A surge in data center development is expected to significantly increase electricity demand in key U.S. regions, potentially driving sharp price increases—especially in Texas—according to new analysis from the U.S. Energy Information Administration.
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The report highlights how rapid load growth tied to digital infrastructure is reshaping power markets in both Electric Reliability Council of Texas and PJM Interconnection, with implications for grid reliability, fuel use and pricing.
Data centers are emerging as a primary driver of electricity demand growth, particularly in Texas and the PJM region, which includes major data hub states like Virginia.
“We expect that the regions of the country whose grids are managed by ERCOT and PJM will experience the fastest growth in electricity demand from data centers through 2027,” EIA said.
According to the agency, electricity demand in ERCOT is projected to grow by about 10% annually between 2025 and 2027, while PJM is expected to see 3.2% annual growth. However, under a high-demand scenario, those figures could rise to 15% and 4.7%, respectively.
This growth marks a dramatic shift compared to historical trends. Between 2005 and 2019, U.S. electricity demand increased by just 0.1% annually, rising modestly to 1.7% from 2020 to 2025.
The EIA analysis warns that if demand growth exceeds expectations, electricity prices could rise sharply—especially in regions with less interconnection flexibility.
“Most regions can accommodate higher-than-expected electricity demand growth without large price impacts, EIA said its analysis shows, ‘but the modeled price effects in ERCOT highlight some of the challenges grid operators have in managing large increases of load in the near term.’”
In Texas, the impact could be especially pronounced. Under a high-demand scenario, wholesale electricity prices at the ERCOT North hub could be nearly 79% higher than the forecast baseline of $47.39 per megawatt-hour by 2027.
By contrast, price increases in PJM are expected to remain more moderate—around 4%—due to its broader interconnections and access to a larger mix of coal and natural gas generation.
Other regions, including New England and New York, could see price increases of 5.3% and 4.4%, respectively, under similar high-demand conditions.
The findings underscore growing concerns about the energy demands of hyperscale data centers, which are expanding rapidly due to artificial intelligence, cloud computing and digital services.
While most regions may absorb increased demand without major disruptions, ERCOT’s relatively isolated grid structure makes it more vulnerable to price volatility during demand spikes.
The analysis also suggests that rising electricity demand could shift the generation mix, increasing reliance on fossil fuels such as natural gas and coal in the near term, particularly if renewable capacity additions and transmission upgrades lag behind.
Importantly, the report notes that price impacts will likely be limited in 2026 due to the gradual ramp-up of demand. However, by 2027, the strain on existing generation capacity is expected to become more evident.
As data center expansion accelerates, energy demand is rising faster than expected in key U.S. regions, with Texas facing the greatest risk of price spikes—highlighting the urgent need for grid upgrades, new generation capacity and better demand planning.
Originally reported by Robert Walton, Senior Editor in Utility Dive.
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