The Economist is out with a new piece debunking the myth that data centers are to blame for higher utility costs – and highlighting that in many cases that data centers actually lower families’ energy costs.
In case you missed it…
Americans’ electricity bills are up. Don’t blame AI
The Economist
3/5/2026
In the past few years retail electricity prices have indeed outpaced overall inflation (see chart 1). And data centres are gobbling up more power. Goldman Sachs, a bank, reckons that they will account for nearly half of the overall demand growth in America in the coming years.
Yet even bullish forecasts put data centres’ share of total demand at only a fifth in 2030. Today it is less than a tenth. A study last year by the Lawrence Berkeley National Laboratory showed that data-centre load was not the main cause of the rate rises in the five years to 2024. It fingered grid upgrades and rising costs of power-generating equipment and raw materials such as copper. Wood Mackenzie, a research firm, estimates that last year demand for distribution transformers outstripped supply by 10%. For power transformers the gap was 30%. Manufacturers report waiting lists for essential grid-related kit stretching to 120 weeks or more, up from 50 weeks in 2021.
Many prices started going up in early 2021, nearly two years before the launch of ChatGPT ignited the AI boom. They are likely to keep rising for non-AI reasons. The Edison Electric Institute, which represents private-sector utilities, predicts its members’ cumulative capital spending will reach $1.1trn between 2025 and 2029, up from $765bn in the previous five years. More than half the sum for distribution and transmission infrastructure will go on replacing ageing equipment and hardening it against extreme weather made likelier by climate change. Between 2019 and 2023 big Californian utilities spent $27bn just on mitigating wildfire risk. These investments have been neglected for years. Now, says an industry bigwig, AI provides a pretext to help win approval from regulators to pass the cost on to consumers.
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AI may even be lowering prices. The tech giants are already investing in their own capacity (mostly, whisper it, in the clean variety). Microsoft has signed a long-term deal to restart a nuclear reactor at Three Mile Island to supply its data centres. Meta has backed a handful of nuclear startups. In December Google’s corporate parent, Alphabet, paid $5bn for Intersect Power, a developer of utility-scale solar power and battery storage. A data centre in Ashburn belonging to Equinix, a big operator, is experimenting with fuel cells.
Besides adding its own supply, big tech is making existing capacity more flexible. Google has agreed to novel tariff arrangements with Indiana Michigan Power, a midwestern utility, whereby its data centres can reduce their consumption when other demand is high. Microsoft is going further. In one of its Irish data centres it uses backup batteries as a “grid stabiliser” that can push power back into the network or draw excess power from it at times of stress. Since grids often run well below full capacity, adding a large, flexible customer can bring in lots of revenue for utilities without requiring costly expansion. This lets the utilities lower rates for households while preserving their margins.
The Electric Power Research Institute, a think-tank, found that some states with high load growth between 2019 and 2024 reported price declines, after adjusting for inflation (see chart 2). The World Resources Institute, another think-tank, notes that in North Dakota rising demand from oil and gas extraction, cryptocurrency miners, data-centre operators and food-processors led to large price reductions for local electricity users. PG&E, a big Californian utility, estimates that adding a gigawatt of load could lower bills by up to 2%. If Americans want lower electricity bills, they should be shouting for more AI, not less.
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