Rising Electricity Costs Driven by AI Data Center Demand

The demand for electricity in AI data centers is rapidly increasing, leading to a rise in consumer electricity costs. In 2023, more than 4% of the nation's electricity was consumed by data centers, with projections estimating this could rise to as much as 12% within three years. This is due to the fact that computers running AI systems consume significantly more energy than those streaming services like Netflix or TikTok.

Amazon's CEO, Andy Jassy, stated to investors that the company could have achieved higher sales if it had more data centers. Power is essential to the success of these centers. Despite some corporate customers being underwhelmed by AI's usefulness, tech companies plan to invest billions in AI.

The boom in data centers poses a threat to increase power bills for residents and small businesses. Nationally, the average electricity rate for residents has risen more than 30% since 2020, largely driven by utilities catching up on deferred maintenance and hardening grids for extreme weather.

A June analysis by Carnegie Mellon University and North Carolina State University found that electricity bills are on track to rise an average of 8% nationwide by 2030 due to data centers. In Ohio, the electricity bill for a typical household increased by at least $15 a month due to data centers.

Tech companies require significant power for data centers, necessitating costly upgrades to the electric grid. These costs will be shared by residents and small businesses through higher rates unless state regulators and lawmakers force tech companies to cover these expenses.