Earlier this year, New Jersey residents received concerning news from the state’s public utilities board, which indicated that electricity rates could rise by as much as 20% starting June 1. A significant contributor to this anticipated increase is the proliferation of data centers.
As demand for artificial intelligence (AI), data storage, and various technological services continues to escalate, the expansion of large-scale computing facilities across the United States is expected to drive electricity consumption to unprecedented levels in the upcoming years, experts warn.
A report by Schneider Electric, a firm focused on digital automation and energy management, forecasts a 16% rise in electricity demand by 2029, primarily due to the growing number of data centers. Since these facilities typically rely on the national electrical grid for power, the financial burden will ultimately fall on American ratepayers, according to Mark Wolfe, executive director of the National Energy Assistance Directors Association, which represents states on energy-related matters.
“Utilities are under pressure to accommodate soaring demand from AI and cloud computing, prompting them to construct new infrastructure and increase rates, often without clear communication or public involvement,” he stated in an email to CBS MoneyWatch. “This situation leads to higher electricity bills for average households, while tech companies enjoy preferential agreements made in private.”
Currently, thousands of data centers are located throughout the country, with the highest concentrations found in Virginia, California, and Texas. According to Environment America, a network of environmental advocacy groups, the number of data centers in the U.S. has nearly doubled between 2021 and 2024.
In addition to the sheer number, the size of these data centers is also on the rise. “The trend has been towards larger data centers,” noted Dave Turk, former deputy secretary of the U.S. Department of Energy, in a conversation with CBS MoneyWatch. “These larger facilities generally exhibit greater energy efficiency.”
The rapid expansion is largely fueled by the swift growth of “generative” AI companies, which demand substantial amounts of electricity to train advanced models like ChatGPT. According to a study by the Electric Power Research Institute, AI searches consume ten times more energy than standard internet searches.
“AI is becoming an integral part of data centers and is certainly a factor driving electricity demand upward,” Turk added.
Data centers, which house thousands of computer servers, networking equipment, and other infrastructure, also require power for cooling systems to prevent overheating.
Torsten Sløk, chief economist at Apollo Global Management, projects that data centers will need an additional 18 gigawatts of power capacity by 2030. For perspective, the power demand of New York City is approximately 6 gigawatts.
In 2023, around 4.4% of U.S. electricity was used to power data centers, as reported by the Lawrence Berkeley National Laboratory, part of the Department of Energy. Although not all of this demand is directly linked to AI, it does constitute a significant percentage, according to Turk.
The rise of data centers is not the sole factor driving electricity prices in the U.S. Other elements, such as natural gas prices, inflation, the ongoing electrification of buildings and vehicles, also significantly influence costs. However, utilities are incorporating the heightened demand from data centers into their pricing strategies.
For instance, in April, Dominion Energy, one of Virginia’s largest utility providers, proposed a monthly rate increase of $8.51 for 2026 and mentioned the possibility of establishing a new rate category for high-energy consumers, including data centers.
Recent data from the Labor Department indicates that electricity prices rose by 4.5% over the last year, with expectations of further increases this summer. Additionally, energy costs may escalate if a Republican-backed budget proposal, known as the “big beautiful bill,” is enacted by President Trump. Analysts from Rhodium Group predict that this legislation, which seeks to eliminate various tax credits from the Inflation Reduction Act, could lead to an annual increase of nearly $400 in energy expenses for families.
Moreover, the surging energy demand from data centers could jeopardize grid reliability, experts caution. A recent report from the North American Electric Reliability Corporation highlighted that facilities catering to AI and cryptocurrency companies are being established more rapidly than the necessary power plants and transmission lines, resulting in diminished system stability.
PJM, a grid operator serving 13 states and Washington, D.C., has identified data center demand as a contributing factor to potential capacity shortages in its 2025 forecast.
Edited by Alain Sherter
