Data centers have been criticized for their energy consumption and rising electricity bills, but a new study suggests that more demand can actually lower prices. Researchers at Lawrence Berkeley National Laboratory and the consulting group Brattle found that states with spikes in electricity demand saw lower prices overall, despite traditional wisdom that higher demand should lead to higher costs.
The study’s lead author, Ryan Hledik, said: “It’s contrary to what we’re seeing in the headlines today.” The researchers discovered that the largest factors behind rising rates were the cost of poles, wires, and other electrical equipment, as well as the cost of safeguarding against future disasters. In states with high demand, utilities could spread these fixed costs over more megawatt-hours, reducing rates for everyone.
However, not all data centers have a neutral effect on prices. If operations require entirely new power plants or gobble up the grid’s existing capacity, prices can spike. The study also found that renewables like wind and solar are not the main drivers of rising rates. Instead, it’s the transmission costs and infrastructure upgrades needed to accommodate growing demand.
The researchers warn that these patterns may not hold permanently, as national electricity prices are largely tied to inflation. However, more AI and data centers could still increase prices if utilities struggle to keep up with demand. As Devin Hartman, director of energy and environmental policy at the R Street Institute, said: “These effects are only starting to be felt.” The study’s findings suggest that a more nuanced approach is needed to address rising electricity bills and promote sustainable energy policies.
Source: https://www.washingtonpost.com/climate-environment/2025/10/25/data-centers-electricity-prices-rise