Here's how artificial intelligence data centers affect the electrical grid

2026-01-19 08:25:00, Kuriozitete CNA

Tech giants are in a heated race to build data centers and dominate the artificial intelligence landscape. But America may not be ready for the energy demand.

The country's aging power grid may struggle to cope with rising energy needs. And American households are largely footing the bill for the additional costs.

The Trump administration and a consortium of governors from northeastern states are asking PJM, America's largest electric grid operator, to ease the national rise in electricity costs.

Federal officials want PJM to hold an emergency auction for electricity, which the White House and governors cannot mandate, with tech giants paying for the rising costs from their data centers.

Here's what you need to know about the data center boom.

Where are data centers built?

Virginia has the largest cluster of data centers in the world. There are currently 561 data centers in 23 markets, according to Data Center Map, which has been tracking data centers since 2007.

Developments are also expanding to remote locations, where energy is more abundant and networks are less congested, according to McKinsey & Company's August data center report. Data centers are expected to appear in Denver, Los Angeles and Pennsylvania, among other regions.

Some states are encouraging these investments. Ohio, for example, has offered partial or full sales tax exemptions to companies that make significant investments, McKinsey noted.

Which companies are leading this?

America's tech giants are racing to be at the forefront of the artificial intelligence boom. Meta said it spent $17 billion on capital expenditures, which usually refers to money spent on data centers and infrastructure, for the quarter ending June 2025.

Microsoft said it spent $24.2 billion for the quarter that ended last June, while Amazon said it would invest $15 billion in Northern Indiana to build new data center campuses, in addition to an $11 billion investment announced in 2024. And Bank of America in September estimated that companies' annual spending on building data centers reached $40 billion in June.

Are they making electricity bills more expensive?

Residential electricity rates rose 5.2% in October compared to the same time in 2024, according to the monthly electricity report released by the Energy Information Administration. Electricity costs for areas near data centers rose as much as 267% compared to five years ago, a Bloomberg News analysis found last year.

The growth is partly due to the data center boom, which is increasing demand and straining resources, noted Ryan Hledik, a principal at research and consulting firm Brattle Group.

But there are exceptions. , Prices can fall if a data center is built in an area that has spare capacity or if it operates outside peak usage hours, he noted.

America's aging electrical infrastructure is also not helping to keep costs down. Most of the rate increases over the past decade can be attributed to America's distribution system, he explained.

The distribution system requires more expensive investments due to rising costs following the supply shock from the pandemic, Hledik said.

Will data centers continue to consume energy?

Data centers are projected to consume about 6.7% to 12% of electricity in the U.S. in 2028, up from 4.4% in 2023, according to a December 2024 report from the Department of Energy.

Some utility companies are already stepping in to prevent demand for data centers from impacting residents, Hledik noted, by introducing new tariffs for large customers.

States are also stepping in. Oregon passed a bill requiring data centers to “pay for the actual load they place on Oregon’s power grid.”

And Microsoft recently said it will seek to pay higher electricity bills in areas where it builds data centers.

How do data centers affect water supplies?

Data centers also need significant amounts of water to cool their complex systems, according to the McKinsey report.

These facilities are expected to need 170% more water by 2030, McKinsey noted, citing a report from WestWater Research. And facilities like the power plants used to power data centers also need water for cooling.

This affects the broader question of whether data centers and American families can coexist in harmony, Hledik said./ CNA