AI’s Growing Power Demand is Adding Pressure to Electricity Prices

The rapid expansion of artificial intelligence across the economy is driving a surge in electricity demand. AI relies on vast server farms packed with high-speed semiconductor processors that require enormous amounts of energy to process data.

These facilities—data centers—are often located in remote or extreme climates. But their power needs increasingly compete with residential demand, leading to increased strain on the U.S. power grid as well as higher utility bills.

Electricity prices in U.S. cities began to outpace historical trends in 2021, coinciding with a sharp increase in new data center construction. The push to expand generation capacity has reached unprecedented levels.

Data centers accounted for roughly 4.4% of total U.S. electricity consumption in 2023, and the Department of Energy projects that share could climb to between 6.7% and 12% by 2028.

(Sources: U.S. Dept. of Energy, Federal Reserve Bank of St. Louis)

- Tony Winkels is Managing Partner and Wealth Advisor at Fortis Wealth Management