The vast interconnected network that is the United States electric grid is one of the most important and impressive infrastructure projects in history. Since its creation, it has served as the hidden backbone of society, powering homes and critical infrastructure. However, with technology advancing and the expansion of high-energy industries, the network is in a state of rapid change. This change can be seen at times in consumer bills, with some reports even claiming that the average price of retail electricity has risen by 30 percent from 2010.
Demand seems to be the largest single factor of this increase, with an ongoing surge of data centers, which consume a substantial amount of electricity. In 2024 data centers were estimated as taking up about 4 percent of the total electricity used in the United States. The Electric Power Research Institute (EPRI) estimated that this could reach 9 percent by 2030. Currently, the financial responsibility for these data centers are often showing up in one form or another on the electric bills for Americans.
Many solutions to lower the costs from data centers and advocacy for policymakers to step in are being discussed. One thought is to make AI data centers bear the full cost, rather than it being distributed in people’s electric bills (which may manifest as operation and maintenance costs or other costs). Many new data centers enter into specialized agreements with utilities to cover electric costs, but work remains to be done.
While the expansion of clean energy sources is increasing overall electric capacity, the long-term outlook is still uncertain, and other parallel initiatives like the U.S. Department of Energy’s (DOE) “net-zero emissions by 2050.” Renewable energy may be able to lower energy costs in certain regions, but integrating new capacity into the grid will require significant investment and time. The DOE encourages stakeholders to leverage funding opportunities and financial assistance to implement cleaner energy solutions.
Additionally, the aging electric grid itself is also demonstrating a significant challenge. Almost 70 percent of transformers and power lines are older than 25 years, and production of new components can be slow. Outdated infrastructure can present not only risks for public safety, but economic disruptions as well. Without modernization of the grid, the possibility of power outages substantially increases, potentially causing businesses to lose revenue from damages and lost productivity.
Modernization of the grid is a critical step in preventing this severe economic vulnerability. The DOE’s Grid Resilience and Innovation Partnerships Program (GRIP) is designed to provide substantial funding towards projects that improve grid reliability, but more is needed. Another solution that has been proposed is creating two new federal institutions that would be called the National Power Authority and the Grid Trust Fund. These entities would handle the financing, strategizing, and organizing in the process of modernizing the electric grid.
Policymakers have begun to take notice of the issue and proposed solutions. New policy reforms have begun to take shape nationwide. Recently, the Federal Energy Regulatory Commission (FERC) issued tailored show cause orders in an attempt to reform how large data centers and other high energy industries utilize the grid. Under the new orders each Regional Transmit Organization (RTO) or Independent System Operator (ISO) have 60 days to justify their current tariffs or file changes.
Five categories of reform must be addressed regarding transmission efficiency: preventing cost shifts, accommodating co-location agreements and behind-the-meter generation, new transmission services for large loads, and creating a process for studying generating facilities that serve large loads. These orders are continuations of Commission actions to address the rapid growth of large loads. This attempt is focused on changing individual markets rather than imposing a nationwide policy change, so states can accommodate their own circumstances and conditions. So far, this order has been the most significant attempt to modernize the electric grid and the economic markets.
As electricity demand increases policymakers must ensure that the electric grid can adapt to new technologies and expansions without placing unjust costs on households and businesses. A reliable, affordable, and modern grid will require significant investment, prudent cost allocation, and targeted reforms.
Written by Isabel Dean, Public Policy Intern
The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.