Processing Power: The Effect of Data Centers on Wholesale Electricity Markets

Robert Reaser, Owen Kay and Reid Taylor

No 404751, 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri from Agricultural and Applied Economics Association

Abstract: Artificial-intelligence-driven data centers are reversing two decades of flat U.S. electricity demand and have generated questions about how this growth will impact electricity prices. We quantify this effect using an hourly, unit-level least-cost dispatch model covering wholesale electricity markets in the continental United States. We find that existing data centers have already increased wholesale prices by 2 to 6% on average nationwide, with substantially larger effects in regions hosting major data center corridors. Extending the model through 2028, we show that if proposed construction proceeds under high-utilization scenarios, wholesale prices could rise dramatically (50%), while more moderate build-out yields smaller (20%) but still meaningful effects. Impacts vary due to utilization and build-out assumptions. Finally, we use the model to address several policy discussions including optimal data center siting decisions and renewable build-out uncertainty.

Keywords: Resource; /Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 68
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea26:404751

DOI: 10.22004/ag.econ.404751

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