Data center impacts consumption? AI influences the U.S. midterm election landscape, the reason is: electricity prices!

The surge in electricity prices caused by the data center boom is becoming a heavy burden for American consumers and businesses, quickly evolving into a key political issue. From gubernatorial races in New Jersey to congressional seat contests in Virginia, the rising electricity costs are reshaping voter intentions.

According to data from the U.S. Energy Information Administration (EIA), from January to September this year, residential electricity prices in the U.S. have increased by approximately 10%. The regions with the highest increases are predominantly Democratic-led; according to a Goldman Sachs report, electricity prices in states like Maryland, Delaware, and California have risen by 29% over the past three years.

Electricity prices, intertwined with food prices and other inflation factors, continue to challenge the financial resilience of American households. The National Association of State Energy Officials predicts that the number of users facing power disconnections due to unpaid bills could rise to 4 million in 2024, significantly up from 3.5 million last year and 3 million in 2023.

Meanwhile, Republicans are attempting to leverage voter dissatisfaction with soaring electricity prices to break the Democratic Party's political dominance in certain districts during the midterm elections, directly targeting the green energy policies promoted by the Democrats. Ashley Koning, director of the Eagleton Center for Public Interest Polling at Rutgers University, noted, “This utility rate crisis has somewhat awakened all the campaign teams.”

Surge in Data Center Demand Drives Up Electricity Costs

After decades of stagnation, U.S. electricity demand is experiencing growth for the first time, largely driven by data centers powering artificial intelligence.

According to estimates from the International Energy Agency (IEA), electricity consumption by data centers is expected to double by 2030, with load growth in certain areas of the U.S. entirely driven by AI-related computing demands. This means that the grid load in specific regions is quickly reaching capacity, especially in areas managed by the PJM Interconnection, the largest power grid in the U.S., such as Virginia, Pennsylvania, and New Jersey.

According to data from the U.S. Energy Information Administration, New Jersey's retail electricity prices rose by 19% year-on-year in August, leading the national average increase of 6%.

“AI computing is not an 'optional consumption'; it runs almost around the clock,” pointed out Meredith Fowlie, an energy economist at the University of California, Berkeley. “The rigid demand for electricity limits the room for price adjustments.”

A report from Bank of America in October also warned: “The pressure on peak electricity demand capacity may persist, meaning customer electricity bills will face ongoing pressure.” The report noted that this would disproportionately impact low-income households.

Democratic-led Areas Become Hard Hit, "Green Policies" Intensify Supply Shortages

A recent report by Goldman Sachs analyst Carly Davenport shows that the states with the highest electricity price increases are mainly concentrated in the Northeast and Mid-Atlantic regions, which are predominantly Democratic-led

In the past three years, states with cumulative electricity inflation as high as 29% (such as Maryland, Connecticut, Delaware, Washington D.C., and California) tend to have deregulated or competitive electricity markets; while states with slower electricity price growth (such as Michigan, North Dakota, Arkansas, South Dakota, and Louisiana) are mostly traditional regulated markets.

Maryland lawmaker Brian Chisholm criticized, stating: “Politicians and special interest groups have traded energy independence for a delusional climate worship ideology, and every Maryland family is paying the price for skyrocketing bills and rapidly diminishing energy supply.”

Republicans are pointing fingers at the radical green energy policies implemented by Democratic-led states, arguing that the premature phase-out of reliable fossil fuel power plants in favor of unstable solar and wind energy systematically undermines the reliability of the regional power grid.

Maine's situation illustrates how infrastructure upgrade costs are driving up electricity prices. The state's retail electricity prices rose 23% year-on-year in August, partly due to repair costs from winter storms damaging power lines in recent years. The largest utility company, Central Maine Power, is seeking regulatory approval to further increase electricity prices over the next five years to improve the grid's resilience against damage.

Political Consequences Are Already Apparent

The electricity price crisis has become a significant issue in the U.S. midterm elections, particularly at the core of the New Jersey gubernatorial race.

In the New Jersey gubernatorial race, Republican candidate Ciattarelli promised to withdraw from the regional carbon reduction program to lower electricity prices, while Democratic candidate and Congresswoman Mikie Sherrill proposed declaring a utility cost emergency, freezing rates, and seeking cost-reduction measures.

Virginia's Democratic gubernatorial candidate Abigail Spanberger mentioned utility rates in her first campaign ad, which is no coincidence. Virginia is one of the most concentrated areas for data centers in the U.S., with AI companies densely located there, causing a surge in grid load and rising construction costs, becoming a common concern for local governments and voters.

“In this election, energy is not just an environmental topic; it is a comprehensive symbol of inflation, employment, and household finances,” pointed out Ashley Koning, director of the Rutgers University Polling Center. “Voters are no longer concerned about how advanced AI technology is; they are asking: why has my electricity bill doubled?”

Businesses are also feeling the impact.

Steve McFadden, a coffee shop owner in Collingswood, New Jersey, has been forced to raise prices due to soaring electricity costs, stating, “We can absorb some of the costs, but after reaching a saturation point, we can’t anymore.” Steve Heisman, CEO of the nonprofit housing provider HABcore, noted that the organization’s collective living housing in Asbury Park incurred $8,075 in electricity costs from June to September, a 35% increase year-on-year Meredith Fowlie, an energy economist at the University of California, Berkeley, pointed out the uniqueness of electricity as a necessity: "If strawberries are expensive, I can buy apples—there are substitutes. But in the long run, there aren't many substitutes for electricity."