Introduction
Digital transformation and the rapid adoption of artificial intelligence (AI) have triggered an unprecedented boom in data‑center construction. After years of relatively flat electricity consumption, U.S. demand is now rising again. The U.S. Energy Information Administration (EIA) expects annual electricity consumption to climb from roughly 4,097 billion kWh in 2024 to 4,193 billion kWh in 2025 and 4,283 billion kWh in 2026, surpassing the previous record set in 2024dws.com. A principal driver is the growth of data centers built for AI and cryptocurrency. Data centers accounted for about 4.4 % of U.S. electricity consumption in 2023, and a U.S. Department of Energy (DOE) report projects that share could reach 6.7 %–12 % by 2028energy.gov. Because AI workloads require far more compute resources than traditional computing, some analysts estimate that AI could make up up to 40 % of global data‑center power demand by 2026enr.com.
The scale and timing of this energy surge pose major challenges for governments, utilities and communities. Traditional interconnection processes take five or more years to study and build transmission, leaving many new loads stranded in queues. In response, the Federal Energy Regulatory Commission (FERC) approved the Provisional Load Process proposed by Southwest Power Pool (SPP) in October 2025. This tariff revision allows a large load (e.g., a data center or industrial facility) to be studied and partially connected using planned generation resources, even when adequate generation does not currently existspp.org. The process assigns the cost of needed network upgrades to the customer initially, with remaining costs socialized only after the customer’s planned generation becomes a designated resourcespp.org. FERC also supported a 90‑day accelerated interconnection pathway for “high‑impact large loads,” showing regulators’ willingness to adapt interconnection rulesutilitydive.com. States such as Texas, Indiana and Ohio have simultaneously begun requiring large data‑center customers to pay most of the cost of new power infrastructureargusmedia.com. These initiatives aim to accelerate service to large loads while protecting existing ratepayers.
This report analyzes the anticipated impacts in 2026 of the data‑center‑driven load surge and associated regulatory reforms. It synthesizes academic studies, regulatory filings and news reports to assess how governments, businesses and society will be affected. Although many policy initiatives are recent, their implications will become tangible by 2026 as new facilities connect to the grid and as lawmakers and utilities refine rules in response to public concerns.
Government impacts
Federal policies and FERC’s provisional load process
FERC’s provisional load process: SPP’s provisional load process, accepted by FERC in October 2025, is one of the first attempts to address large loads with insufficient existing generation. Under the new Attachment AX tariff:
- When a transmission customer seeks to add a large load but lacks enough designated resources to cover a 10‑year forecast, SPP can study the load using the customer’s planned generation in addition to existing resourcesspp.org. SPP argued that the process incentivizes developers to build new generation and attracts interconnection customers by providing greater certainty and earlier servicespp.org.
- The transmission customer initially pays for network upgrades. Once the planned generation becomes a designated resource, remaining upgrade costs are rolled into base plan funding, meaning they are recovered through regional ratesspp.org. This cost‑allocation structure protects other customers if the planned generation never materializes.
- FERC accepted the tariff revisions as just and reasonable, stating that the process helps evaluate load additions when customers lack designated resources and aids transmission planningspp.org.
Accelerated interconnection for high‑impact loads: SPP created a “High‑Impact Large Load” (HILL) policy to study and approve large loads – defined as 10 MW at ≤69 kV or 50 MW at >69 kV – within 90 daysutilitydive.com. This accelerated pathway and the provisional load process aim to reduce queue times, enabling data centers and factories to secure power faster.
FERC’s emphasis on accurate load forecasting: In September 2025 FERC Chairman David Rosner asked all regional grid operators to explain their practices for forecasting large loads and for screening speculative requests. The letter notes that even small improvements in forecast accuracy can save billions in capital and reduce customer billspowermag.com. FERC requested information on verifying load readiness, avoiding double counting across regions, and evaluating whether customers actually build the planned facilitiespowermag.com. The agency’s scrutiny suggests that by 2026, provisional processes may be accompanied by more standardized screening criteria.
DOE’s role and federal support programs: The DOE’s 2024 Report on U.S. Data Center Energy Use found that data centers consumed about 4.4 % of U.S. electricity in 2023 and forecast consumption could reach 6.7 %–12 % of total U.S. electricity by 2028energy.gov. The DOE pledged to support flexibility and grid‑integration technologies through programs such as the Onsite Energy Program, the Industrial Energy Storage Systems Prize, repurposing retired coal‑plant infrastructure, innovative rate structures and commercialization of next‑generation geothermal, nuclear, long‑duration storage and efficient semiconductorsenergy.gov. By 2026, DOE funding and technical assistance are expected to stimulate pilot projects, including onsite generation at data centers and reuse of brownfield sites for AI campuses (e.g., at Idaho National Laboratory or Oak Ridge)enr.com. These initiatives align with President Trump’s July 2025 AI infrastructure action plan, which calls for streamlining permitting, using federal lands for data centers and postponing retirement of aging coal plants to ensure dispatchable powerenr.com.
Energy mix and reliability considerations: EIA forecasts that U.S. power demand will continue rising, reaching 4,305 billion kWh in 2026, while natural‑gas‑fired generation’s share will decline from 42 % in 2024 to roughly 40 % in 2025–2026, with renewable generation rising to 26 % by 2026reuters.com. Rapidly growing data‑center loads could strain reliability, prompting policymakers to consider dispatchable resources. Moody’s Investors predicts data‑center‑driven investments will exceed $2 trillion over the next four yearsenr.com, and the DOE anticipates that data centers may necessitate the first significant expansion of U.S. nuclear capacity in decadesenr.com.
State‑level regulations and planning
Requiring data‑center customers to pay for infrastructure: Several states have adopted rules to protect existing ratepayers from the cost of building new generation and transmission for data centers. Indiana’s Senate Bill 6 (May 2025) requires large‑load customers to reimburse at least 80 % of the cost of energy infrastructure for their projectsargusmedia.com. Ohio’s utility regulator ordered new large data‑center customers to pay for 85 % of the generation capacity they are subscribed to use, even if they ultimately use lessargusmedia.com. Texas law now mandates that large customers pay for any increase in power costs their projects cause and imposes a $100 k interconnection study fee to deter “phantom” requestsargusmedia.com. These policies are expected to influence regulatory debates in other states during 2026.
Addressing speculative requests: Many data‑center developers submit duplicate interconnection requests across multiple jurisdictions to secure the fastest connection. The London Economics International (LEI) report commissioned by the Southern Environmental Law Center notes that such duplicate requests create upward bias in demand projections and risk leaving ratepayers with stranded infrastructure if the projects are cancelledselc.org. State rules that require financial commitments (e.g., study fees and reimbursement of infrastructure costs) are designed to discourage speculative requests and provide more realistic forecasts.
Virginia’s debate over incentives and environmental impacts: Virginia hosts the world’s largest concentration of data centers. A data‑center can consume over 100 MW, equivalent to the power used by about 80 000 householdsvcnva.org. A Joint Legislative Audit and Review Commission (JLARC) report found that data centers could almost double Virginia’s energy use within a decadevcnva.org and that energy prices are likely to rise for all customersvcnva.org. JLARC estimated that data centers could raise Dominion Energy’s residential bills by $444 per year by 2040vcnva.org. Virginia currently offers generous sales‑and‑use tax exemptions for data‑center equipment; the state lost nearly $1 billion in tax revenue in fiscal 2023, with 82 % of the benefits flowing to five companiesvcnva.org. The report notes that the exemption does not pay for itself and provides only moderate economic benefitsvcnva.org. In 2026 lawmakers may reconsider these incentives and tie them to environmental performance standards.
Business impacts
Data‑center developers and technology companies
Accelerated yet costly interconnection: The provisional load process and SPP’s 90‑day HILL pathway offer data‑center developers faster access to the grid, but they require up‑front financial commitments. Developers must initially bear network‑upgrade costs and risk paying for upgrades if planned generation fails to materializespp.org. As more states adopt cost‑recovery rules, large technology firms may face higher capital requirements. Firms such as Meta, Amazon and Alphabet have argued that excessive cost‑allocation rules could deter investmentsargusmedia.com, but analysts note that for trillion‑dollar companies, securing reliable power quickly may outweigh cost concernsargusmedia.com.
Massive investment wave: Demand for AI and cloud services is driving unprecedented investment in data‑center infrastructure. McKinsey projects that global data‑center capacity demand could grow 22 % annually to 171–219 GW by 2030, up from about 60 GW in 2025enr.com. Moody’s predicts more than $2 trillion in investments in data‑center and power infrastructure over the next four yearsenr.com. In Texas, startup Fermi America plans a $300 billion data‑center and energy campus that will provide 11 GW of power when fully completed; its first 1‑GW phase is planned to come online in 2026enr.com. Data‑center developers are also looking to repurpose retired coal facilities and collaborate with nuclear providers to secure firm capacityenr.com.
Onsite generation and new power technologies: With queue times for grid interconnection averaging five years and sometimes extending to seven years for data centersfas.org, companies are increasingly investing in onsite generation. Meta is reportedly building data centers powered by new natural‑gas plantsenr.com, and Fermi America proposes combining natural gas, solar and nuclear generation at its Amarillo campusenr.com. These investments can shorten timelines but may increase reliance on fossil fuels unless paired with carbon‑free resources.
Risk of over‑forecasting and supply‑chain constraints: The LEI report warns that data‑center load projections often exceed the capability of global semiconductor manufacturers to supply the chips needed for AI serversselc.org. It also notes that developers submit redundant requests across multiple jurisdictions, leading to overstated demand and risking underutilized infrastructureselc.org. Analysts from the World Resources Institute highlight that speculative requests distort planning and that supply‑chain bottlenecks for transformers and switchgear can delay data‑center construction by 24–72 monthswri.org. Businesses must therefore balance ambition with realistic timelines and supply constraints.
Utilities and energy developers
Rapid load growth requires massive capital: After decades of <1 % annual load growth, utilities now face predictions of 3 % annual peak‑load growth over the next five yearsgridstrategiesllc.com. Grid Strategies notes that five‑year load forecasts increased from 23 GW to 128 GW between late 2022 and mid‑2024, largely driven by data centers and manufacturinggridstrategiesllc.com. Meeting this demand will require utilities to plan six times more transmission and generation than they built in recent decadesgridstrategiesllc.com. The firm estimates that the U.S. could need $720 billion in grid upgrades by 2030morganlewis.com. The provisional load process gives utilities a mechanism to study and collect partial costs from large loads, but they must still plan long‑lead resources.
Revenue and rate implications: Utilities will need to invest heavily to meet AI demand, potentially raising rates. Bain & Company analysis (cited in Power & Policy) suggests utilities may need to generate 10–19 % more revenue annually to finance the capital required for data‑center growthpowerpolicy.net. In the PJM region, explosive data‑center growth caused a 174 % jump in capacity market prices during the 2025/2026 auction, increasing total procurement costs by $9.3 billion and leading to 1.5–5 % bill increases for many customerspowerpolicy.net. These examples signal that, unless costs are carefully allocated, data‑center‑driven investments could put upward pressure on rates in 2026 and beyond.
Innovation and efficiency solutions: To mitigate energy demand and costs, businesses are exploring advanced cooling and energy‑efficiency technologies. Thermal Energy Storage (TES) can shift cooling loads to off‑peak periods, reducing costs and carbon emissions; TES allows data centers to downsize cooling plants, provides resilience during outages and can help stabilize the griddatacentremagazine.com. Thermal Energy Networks (TENs) – networks of pipes that share heat between buildings – could repurpose waste heat from data centers and provide cooling, improving power‑usage effectiveness (PUE). The Federation of American Scientists recommends that Congress fund TEN pilots and require PUE reporting in the 2026 National Defense Authorization Actfas.org. By integrating data centers into TENs, utilities could shorten interconnection timelines and improve grid resiliencefas.org.
Carbon emissions and sustainability: Without careful planning, rising data‑center demand could hinder decarbonization. The World Resources Institute notes that utilities have requested rate increases in part because of data‑center demand and extreme weatherwri.org. It warns that building new natural‑gas plants or delaying coal retirements to supply data centers could “lock in” emissions for decadeswri.org. State‑level debates in Virginia underscore this tension: Dominion Energy’s latest plan proposes multiple gas plants despite evidence that clean energy and storage are more cost‑effectivevcnva.org. Businesses that invest in efficiency and pair data centers with renewable or nuclear generation will be better positioned to meet sustainability goals.
Societal impacts
Electricity affordability and fairness
Rising bills: Rapid load growth is already affecting consumer bills. Residential electric bills rose 6.5 % per year from 2021–2024 as the data‑center build‑out began, compared with a 1.5 % annual increase from 2008–2021argusmedia.com. A Carnegie Mellon/North Carolina State University study cited by Argus Media predicts that data centers and cryptocurrency mining could raise average U.S. wholesale power generation costs by another 8 % through 2030, with increases as high as 25 % in concentrated markets like Northern Virginiaargusmedia.com. To shield ratepayers, states now require data‑center customers to reimburse most infrastructure costsargusmedia.com. However, capacity market results show that costs may still spill into bills: the PJM capacity auction for 2025/2026 resulted in 1.5–5 % bill increases, and a typical Dominion Energy residential customer could pay $37 per month more by 2040 due to data‑center investmentspowerpolicy.net.
Equity and public acceptance: Without assurance that new data centers will not raise bills, public opposition can stall projects. Argus Media reports that the Tucson city council rejected a large data‑center proposal (Project Blue) after strong public resistanceargusmedia.com. The article also notes that when customers are not insulated from costs, they may pressure elected officials to oppose data‑center projectsargusmedia.com. Requiring financial commitments from data‑center developers helps address fairness concerns and may improve public acceptance.
Environmental and health impacts
Air pollution and climate risks: Data‑center expansions have led utilities to propose additional natural‑gas generation. Virginia advocacy groups warn that building new gas plants could subject communities to $7.4 billion to $13.9 billion in health harms by 2039vcnva.org and that gas prices are projected to nearly double by 2026vcnva.org. The World Resources Institute cautions that increasing gas generation and delaying coal retirements could lock in greenhouse‑gas emissions for decadeswri.org. At the same time, data centers could generate multiple benefits when paired with clean energy and storage – for example, by repurposing brownfield sites and integrating with renewable‑heavy gridsenergy.gov.
Land use and community impacts: Hyperscale data centers require significant land, often near high‑voltage transmission lines. In Virginia, a proposed campus would combine 3.5 GW of gas‑fired plants with data centers on a single sitevcnva.org, raising concerns about local pollution and land conversion. Communities worry that data centers will strain water resources and change the rural character of areas like Northern Virginia’s “Data Center Alley.” Local governments must balance economic benefits, such as property‑tax revenues, against environmental and social costs.
Economic opportunities and workforce
Jobs and tax revenue: Data centers bring property‑tax revenue and jobs. Virginia’s data‑center industry has provided significant revenue to local governments, although the state’s generous sales‑tax exemption means that only a portion of benefits accrue to state coffersvcnva.org. The DOE’s AI action plan emphasizes training electricians, HVAC technicians and other high‑paying trades to support data‑center constructionenr.com. Thermal Energy Networks can create plentiful and high‑paying jobs for pipefitters and tradespeople, particularly in rural areasfas.org.
Digital‑economy benefits: Beyond infrastructure investments, data centers underpin the growing digital economy – cloud computing, AI research, streaming, logistics and biotechnology. McKinsey notes that AI demand could drive global data‑center capacity to 171–219 GW by 2030enr.com, enabling applications that deliver significant productivity gains. Society will benefit from new services, although these benefits must be weighed against the costs and environmental impacts discussed above.
Outlook for 2026 and recommendations
Expected conditions in 2026: The EIA projects U.S. electricity consumption will set another record at ~4.3 trillion kWh in 2026reuters.com. Many of the policies described here – FERC’s provisional load process, SPP’s 90‑day interconnection pathway, state cost‑allocation laws and the DOE’s flexibility programs – will be in their first full year of implementation. Several major data‑center campuses (e.g., Fermi America’s 1‑GW phase) are scheduled to start operations by late 2026enr.com. At the same time, utilities will be filing integrated resource plans that incorporate unprecedented load projections, and state legislatures will debate whether to adjust tax incentives and environmental requirements.
Balancing growth with public interest: To ensure that the data‑center boom delivers net benefits, policymakers and industry should consider the following strategies:
- Require realistic load forecasts and financial commitments. FERC and states should continue to refine screening criteria to discourage speculative interconnection requests, including non‑refundable study fees and requiring large customers to pay a significant share of infrastructure costsargusmedia.com. Accurate forecasts will prevent overbuilding and protect ratepayersselc.org.
- Link incentives to efficiency and sustainability. States with significant data‑center development should reevaluate tax exemptions and provide incentives only to facilities meeting stringent power‑usage effectiveness (PUE) and clean‑energy standardsvcnva.org. Federal legislation could require PUE reporting and support pilots that integrate data centers into Thermal Energy Networksfas.org.
- Accelerate grid expansion and diversification. Utilities need to plan for six times more generation and transmission than past decadesgridstrategiesllc.com. Expanding high‑voltage transmission, long‑duration storage, and carbon‑free dispatchable resources (advanced nuclear, geothermal) will allow data centers to connect without locking in fossil‑fuel dependenceenergy.gov. Federal permitting reforms should balance speed with environmental review.
- Protect communities and low‑income ratepayers. Regulators should ensure that costs are fairly allocated and that low‑income households are not disproportionately burdened by rising rates. Community benefits agreements can fund local infrastructure, training and environmental mitigation.
- Encourage innovation and flexibility. Investments in energy‑efficient hardware, waste‑heat recovery, and load‑flexibility technologies (TES, TENs) can reduce peak demand, improve grid resilience and create new revenue streamsdatacentremagazine.comfas.org. Pairing data centers with co‑located renewable generation and storage can further decouple growth from emissions.
The next few years will set the trajectory for the United States’ digital and energy future. By embracing accurate planning, equitable cost allocation and sustainable technologies, governments and businesses can harness the economic opportunities of data centers while safeguarding public interests. Failure to address these challenges could leave communities with higher bills, stranded assets and increased pollution. The policy experiments launched in 2025 will be tested in 2026, offering valuable lessons for balancing innovation with responsibility.
Appendix: projected share of U.S. electricity use by data centers
The figure below illustrates DOE’s projection that data centers could consume 6.7 %–12 % of U.S. electricity by 2028, up from about 4.4 % in 2023
