Originally published in Barron’s.
A single data center can consume as much electricity as a small city. So it makes sense that families across the country are worried that their utility bills might go up if a data center comes to their community, or that they will be forced to subsidize infrastructure built for some of the world’s largest corporations run by the world’s richest men.
Politicians on both sides of the aisle are capitalizing on these anxieties ahead of the midterm elections, using data centers as a rhetorical device in their campaign fight around affordability. Some are even calling for a complete halt to the construction of new data centers. What they aren’t discussing is that more data centers don’t have to mean higher utility bills.
Data center demand can actually bring down the cost of electricity. Recent analysis by the Electric Power Research Institute found that data-center growth actually reduced average retail electricity rates in the U.S. between 2015 and 2024, and that the doubling of data-center capacity reduced residential rates by roughly 4%, likely due to economies of scale. PG&E estimates that every gigawatt of new data-center demand could reduce average household bills up to 2%.
It just depends on how policies are written and enforced. If laws are written to ensure the largest utility customers pay for their costs, while also giving them greater freedom to bring their own power, use electricity flexibly, and invest in new grid capacity, data-center growth can be a net positive for all ratepayers.
One way that can happen is if policymakers step in and direct the influx of private cash from data centers to help dilute utility companies’ massive overhead costs—things like poles and wires.
But companies are also increasingly trying to create their own power by building or paying for the electricity generation, batteries, and other equipment needed to serve their facilities rather than relying on the existing grid to provide everything. Done right, these projects can keep the cost of serving enormous new electricity demand off other customers’ bills while also providing reliable power for the data center.
In Nevada, Google worked with NV Energy, the state’s primary electric utility, to support the development of 115 megawatts of enhanced geothermal generation. Google pays the additional cost associated with the emerging technology rather than passing that premium to other NV Energy’s customers. The arrangement gives an innovative, round-the-clock energy resource a credit-worthy customer and a pathway into a regulated electricity market.
Meta likewise signed a 20-year agreement with Constellation Energy, one of the nation’s largest nuclear power operators, to support the continued operation of a nuclear plant in Illinois after its state subsidy expires next year. The agreement also supports a 30-megawatt increase in the plant’s output.
These sorts of partnerships provide a model that can extend beyond data centers to semiconductor plants, advanced manufacturing facilities, military installations, hospitals, telecommunications systems, and other facilities essential to national and economic security. Last year, West Virginia created a microgrid development program that allows large projects to develop dedicated power generation and distribution systems outside the normal utility system. It’s just one state-level example of creating a legal pathway for large projects to develop independently powered campuses.
Finally, data-center growth can force utilities and regulators to discover ways to get more out of the grid we already have, helping meet growing demand without immediately asking ratepayers to finance expensive new construction. Indiana enacted legislation last year that requires regulators to study technologies that might allow existing power lines to safely carry more electricity. These technologies can increase the capacity of existing transmission corridors more quickly and often at lower cost than constructing entirely new lines.
More states should do the same—quickly. Otherwise, prices will go up.
Virginia’s legislative watchdog, the Joint Legislative Audit and Review Commission, has estimated that without proper planning and protections for existing customers, infrastructure needed to serve data centers could add $14 to $37 a month to the typical Virginian’s electric bill by 2040.
The urgency can benefit everyone. With the right rules, data centers can be more than a new source of electricity demand—they can help deliver more power, a stronger grid, and more affordable electricity for everyone.