A new analysis from the Institute for Energy Research challenges a growing narrative that data centers are driving up electricity costs. A closer look at the data suggests that the relationship is far more nuanced.
Researchers analyzed U.S. Energy Information Administration (EIA) data on electricity prices and sales across all 50 states, comparing those figures with state-level data center concentrations. The findings show no statistically significant correlation between the number of data centers in a state and either current electricity prices or long-term price trends.
In fact, the top 10 data center states, which include VA, TX, CA, IL and OH, report average electricity prices of 14.46¢/kWh, nearly identical to the 14.39¢/kWh average in all other states.
The analysis points to a more important takeaway: electricity prices are shaped primarily by system costs, fuel prices, and regulatory policy – not simply by demand from large users.
Electric grids are capital-intensive systems with significant fixed costs tied to generation, transmission, and distribution infrastructure. These costs must be recovered regardless of how much electricity is used.
In states where electricity demand has stagnated or declined, those fixed costs are spread across fewer kilowatt hours, which puts upward pressure on rates. Conversely, in regions experiencing growth, expanding demand can help distribute costs across a larger base of customers—potentially moderating rate increases when paired with needed infrastructure investment and planning.
Fuel costs, along with state policy decisions around generation mix, environmental compliance, and grid modernization also play a significant role in determining electricity prices. These factors often have a more direct and measurable impact than the presence of individual large-load customers.
Ohio, which ranks among the top data center states nationally, sits at the center of this discussion as policymakers consider how to meet increasing electricity demand driven by artificial intelligence, advanced manufacturing, and broader economic growth.
The question facing Ohio is not simply whether demand is increasing, but how that demand is integrated into the system—including the pace of new generation development, transmission upgrades, and coordination with utilities and grid operators.