Rising Electricity Prices Driven by AI Data Centers Threaten Economic Growth
By John Nada·Feb 12, 2026·4 min read
Electricity prices are surging due to AI data centers, threatening consumer spending and economic growth. Rising costs will impact low-income households the most.
Electricity prices have surged by 6.9% in 2025, more than double the inflation rate of 2.9%, largely due to soaring demand from artificial intelligence data centers, according to Goldman Sachs. This trend is set to continue, with projections indicating an additional 6% increase by 2027. The rapid expansion of data centers, which are responsible for 40% of electricity demand growth, is outpacing the slow growth of power supply, putting upward pressure on prices and threatening disposable incomes for households.
Goldman Sachs analysts warn that higher electricity costs will lead to reduced consumer spending and slightly slower economic growth over the coming years. They estimate that consumer spending growth will fall by 0.2% through 2027, while economic growth will decelerate by 0.1%. Lower-income households, which allocate a larger share of their income to utility bills, will be disproportionately affected by these rising costs.
The stark regional disparities in electricity pricing further complicate the issue, driven by varying market structures and regulatory choices across the U.S. States with more data centers, such as California and areas in the Midwest and mid-Atlantic, will see the most significant price increases. The tight supply-demand balance in these regions is exacerbated by regulatory barriers and labor shortages in building new power plants, which are expected to push wholesale electricity prices higher. As businesses pass on their increased costs to consumers, the inflationary impact is projected to rise by 0.1% through 2027.
Families won't see relief from rising electricity prices anytime soon, as demand from artificial intelligence data centers continues to soar while power supply grows slowly, according to Goldman Sachs. The trajectory of electricity prices, however, will vary widely across the U.S. based on different regional market structures and regulatory choices. Goldman analyst Manuel Abecasis noted that the income and spending drags will likely be larger for lower-income households because electricity accounts for a greater share of their spending.
Households in regions with a higher concentration of data centers will also take a bigger hit. For instance, the cost to secure power supplies in the PJM Interconnection—a market covering 13 states primarily across the mid-Atlantic and Midwest—has exploded in recent years, with $23 billion attributable to data centers. This surge in costs is expected to be passed down to consumers, resulting in a substantial financial burden.
Utilities are also facing increased pressure to spend more on infrastructure to meet the burgeoning demand. This necessary investment is further compounded by labor and material shortages, making it difficult to build new power plants. Consequently, the rising electricity prices translate directly into increased costs for consumers, which will likely slow economic growth. Higher electricity prices will increase core inflation by 0.1% through 2027 and by 0.05% in 2028, according to Goldman analysts.
Political implications are also significant as the rising electricity prices tied to the AI sector have become a flashpoint in the upcoming midterm elections. Lawmakers are under pressure to address rising utility costs, with some politicians advocating for measures to control these expenditures. The growing concern surrounding electricity prices has influenced political campaigns, as evidenced by the recent victories of Democrats Mikie Sherrill and Abigail Spanberger, who won gubernatorial elections in New Jersey and Virginia, respectively, in 2025. Their campaigns emphasized the need to bring utility bills under control.
President Donald Trump has also recognized the potential threat that rising electricity prices pose to the Republican Party's political fortunes. He has embraced the AI industry as an engine of economic growth while simultaneously acknowledging the challenges posed by increasing utility costs. In January, he secured a promise from Microsoft that it would not allow its data centers to drive up prices, demonstrating a proactive approach from the tech industry in addressing these concerns.
Additionally, the White House signed a pact with several states last month that calls for tech companies to contribute to the construction of new power plants in the nation's largest electric grid, PJM Interconnection. This agreement reflects a growing recognition of the challenge posed by the energy demands of the AI industry and aims to ensure a more stable and affordable electricity supply for consumers.
The intersection of rapidly growing electricity demand from data centers and limited supply creates a precarious economic situation. The financial burden on consumers is likely to weigh on household spending, further contributing to a slowing economic landscape. As the AI sector continues to expand, its role in driving electricity prices will remain a critical factor for policymakers and consumers alike, necessitating a closer examination of how these dynamics will shape the future of energy and economic health in the U.S. The ramifications of these rising costs will be felt widely, particularly among those least able to absorb them, which raises questions about equity and the long-term sustainability of economic growth amidst an energy crisis exacerbated by technological advancements.