From data centres to higher electricity prices

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The massive demand for electricity from data centres is increasingly straining supply. This is particularly a problem in the US, where a lack of investments in the power grid is now increasing the risk of blackouts in those parts of the country where data centre growth is particularly rapid (Texas, Carolinas, Virginia). But one way or another, we all pay for data centres in the form of higher power prices.Owen Kay and Reid Taylor from the Dallas Fed, together with Robert Raeser from UC Davis, tried to estimate how much electricity prices in the US have increased due to the rapid buildout in data centres. The chart below shows that, depending on the utilisation rate of data centres, electricity production costs are now between 5% (low capacity utilisation) to 15% (high utilisation) higher than without any data centre buildout in the last five years.Increase in power generation costs relative to no data centre buildoutSource: Kay et al. (2026)That is not too much, if you ask me. I can live with that since any new technology will increase electricity demand and, as a result, production costs, which in turn end up raising our bills. If we weren’t prepared to pay that kind of money, we might as well shut down all factories and lay everyone off.But of course, it doesn’t end there. The authors of the study also simulate how much electricity bills could rise if the data centre boom continues as is currently projected by the hyperscalers and others. In that case, additional power demand from data centres increases generation costs between 20% and 60% by the end of 2028.Increase in p…