Power hungry: AI data centers’ appetites for electricity are reshaping energy landscapes
AI data centers are significantly increasing electricity consumption across the U.S., with projections indicating a substantial rise in demand by 2035. This surge raises concerns about power grid capacity, utility rates, and the need for new infrastructure. Several states have begun enacting or considering laws to manage these impacts and regulate costs for ratepayers.
Artificial intelligence is rapidly escalating electricity demand in data centers, with projections indicating a potential threefold increase in U.S. consumption by 2028 and up to 20% of total electricity production by 2035. Kim Lundgren, CEO of Boston-based sustainability consulting firm KLA, highlights the significant and growing usage, noting concerns about power grids and utility rates for local communities evaluating new data center projects. Andrew Denis, chief scientist at Delaware-based ZON, described AI’s power needs as "large and compounding," with average rack densities doubling recently and next-generation systems pushing significantly higher kilowatt demands.
The surging demand for power is compelling data center developers, particularly hyperscalers, to prioritize "speed to power" over traditional location factors. Britt Burt, vice president of power industry research at Industrial Info Resources, notes that power availability is now the defining constraint, causing delays for roughly half of the data center projects slated for 2026. While an estimated $4 trillion of global data center investment is targeted for the U.S., states like Virginia, Wyoming, Iowa, Ohio, Texas, and New Mexico are projected to see disproportionately large increases in data center energy use, with Virginia's tech facilities potentially reaching 57% of state energy use by 2030.
This growth has raised concerns about higher utility bills for residential and business ratepayers. In response, states such as Florida, Tennessee, and Oregon have enacted laws to restrict utilities from passing on these increased costs, with Oregon's law including a tariff on large data center developers. Power grid infrastructure, especially in rural areas, also requires significant upgrades. Some developers are funding these upgrades or exploring off-meter power solutions, a move supported by former President Donald Trump to ease regulations. However, energy analysts like Parag Nathaney caution that going off-grid presents its own financial, supply chain, and regulatory hurdles, emphasizing the need for cooperation between data center builders and utilities to manage grid capacity and avoid straining existing infrastructure.