Data center boom risks reversing electricity cost gains, with $7 trillion buildout at stake

What happened

A new Electric Power Research Institute study found that between 2015 and 2024, data center expansion actually caused retail electricity prices to fall—for every doubling of data center capacity, average retail electricity prices decreased by 3.5% (about 6% on a statewide level). However, Goldman Sachs projects electricity costs will rise 6% between 2026 and 2027, and 3% more by 2028, as the AI infrastructure buildout accelerates.

Why it matters

The cost savings came from spreading fixed electricity infrastructure costs across more consumers and kilowatt-hours. But if the expected $7 trillion data center spending by 2030 outpaces actual AI demand, that benefit reverses—utilities will recover fixed costs from fewer customers, raising prices. PJM, the largest U.S. power grid operator, projects a $6.3 billion increase in consumer electricity costs over the next three years, largely from data center power demands. In Virginia, the state with the most data centers, residential electricity prices have risen more than 13% in the last year.

What to watch

The turning point hinges on whether the rapid AI buildout justifies the capacity. If hyperscalers build more data centers than AI adoption requires, Asa Watten, the study's coauthor, warns fixed costs will spread across fewer paying customers, driving prices up—the opposite of the 2015–2024 trend. Billionaire investor Mark Cuban warned on the All-In podcast this week that many data centers could become obsolete as AI becomes cheaper, while other experts note continued energy efficiency improvements (from electrification and more efficient generators) could still offset costs.