AI Data Centers Are Hiking Electricity Costs in Some States as Expert Warns ‘There’s So Much More to Come’

AI Data Centers Driving Up Electricity Costs in Several States

As artificial intelligence (AI)-powered data centers continue to expand across the country, residents in some areas are facing higher electricity bills. Marina Domingues, the vice president of U.S. New Energies at the Rystad Energy research firm, describes the increase in electricity prices as just “the tip of the iceberg.” The U.S. Department of Energy reported that data centers consumed approximately 4.4% of total U.S. electricity in 2023 and are projected to consume between 6.7 to 12% by 2028.

In Baltimore, resident Nike Carstarphen noticed a 20% hike in her electricity rate within a month, despite cutting down her electricity usage by 40% by not using her air conditioner. Utility company Baltimore Gas and Electric (BGE) raised prices by an average of $32 per month in September. The primary cause of the skyrocketing electricity costs is attributed to the emergence of new data centers in northern Virginia, affecting residents in neighboring Maryland and Washington, D.C.

The proliferation of AI data centers brings both benefits and challenges to communities where they are located. These centers create jobs and generate revenue, but they also come with drawbacks. Northern Virginia, currently the largest data center market globally, houses 13% of all reported data center operational capacity worldwide, as per a report from the Joint Legislative Audit and Review Commission (JLARC). The impact of these data centers is being felt beyond Virginia, with residents in nearby Maryland and D.C. experiencing increased electricity costs.

The rise in residential electricity bills in the region can be attributed to the significant power requirements of data centers and the necessity for new infrastructure to meet these demands. A report from the U.S. Department of Energy indicated that data centers used 4.4% of total U.S. electricity in 2023 and are expected to consume a larger share by 2028. Marina Domingues from Rystad Energy emphasised that the surge in electricity prices is just the beginning, with more challenges anticipated due to the escalating demand for power and infrastructure upgrades.

While data centers currently cover their electricity costs, the immense energy demands of these facilities are projected to increase system costs for all customers. Utility companies may need to invest in new generation and transmission infrastructure to meet the growing requirements of data centers, resulting in fixed costs that would need to be recuperated. There could also be a heightened reliance on imported power, potentially leading to increased energy market prices.

Locally, residents are already experiencing the effects of these developments. Some U.S. states are preparing for the energy demands of the future, with regional grid operators like PJM Interconnection proposing billions of dollars in infrastructure enhancements since 2023 to accommodate new data centers. Elected officials in Virginia and New Jersey have responded to voters’ concerns about rising utility costs associated with data centers, promising to address these issues.

As discussions continue on how to manage the increasing electricity costs linked to AI data centers, companies operating these facilities stress that they are already covering their electricity expenses. Microsoft, for example, highlighted their commitment to paying for the electricity they use and the associated infrastructure costs. Nevertheless, the broader implications of data centers on consumer costs are expected to unfold over the coming years, presenting both challenges and opportunities for communities hosting these facilities.