It's Not Data Centers Causing Power Bills to Spike

As electricity bills climb across the US—New Jersey alone saw a 19% jump last year—many Americans are blaming energy-hungry data centers. Politicians have seized on the issue, warning that the proliferation of these facilities will inevitably drive up costs for everyone. However, a recent study from Lawrence Berkeley National Laboratory and the consulting firm Brattle, published in the Electricity Journal, challenges this narrative, suggesting the real culprits behind rising rates are not data centers, but the soaring costs of infrastructure and disaster resilience. The researchers found that, in several states, higher electricity demand actually coincided with stable or even falling prices, per the Washington Post.

For example, North Dakota and Virginia, both of which saw demand spikes partly due to data centers, experienced drops in inflation-adjusted electricity prices. Conversely, California, where demand fell, saw one of the largest price increases. The reason, the study says, is that the majority of electricity system costs are fixed—covering things like poles, wires, and upgrades to withstand extreme weather. When demand rises, fixed costs are spread over more customers, sometimes leading to lower rates. However, the situation varies locally depending on whether utilities need to build new power plants or simply manage demand with existing infrastructure.

As for renewables, the cost of generating power from wind, solar, or natural gas has dropped 35% over the past two decades. But the price of transmission and distribution has more than doubled, with the cost of wires and transformers rising faster than inflation, per the Post. As a result, states with aggressive clean energy standards have also seen modest rate hikes. Extreme weather has also forced utilities to spend billions on repairs and preventative measures. The study found about 40% of California's electricity price jump in the last five years was related to wildfires. Data centers could have an impact in the future, especially if growth outpaces utilities' ability to plan and build. For now, though, they're receiving unwarranted blame, researchers say.