Powering Up: The Surging Demand for Electricity

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After years of minimal growth, U.S. electricity demand recently began to accelerate. Chart 1 shows that for a decade before the pandemic (2010–19), growth in electricity demand was nearly flat (purple diamond). Although population growth and the economic recovery from the Great Recession increased electricity use during this period, these increases were partly offset by widespread adoption of energy-efficient technologies such as LED bulbs and modern HVAC systems. Over the past three years, however, electricity demand has grown on average 1.3 percent per year—more than twice the average rate during 2010–19. Moreover, this surge is expected to continue, with the projected average growth rate for power demand (indicated by the shaded diamond) exceeding rates seen in the two decades before the Great Recession.

Chart 1: After a decade of stagnant growth, U.S. electricity demand has surged, driven largely by commercial demand

A key driver of this recent surge has been the commercial sector, as shown by the purple bars in Chart 1. Commercial electricity demand accounted for 60 percent of growth in total U.S. power demand during 2021–23. Panel A of Chart 2 shows that this growth has been concentrated in Virginia, North Dakota, and Texas, while commercial electricity use in the rest of the United States has remained relatively stable (dark blue line).^_ North Dakota has experienced the fastest relative growth in commercial electricity demand, partly due to the establishment of large computing facilities supported by the state’s abundant and competitively priced energy sources. Virginia has emerged as a major hub for data centers, driven in part by its access to a high-capacity fiber-optic network and to subsea fiber cables that facilitate fast and reliable data transmission. And Texas, one of the most densely populated states with data centers, has also seen significant demand growth due in part to its lower energy costs, robust economic activity, and population growth.

Chart 2: Rising U.S. power demand growth and revised near-term forecasts

Near-term forecasts for U.S. electricity demand have been revised up substantially. Panel B of Chart 2 shows electricity demand forecasts for 2024 and 2025. The 2024 forecast rose from 1.3 percent in the January 2023 EIA report to 2.6 percent in the September 2024 report. The 2025 forecast has been revised even more dramatically: the demand growth forecast in the September 2024 report is more than eightfold that of the January 2024 report. Forecasts for both years are well above the 2010–19 average growth (dashed line). These upward revisions underscore the uncertainty in projecting electricity demand, particularly as AI adoption and data center growth ramp up.

Map 1 further highlights the role of data centers in driving commercial electricity demand, particularly in states that have become major or emerging hubs for these facilities. The cross-industry adoption of generative AI—which requires data centers for the necessary computational power and storage capacity—has accelerated this trend. For example, data retrieved from Bloomberg ESG show that companies such as Google and Microsoft more than quadrupled their electricity use from 2016 to 2023, citing expansions in AI and data centers among the drivers of their increased electricity consumption. This boom, combined with other trends such as industrial onshoring and clean energy investments, is contributing to a marked increase in forecasts of electricity use.^_ In some states, those investments are already driving up demand, with further increases likely as more projects come online.

Map 1: Data center boom appears to be an important factor in driving commercial power demand

Higher electricity demand signals a more electrified economy. Chart 3 shows the electricity intensity of U.S. GDP (that is, the amount of electricity used per unit of GDP) since 1980 alongside long-term projections. Overall, U.S. electricity intensity has been declining since the early 1990s. However, this trend may reverse if recent demand growth continues. For example, a high-demand growth scenario from the National Renewable Energy Laboratory (NREL) suggests that electricity intensity could increase by 23 percent by 2040 (dashed purple line), driven by the widespread adoption of electrification technologies.^_ This increase would represent a significant departure from the historical trend (dashed light blue line), which implies a 50 percent decline in electricity intensity over half a century, and highlights the potential for a more electricity-intensive economy.^_

Chart 3: U.S. economy is likely to become more electricity-intensive

The surge in U.S. electricity demand, particularly within the commercial sector, underscores the ongoing transformation toward a more electrified economy. The integration of advanced technologies such as AI, automation, and data centers into the U.S. economy is energy-intensive but important for maintaining economic competitiveness. Countries that efficiently power these technologies are likely to lead in innovation and productivity gains. To fully realize the potential benefits of this electrification, substantial investments in energy infrastructure may be necessary. This includes expanding transmission and distribution networks, modernizing the grid, and increasing renewable energy capacity. These investments will not only support growing electricity demand but also ensure that the U.S. economy can continue to grow competitively and sustainably.