.
According to the National Energy Assistance Directors Association, households that use electricity for heating are expected to see their winter heating bills rise to $1,205 this season, about 10% higher than last winter’s $1,093. Again, feel the pressure on their utility bills in the coming months, particularly if winter is cold, according to a Bank of America Institute report.
Excitement about AI has pushed the US stock market higher, leading to speculation that it could soon be in an attack bubble that might burst. Right soon, Pop!
No matter whether the market’s AI rally lasts, the technology’s growth is clear. The International Energy Agency expects global electricity demand from AI data centers to more than quadruple by 2030.
Global electricity demand from data centers is set to more than double over the next five years, consuming as much electricity by 2030 as the whole of Japan does today, Faith Birol, IEA Executive Director, said in that analysis.
According to the IEA analysis, the effects will be particularly strong in countries like the U.S., where data centers are expected to make up almost half of the growth in total electricity demand.
IEA found that by 2030, the US economy is likely to use more electricity for processing data than for making all energy-intensive tools combined, such as:
- aluminum
- steel
- cement
- chemicals
Quigley of UPenn said that expected demand has created a need for new infrastructure, such as power lines, substations, and power plants, and that companies pass at least some of these costs on to residential customers.
He said that, in effect, households are holding to pay for the extension of AI data centers.
Quigley said that while AI-powered electricity demand is rising across the U.S., some electric grid managers are better at controlling costs than others. The price increase will vary by region, he said.
For example, extreme weather such as hurricanes, storms, and wildfires has led to sizable price increases in some states, such as California. In California, wildfire risk mitigation and liability insurance were major cost drivers, according to an October report from Lawrence Berkeley National Laboratory, a U.S. Department of Energy lab managed by the University of California. In response to inflation, 31 states saw electricity prices decline from 2019 to 2024, according to Lawrence Berkeley National Laboratory researchers. 17 states saw price increases after inflation, especially in states on the West Coast and in the Northeast, they found.
Additionally, they also found that average retail electricity prices rose by 23% in nominal terms during that period before inflation adjustments. Easing residential electrification, including electric vehicles, is among the factors pushing electricity demand, according to the Bank of America Institute.
Source: AI data center ‘frenzy’ is pushing up your electric bill — here’s why
