Two-thirds of Americans think new data centers will increase electricity costs, according to a Harvard poll conducted last year. There’s a logic to that belief: Data centers use tons of power, and average electricity prices have risen 39% nationally over the past five years, according to economic data from the Bureau of Labor Statistics.
But a recent study from the Electric Power Research Institute, a non-profit research organization funded by government, academia, utilities, and the private sector, finds that new data centers weren’t the main cause of that increase. Replacing aging grid infrastructure, recovering from natural disasters like wildfires and hurricanes, and fluctuating natural gas prices drove electricity prices higher, according to
additional research from the Lawrence Berkeley National Laboratory and The Brattle Group.
In fact, facilities powering AI and other digital platforms put downward pressure on electricity prices. But as data centers continue to grow, that trend may be starting to reverse.
To explain how a power-hungry data center can actually lower electricity prices, we’ll use an analogy: Say you’re throwing a party, and you’re buying a big spread of food for your guests. You ask each of your guests to chip in an equal amount for their share of the food.
“You know that your buffet is going to cost you $1,000, let's say, and if you have 10 people show up, your cost is much higher per person,” said Robin Millican, director of research programs and strategic partnerships at Columbia University’s Center on Global Energy Policy.
That comes out to $100 each, a pretty pricey buffet. But then, you find out your cousin and four of her friends are in town. They want to come to the party, too. That’s five more guests, and they’ll pay their share. So, the price of that buffet goes down for everybody, to $66 per person.
To translate this to power prices and data centers, the “buffet” is the fixed cost of running the power grid: Building and maintaining all the power plants, poles, wires, and substations. The guests are electricity consumers. Your cousin and her friends are a new data center hooking up to the grid.
“You're taking the fixed costs of managing the grid, and you're able to essentially have more customers pay for those fixed costs,” Millican said.
This is partly how data centers pushed down electricity prices in recent years, according to the EPRI study: They helped spread out those fixed costs of providing electricity to more customers.
“Average residential retail rates in the average state would have been about 6% higher without the data centers built from 2019 to 2024,” said Asa Watten, a researcher at EPRI and the co-author of the study.
One big caveat there: It’s a national average. | 
