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Senior Economist Nida Çakır Melek and Research Associate Alex Gallin
After years of stagnant growth, U.S. electricity demand has surged in recent years. The increase has been driven in part by the commercial sector, particularly the rapid expansion of data centers and the adoption of artificial intelligence (AI).
The surge is expected to continue, signaling a shift toward a more electrified economy, with significant implications for economic competitiveness and energy infrastructure.
The acceleration in U.S. electricity demand is examined in a September 2024 Economic Bulletin by Senior Economist Nida Çakır Melek and Research Associate Alex Gallin.
Which factors have been driving the recent surge?
Commercial electricity demand accounted for 60% of growth in total U.S. power demand from 2021 through 2023. Our analysis shows that this growth has been concentrated in Virginia, North Dakota and Texas, while commercial electricity usage in the rest of the country remained relatively stable.
North Dakota has experienced the fastest relative growth in commercial electricity demand, partly because of 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.
Texas, one of the most densely populated states with data centers, also has seen significant power demand growth due in part to its lower energy costs, robust economic activity, and population growth.
How much is electricity demand expected to grow in the near term?
Near-term forecasts for U.S. electricity demand have been revised up substantially. The 2024 forecast rose from 1.3% in the January 2023 U.S. Energy Information Administration (EIA) report to 2.6% in the agency’s 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 average growth from 2010 through 2019. These upward revisions underscore the uncertainty in projecting electricity demand, particularly as AI adoption and data center growth ramps up.
Specifically, 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.
What are the implications for the U.S. economy overall?
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.
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