The data centre boom is reshaping America’s energy landscape at extraordinary speed. As the demand for AI accelerates, the US has already committed a record $63.35 billion to new data centres, with 809 sites in development. This rapid expansion, which is also being seen across Europe, is fuelling protests particularly around two issues: whether energy-hungry data centres will drive up everyone’s electricity bills and what the impact would be on the planet.
Olivier Darmouni, an Associate Professor at HEC Paris, one of Europe’s leading business schools, challenges these assumptions in his latest research paper which was presented for the first time at a media roundtable in Covent Garden, London. Organised by MHP and HEC Paris, the event brought together journalists from CNBC, Reuters, TIME Magazine, Bloomberg, The Guardian, Energy Voice, The Energyst and El Periódico de la Energía to discuss his findings and what they could mean for the US and Europe, the top two global locations for data centres.
Professor Darmouni summarised his analysis of 420 planned data centre projects in the US and explained that nationwide energy price increases would be fairly modest at around 2%. Meanwhile, regional prices could see potential hikes of up to 40%.
According to Darmouni, higher prices would have a limited impact on the national economy, reducing production output by only 0.1% of GDP. Instead, he maintains that the future economic risk will come from lower grid reliability, volatile fossil fuel prices and social costs from rising carbon emissions.
Professor Darmouni also discussed how the data centre build-out could alter the energy supply mix. He pointed out that soaring energy demand could be met by expanding the capacity of existing fossil fuel plants. However, he believes this would be a short-term solution and that countries will have to commit to renewables to fill the supply gap.
How big tech can avoid becoming the new “oil & gas”
Prompted by a question from one of the attending journalists, Professor Darmouni touched on how big tech companies are coming under increasing scrutiny for their “power hungry” AI models and systems. In the face of mounting public pressure, he explained that some companies have turned to “special tariffs,” where they can pay for higher network costs in return for faster access to the electricity grid, while at the same time taking steps to solve the energy supply crisis they are aggravating.
“Big tech does not want to become the new oil and gas,” explained Professor Darmouni. “Special tariffs could prevent that, as they are a win-win situation which could reduce costs for everyone.”
By way of example, Duke Energy, based in North Carolina, has been implementing “take-or-pay” provisions, where data centre operators essentially co-invest in grid development in return for speedier connections. Meanwhile, the White House has explored similar mechanisms with its recent Ratepayer Protection Pledge, which is designed to shield consumers from spiking electricity prices.
Meeting the electricity demand of new data centres
While Professor Darmouni acknowledged the expansion of renewable energy in the US, he argued that it will not be sufficient to power the scale of planned data centre growth, at least not in the short-term. The energy challenge is particularly acute in regions with a high concentration of data centres, such as Texas, Virginia and the Carolinas.
In the near-term he suggested that fossil fuel plants will continue to play a leading role. “Renewables are not optimal for big loads,” he pointed out, “as they require much more money upfront for the same load as fossil fuel plants and for the same capacity produce much less power.” Currently operating at around 50 — 60% capacity, fossil fuel generation remains the only energy source capable of delivering reliable, large-scale power quickly enough to meet rising demand.
Looking ahead, however, the energy mix is expected to shift. Increased R&D investment is expected to grow the share of renewable-generated electricity over the next five to ten years but also the development of innovative energy sources and storage methods, such as small nuclear reactors and distributed batteries. At the same time, supply chain constraints are expected to inflate the cost of gas infrastructure, further strengthening the “long-term appeal of renewable energy.”
Turning to Europe, Professor Darmouni highlighted that the continent’s energy security faces structural challenges as well as a lack of policy alignment. “Europe will need to invest in new grid connections so that countries can distribute electricity more efficiently,” he explained. “This will become increasingly important as the climate warms and consumer demand becomes more volatile and unpredictable,” he added.
Professor Darmouni also noted that policymakers will have to watch out for other risks as well as energy and financial security. While data centre expansion is projected to boost energy sector profits by $90 billion, rising carbon emissions might well offset these gains with a suspected social cost of $80 billion.
“Data centre expansion is a double-edged sword,” he observed. “On the one hand, it could lead to a downward spiral of increasing carbon emissions and growing climate damage, and on the other, renewable energy sector profits will rise to new levels and drive mass innovation,” he said.
In a fast-moving digital world, where AI demand is surging and data centre expansion is accelerating, pragmatic energy policy matters. The growth in digital infrastructure does not have to come at the expense of everyday working people, provided companies help to fund the grid upgrades needed to support it.
Instead, we must ask: who pays for that transformation? By the end of the roundtable, the answer had become clear. The financial burden does not have to fall on households or local businesses, such as farms and small shops, which are already facing higher bills.
As Professor Darmouni summed up at the close of the event, the AI revolution will steer every decision and aspect of our lives: “AI is energy policy. AI is also climate policy.” But with the right policy choices, and proper investments into scaling fossil fuel plants, renewable innovation and grid upgrades, this period of immense technological transformation can be powered without consumers bearing the brunt of the costs.
