Data centers in the U.S. caused average retail electricity rates to fall modestly rather than rise between 2015 and 2024, the Electric Power Research Institute said on June 23 in a brief based on a white paper.
“Despite the popular narrative that data center growth is the driver of recent price increases, evidence points in the opposite direction,” EPRI said in a brief based on the white paper, “Have Data Centers Raised Your Electric Bill? Causal Evidence From the United States.”
The EPRI brief said that a 2025 Lawrence Berkeley National Laboratory study shows negative correlations between average prices and changes in electricity sales.
“However, this observation does not indicate causality. It is possible that data centers and other new loads have chosen to locate in areas with low prices. This selection bias could mask a price-increasing effect,” the EPRI brief said.
The paper presented by EPRI “empirically tests this intuition, using an econometric approach to control for location selection and to show that in fact load growth is the driver of lower prices. We find that data centers caused average retail electricity rates to fall modestly rather than rise between 2015 and 2024.”
“How can higher demand lead to lower prices? Simple supply and demand dynamics are incomplete in the context of electricity markets, which have two features that differ from many other commodities,” the brief said:
• Retail prices reflect average costs, not just the cost of the next unit: When demand rises in the short run, grid operators dispatch increasingly costly generators, which pushes wholesale prices up. But retail tariffs also have to recover the large fixed costs of building and maintaining generation, transmission, and distribution. Those fixed costs are spread across every kilowatt-hour sold. With new demand, the existing system gets used more intensively, and fixed costs are spread across more demand, pushing average costs down.
• New, long-lived demand triggers new, cheaper investment: Durable shifts in demand from data centers, electric vehicles, and heat pumps can lead to new capacity. Because technology costs have fallen so far, newly built generation tends to be cheaper than the older assets it displaces. New capacity often comes in below the average cost of the existing system.
“Empirically, the simple picture is inconsistent with the 'data centers raise bills' story,” the EPRI brief said.
“Without controlling for selection, the correlation between data center growth and price changes is near zero. Virgina, currently the U.S. leader in data centers, which consume over 20% of the state's electricity, saw lower than average rate increases in recent years. Meanwhile, in California average prices rose by 40% from 2019 to 2024, mainly from wildfire-related costs, despite modest data center growth.”
The study’s key result “is that data centers caused residential prices to fall. Using the instrumental variable strategy, we find that a doubling of data center capacity caused residential electricity prices to fall by 3.5% for a fixed level of demand,” the brief said.
