AI data center ‘frenzy’ is pushing up your electric bill — here’s why

Data centers powering the AI ​​revolution are driving up electricity prices for households, and a price cut may not be coming anytime soon, according to energy experts.

Residential retail electricity prices in September increased by 7.4%Up to about 18 cents per kilowatt-hour, according to the latest data from the Energy Information Administration.

Electricity prices closely tracked inflation from 2013 to 2023, but will likely outpace inflation At least until 2026, according to the EIA forecast in May. It was stated that some regions would be hit harder than others.

Energy experts and economists point to electricity-hungry data centers supporting artificial intelligence projects as the main cause of price inflation.

These data centers are large warehouses containing computer servers and other IT equipment that support cloud computing, artificial intelligence, and other technology applications.

The main reason for rising prices is that electricity demand, including actual and projected demand, outstrips new supply.

data centers expected to be consumed The U.S. Department of Energy’s December 2024 forecast predicted 6.7% to 12% of total U.S. electricity by 2028, down from 4.4% in 2023.

John Quigley, a senior fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy, noted that the main reason for high electricity prices for households is “data center mania.”

“Pretty much everything is going well when it comes to increases in electricity demand,” Quigley said.

“It’s going to get worse,” he said.

But researchers at Lawrence Berkeley National Laboratory say rising electricity prices “could strain household budgets, weaken economic competition, and impede the electrification of energy systems.” In a recent analysis he wrote:.

Rising electricity prices for U.S. households also come as politicians continue to use the theme of affordability to rally support.

New Jersey Governor-elect Mikie Sherrill and Virginia Governor-elect Abigail Spanberger are both Democrats. He promised to drop Electricity bills for state residents. During his campaign, spanberger he said he wanted “Make sure data centers don’t increase energy costs for everyone else in Virginia.”

While on the campaign trail, President Donald Trump promised to cut electricity and energy prices in half in his first 18 months in office.

“Compliance continues [the] “it’s the most salient issue in politics,” wrote strategist Chris Krueger of the Washington Research Group in a research note Tuesday.

Rising energy bills are pushing households further into debt, according to a recent analysis by the Century Foundation, a progressive think tank.

The average past-due balance on utility bills has increased 32% since 2022, from $597 to $789. Utilities include electricity and other costs such as gas and water.

It is estimated that households that use electricity to heat their homes will see heating bills in the winter rose to $1,205 this seasonThat’s up about 10% from $1,093 last winter, according to the National Energy Assistance Directors Association.

“Consumers may again feel the pressure on their utility bills in the coming months, especially if the winter is cold,” according to one report. Bank of America Institute report Starting from October.

AI enthusiasm is driving the US stock market higher, fueling speculation that the market is in a tech-fueled bubble This may explode soon.

Regardless of whether the rise of AI in the market is sustainable or not, the scale of the technology’s growth is indisputable. International Energy Agency Worldwide electricity demand is expected The number of AI data centers will more than quadruple by 2030.

“Global electricity demand from data centers is projected to more than double in the next five years, and by 2030, all of Japan will consume as much electricity as it does today,” IEA Executive Director Fatih Birol said in this analysis.

The impacts will be “particularly strong” in countries such as the United States, where data centers are projected to account for almost half of growth in overall electricity demand, according to IEA analysis.

The IEA found that the U.S. economy is on track to consume more electricity to process data by 2030 than the combined production of all energy-intensive goods, including aluminum, steel, cement and chemicals.

UPenn’s Quigley said projected demand drives the need for new infrastructure such as power lines, substations and power plants, and companies pass on the costs at least partially to residential consumers.

In other words, he said, households partially subsidized the expansion of the AI ​​data center.

As AI-driven electricity demand surges across the U.S., some power grid managers are better at managing costs than others,” Quigley said.

“The amount [price] “The increase will vary by region,” he said.

For example, extreme weather such as hurricanes, storms and wildfires contributed to “significant” price increases in some states such as California, where wildfire risk mitigation and liability insurance are “major cost drivers,” according to an October report from Lawrence Berkeley National Laboratory, a U.S. Department of Energy laboratory run by the University of California.

After accounting for the impact of inflation, 31 states saw electricity prices decline from 2019 to 2024, according to Lawrence Berkeley National Laboratory researchers. According to the findings, 17 states saw price increases following inflation, especially those on the West Coast and Northeast.

Average retail electricity prices at the national level were found to have increased by 23% in nominal terms during this period, that is, before accounting for inflation.

Increasing residential electrification, including electric vehicles, are among other factors driving demand for electricity, according to the Bank of America Institute.