AI data centers projected to comprise 12% of US electricity consumption by 2028

Rising electricity costs across America are increasingly linked to the artificial intelligence boom, as data centers powering AI tools strain the power grid and drive up consumer bills. The average price of electricity has jumped 13% since 2022, with data centers projected to consume up to 12% of US electricity by 2028—nearly triple their 2023 usage—creating unprecedented demand that utilities struggle to meet.

What you should know: Individual consumers are feeling the impact of AI’s massive power requirements in their monthly electricity bills.

• Kentucky nurse Lindsey Martin saw her bill spike from around $150 two to three years ago to $372 in August, prompting thousands of similar reports on social media.
• A Bloomberg News analysis found that areas near data centers experienced electricity cost increases of up to 267% compared to five years ago.
• The US Energy Information Administration reports retail electricity costs are expected to grow faster than inflation, with some regions facing even steeper increases.

The big picture: Tech giants are investing unprecedented amounts in AI infrastructure, creating an “explosion in demand” for electricity that the power industry isn’t equipped to handle.

• Meta spent $17 billion in capital expenditures for data centers in the quarter ending in June, while Microsoft invested $24.2 billion.
• Data center construction spending reached a record $40 billion in June, according to the Bank of America Institute.
• OpenAI and Broadcom, a semiconductor company, announced a partnership this week to develop 10 gigawatts of custom AI chips—enough to power a major city.

Why this matters: The AI revolution is fundamentally changing America’s electricity consumption patterns, with costs increasingly passed to residential consumers.

• Data centers are projected to consume 6.7% to 12% of US electricity in 2028, up from 4.4% in 2023, according to the Department of Energy.
• “AI is really computationally intensive,” said Shaolei Ren, associate professor at UC Riverside, as tools evolve beyond text to generate realistic videos and code websites from scratch.
• The surge represents more electricity demand growth than the US has seen in two decades, requiring massive investment in generation and transmission infrastructure.

The pricing problem: Current electricity pricing models weren’t designed to account for data centers’ massive power consumption, leaving consumers to shoulder the costs.

• Large electricity buyers like data centers typically pay lower rates because distribution is less complex than serving thousands of homes, explained Gartner analyst Bob Johnson.
• “In other words, the homeowners shouldn’t have to pay for data centers, but that’s not built into the pricing structure,” Johnson said.
• Oregon passed legislation requiring data centers to “pay for the actual strain they place on Oregon’s electrical grid” to prevent costs from being passed to consumers, but most states lack such protections.

What experts are saying: Industry analysts warn that infrastructure investments driven by AI demand will continue pushing up consumer electricity costs.

• “There weren’t enough data center construction and upgrades in the past to affect consumer prices,” said Ram Rajagopal of Stanford’s Precourt Institute for Energy. “But now the AI industry is seeing an explosion in demand.”
• Rich Powell, CEO of the Clean Energy Buyers Association, a trade group representing electricity buyers, noted the growth is contributing to electricity demand increases not seen in two decades, requiring substantial investment in power generation and transmission.