Data Center Demand Sparks Financial Risks for Utility Customers
A new report from the Union of Concerned Scientists warns that the growing demand for electricity by US data centers could lead to significant financial risks for utility customers. The report, titled 'Data Center Power Play', finds that meeting this demand primarily with new natural gas generation could result in cumulative wholesale electricity costs ranging from $886 billion to $978 billion between 2026 and 2050.
Data centers currently consume approximately 176 terawatt-hours (TWh) of electricity per year, accounting for about 4.4% of national electricity consumption. However, projections estimate that this demand will increase to 325-580 TWh by 2028, representing 6.7%-12% of total US electricity demand.
Natural gas currently provides more than 40% of the electricity powering US data centers, making it the single largest source. Utilities are leaning towards gas-fired generation because permitting and construction timelines are shorter than for renewables.
The report's modeling paints a concerning picture under its mid-growth scenario, where load growth accelerates faster than anticipated due to evolving AI workloads and cloud computing expansion. Ratepayers face exposure to stranded-asset risks, where utilities build expensive gas infrastructure that becomes uneconomical before it's paid off.
The report also highlights the growing trend of Bitcoin miners acquiring natural gas plants, such as MARA Holdings' $1.5 billion purchase of a 505 MW plant in Ohio. This strategic pivot towards vertically integrated energy ownership could provide miners with significant competitive advantages.