The hubbub about data centers — and their growing appetite for electricity — comes with concerns ranging from how much energy they will use to how that use will affect energy affordability, the environment, and grid reliability.
Amid this uncertainty, public power utilities are exploring how to navigate the potential for new data center load and how to best support ongoing affordability and reliability for the communities they serve.
No Clear Forecast
While there seems to be consensus that electric demand from data centers will grow, estimates about how much capacity they will need, and how much current capacity can cover this growth, vary widely. There are also growing concerns about “phantom load” — or duplicate requests from data center developers that are inflating projections well beyond what will be required.
The Energy Information Administration’s December 2025 Short Term Energy Outlook forecast electricity sales to increase by 2.4% to the commercial sector and 1.6% to the industrial sector in 2026, and continue growing further in 2027, with additional sales increases of 4.3% for commercial customers and 3.4% for industrial end users. The EIA noted that “this increase can be largely attributed to increasing demand from large computing facilities, that include data centers.”
A July 2025 report from the Department of Energy estimated that the U.S. electric grid will need to support 100 GW additional peak load by 2030, half due to data center growth alone.
A January 2026 California Energy Commission presentation predicts that data centers’ contribution to peak load in the state will exceed 4.7 gigawatts, or about 20% of overall peak load through 2045. The projections are largely based on assumptions from planners at investor-owned utilities in the state, and while some estimates were scaled back from those released earlier in 2025, the commission acknowledged that this load could be even higher, and that there are gaps in planning amid uncertainty about data center load.
The American Public Power Association’s October 2025 report, What Public Power Needs to Know About Serving Data Centers, includes a comparison of estimates for data center growth that have a wide range of projected capacity needs, from 50 gigawatts (S&P Global Market Intelligence) to well over 120 GW (Deloitte and Lawrence Berkeley National Laboratory).
Underpinning the question of capacity is how much demand data centers need, and whether the computing demand driving data center development is justified. Data center load is driven by consumer demand and the promise that transactions which drive our increasingly digital lives remain available at all hours of the day.
“Our lives are consumed with digital [activities]. We’re not going to go back to depositing paychecks at the bank anytime soon,” said Nur Bernhardt, vice president at Cloverleaf, a firm that works with utilities to develop data center sites.
At a presentation during APPA’s Customer Connections Conference, Bernhardt shared that data center customers’ capacity needs ramp up over time, and that the largest developers are seeking hundreds of megawatts to more than a gigawatt per site. In terms of overall use, U.S. data centers could use 400 terawatt-hours annually by 2030, according to Bernhardt’s presentation. That includes about 300 TWh used by “traditional” data centers, and 100 TWh for those fueling artificial intelligence.
Daily Requests
Texas has emerged as a center of growth for large loads. The Electric Reliability Council of Texas noted that it has about 225 gigawatts in its interconnection queue from large loads, and about three-fourths of that capacity is for data centers. The total capacity requests from large loads grew 270% in 2025 and now comprise over half of ERCOT’s interconnection requests.
Austin Energy, the public power utility serving the capital, said it receives continual inquiries about potential large load projects.
“Companies seem to be especially focused on exploring locations in Texas, which makes it a top priority for ERCOT and for utilities across the state, including Austin Energy. The inquiries are truly unprecedented and require work in areas many utilities have never really had to deal with before,” said Stuart Reilly, Austin Energy’s general manager.
Reilly said Austin Energy is in need of more local generation to support growing demand, regardless of data center inquiries.
“Because electricity demand is the common thread in all these conversations, other large load customers don’t differ much from a data center inquiry to other developments. However, there can be more uncertainty about whether data centers will come to fruition and where they will locate,” Reilly said.
“Our prime considerations continue to be safeguarding reliability and affordability for our community while appreciating that data centers create opportunities for revenue and economic opportunities for our city,” said Reilly. “We want to contribute to economic growth without creating negative impacts to our community. We need to be mindful of electricity needs, water use, land use, and community concerns about the local impact.”
Austin Energy said it talks about the challenges and opportunities related to data centers with its oversight committees, including its city council.
“We are very hands-on with all new large customers, as we hope to have a lasting partnership in our community. Since that relationship is built on trust, we’re very up-front about interconnection study requirements and supply chain wait times,” added Reilly.
What’s Valuable
A McKinsey & Company article in August 2025 expects companies to invest more than $2.68 trillion in the U.S. into data centers through 2030. While most of these costs are for servers and other equipment, about 6%, or $160 billion, would go toward power generation.
Bernhardt noted how the period of load growth coincides with a shift in how grid operators are looking at generation capacity and resource adequacy.
“Utilities are seeing the first significant load growth in decades, while dealing with a transition from legacy fossil fuel generation to intermittent renewable generation. In the past, utilities matched their generation capacity to meet their peak load. Now, utilities are having to shift their approach,” said Bernhardt.
Bernhardt noted that data center customers are willing to provide financial commitment to reduce the risk of stranded assets while building new capacity to help serve the load. That approach requires a strong partnership between utilities, local stakeholders, and the data center.
“The approach that has worked well is for the data center to provide a deposit and financial security early in the process to allow the utilities to increase staffing, conduct engineering studies, and secure production slots for the long lead equipment. The goal is to demonstrate to our utility partners that they are spending time with a committed customer,” he said.
“While we focus on energy first, energy is not everything that we need to develop a site. Land control, completed due diligence, and zoning are all important steps in the process before we can make significant financial commitments.”
“Given the rapid growth of data centers and the increase in demand for electricity that goes with them, we think it is important to require new customers to pay for equipment upfront to protect our other utility customers from those costs,” said Reilly. Bernhardt cautioned that significant prepayment or minimum requirements might signal to prospective data center customers that an area isn’t going to be supportive.
“Data centers are not going to be everywhere, and they definitely won’t go where they aren’t wanted,” said Bernhardt. “Data center companies will invest $10-15 million per megawatt to build their facilities and connect them to the fiber network. Costs can go up fast, so they are looking for a location where they can operate for the next 20-30 years. If the jurisdiction isn’t supportive, they aren’t going to get them.”
As an example of what attracts data centers, Bernhardt mentioned a project with Grand River Dam Authority in Oklahoma, within the Southwest Power Pool market, which has what he called a “transparent, clear way” for large load customers to supplement a utility’s capacity through a supplemental supply rider, which allows them to meet resource adequacy requirements without additional financial risk to existing customers.
“A ‘Bring Your Own Capacity’ approach is a modern update to an old playbook. Before wholesale power markets existed, large manufacturers would negotiate their own power commitments that would be sleeved through their local utility,” he said. But, those arrangements fell out of fashion when load growth was declining.
Bernhardt also noted that communities that can offer a sales tax exemption for servers will be attractive to developers, as those comprise a high proportion of their reoccurring capital costs.
Economic Considerations
A report from Monitoring Analytics, the market monitor for PJM, said that existing and forecast data center demand was responsible for nearly $6.5 billion in increased costs in the capacity market for 2027-2028, and that “data center loads are the source of the reliability issues” in the regional transmission organization.
These types of costs raise concern, but utilities and developers see potential for data centers to offset costs, too.
Bernhardt pointed to a report from the Urban Land Institute, Local Guidelines for Data Center Development, that can be helpful for communities wanting to understand more about the data center model and the “good and bad ways” to develop data centers.
“At the local level, it’s hard to predict what a national industry will do over time,” said Bernhardt. He advised that utilities hearing from developers check the finances and familiarity of the companies looking to invest in the community. “Pick the one with the best balance sheet and the most experience. It’s important that to make sure they have an understanding of the industry’s requirements.”
He advised against being the first partner for a developer, as it’s also helpful for data centers to understand the challenges utilities face in taking on such projects.
Bernhardt advised utilities to take a step back and see whether welcoming a data center would be a good business decision for the community.
If a utility needs to replace an aging or fully deprecated generating plant, or is in the middle of transitioning its mix to cleaner, more intermittent sources, it might have more incentive to find a large load customer to offset the cost of developing new capacity.
“At the end of the day, do you want to raise rates on your current customer base, or seek out a new large customer that’s going to work with you? It’s important to make sure the incremental costs are allocated transparently and won’t impact the general the rate base,” he said.
Finding Flexibility
The Public Utility District for Lewis County, in Washington state, serves not only a growing population, but has been working to accommodate large load customers in its area, including data centers that serve cryptocurrency mining.
Part of its goal, said David Plotz, the PUD’s general manager, is to take control of its future state with a handful of projects to increase its own generating capacity. Plotz said on the Public Power Now podcast that projects being explored include small hydroelectric, pumped storage, and geothermal.
Plotz said that utilities up to now have been “essentially following load, building as need arose,” and that they should now be turning their attention to building ahead of growth.
“Throughout history, we've built new projects with the idea that the load will arrive. But until that load arrives, existing ratepayers subsidize that newly constructed project. So very good planning was always necessary, and it still is today. But the idea that you can predictably bring in Bitcoin mining right at the point of energization means there's no more cross-subsidization. In fact, it makes it even more clear that you can say historical preference rates off the federal system can be reserved for [existing] customers, and, for the newly arriving loads, you can be very specific that these new projects are now being used to deliver the energy to them,” said Plotz.
“As we move into a more connected and technologically complex grid, demand management is becoming a larger aspect of delivering additional capacity to existing load and/or newly arriving load,” he added. Plotz noted that Bitcoin miners have already shown a willingness to be part of demand management efforts, such as by building in curtailment during peak periods into their contracts.
While Bitcoin miners offer this flexibility, said Plotz, utilities shouldn’t expect the same from other data center customers. “Cloud storage can probably shut off just about as quickly, but you don't want a situation where you cannot access your files,” he said.
Locating large load customers closer to generation sources can also offer savings, said Plotz, as it would mean reducing the need to build additional transmission infrastructure.
While the PUD has had inquiries from other types of data center load, Plotz said the scale and timing of what some customers need doesn’t align with what the PUD can offer.
“These data centers want a gigawatt and they want it yesterday. We don't have a gigawatt of spare capacity — our utility only operates around 125 average megawatts,” he said, adding that transmission congestion is a major issue in the area. “Even if we could get the [capacity], getting it here is the harder part.”
Plotz recognized that data center development is not as robust in the Pacific Northwest as other parts of the country, due to transmission congestion and capacity constraints stemming from Washington’s goal to transition to a carbon-free generation mix by 2045.
“If we want to grow or if we want to have those jobs, we need to be a lot more proactive and more unified in the region,” he added.
