Energy experts warn that the rapid expansion of data centers to service artificial intelligence applications could cause electricity bills to skyrocket and put a huge strain on the grid.
How are data centers causing higher electric bills?
According to CBS News, a new report from Schneider Electric, a global specialist in energy management and automation, estimates that data centers' electricity demand could reach a staggering 1,000 terawatts by 2026 — enough energy to power Japan. The company projects a 16% increase in electricity demand by 2029, primarily driven by the growth of data centers.
Unfortunately, utility ratepayers are often left to foot the bill for data centers' massive electricity needs, as these facilities require grid upgrades such as new transmission lines, substations, and increased generation capacity, which are expensive. Consequently, utilities may pass these costs onto customers.
Already, millions of Americans — especially in the northeastern U.S., where there's a high concentration of data centers — are experiencing much higher energy bills than usual, and experts say these computing facilities are partially to blame.
Why does this matter?
A combination of factors is driving up electricity bills, including the need for grid upgrades because of aging infrastructure, rising natural gas prices, and increased demand as more people use air conditioning to combat extreme heat events. The enormous energy consumption of data centers is raising prices even further, and much of the burden is being passed on to consumers and businesses.
"As utilities race to meet skyrocketing demand from AI and cloud computing, they're building new infrastructure and raising rates, often without transparency or public input," Mark Wolfe, executive director of the National Energy Assistance Directors Association, a nonprofit that helps states manage energy programs, told CBS in an email. "That means higher electricity bills for everyday households, while tech companies benefit from sweetheart deals behind closed doors."
AI workloads, particularly training large language models like those used in generative AI, require massive computational power and specialized facilities designed for high-density servers. According to the Electric Power Research Institute, a nonprofit that researches electricity, AI searches require around 10 times more electricity than traditional internet searches, with media generation using even more.
These data centers aren't just hard on people's wallets; they also take a significant toll on the environment, as they require substantial amounts of water, energy, and land to operate, and contribute to e-waste since the hardware they use typically has a short lifespan and necessitates frequent upgrades.
There's also the issue of where data centers source their electricity. While many are investing in and utilizing renewable energy sources such as solar, wind, geothermal, and hydropower to operate their facilities, around 56% of the electricity used to power data centers in the U.S. still comes from fossil fuels, according to a 2024 study from an international team of researchers.
However, many major players in the tech industry, including Google, Microsoft, and Amazon, have made commitments to power their data centers with 100% renewable energy, which will benefit the public by reducing environmental pollution and resource use.
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Always 👍 How can you save money on electric bills?
No matter what's going on with the digital world, you can still lower your energy bills by going solar. While savings vary depending on your location, energy needs, and the size of your system, homeowners can generally expect to save an average of $1,500 annually on electricity bills, per SolarReviews.
However, since the initial investment can be steep, some homeowners may find that leasing solar panels is a more cost-effective option. Through Palmetto's LightReach leasing program, customers can enjoy all the benefits of going solar without paying thousands of dollars upfront and lock in a fixed monthly electricity rate. Some of the company's plans even offer $0 down on installation fees.
If you'd rather purchase a rooftop solar setup, EnergySage provides free tools to help you get estimates on installations from pre-screened installers, making it easy to compare quotes. Not sure whether leasing or buying is best for your needs? Check out Palmetto's list of pros and cons to help you make the right decision for your budget and energy use.
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