According to Goldman Sachs, demand from artificial intelligence data centers is surging while electricity supply growth is slow, so households won’t be able to get relief from rising electricity prices anytime soon.
Goldman analysts told clients in a research note released Wednesday that electricity prices in 2025 rose 6.9% from a year earlier, more than double the headline inflation rate of 2.9%.
Analysts say prices will continue to rise until the end of 2010, as data centers account for 40% of electricity demand growth. This will reduce disposable income, depress consumer spending and slightly slow economic growth in the coming years, they said.
Household electricity prices are expected to rise another 6% by 2027, analysts say. Price inflation will then slow to 3% in 2028 due to lower natural gas prices, they said. Consumer spending growth is expected to decline by 0.2% through 2027, resulting in economic growth slowing by 0.1%, according to Goldman.
However, the bank said the trajectory of electricity prices will vary widely across the United States based on differences in regional market structures and what regulatory choices are made.
“Low-income households are likely to see an even greater drag on their incomes and spending because electricity is such a large part of their spending,” said Goldman analyst Manuel Abecasis. Households in areas with many data centers will also be hit hard, he said.
Goldman analysts expected core inflation to rise 0.1% by 2027 and 0.05% in 2028 as higher electricity prices cause companies to pass on higher costs to consumers.
Analysts say the rapid growth of data centers is colliding with power supply constraints, as labor and material shortages make it difficult to build new power plants, along with regulatory barriers.
Tighter supply-demand balances will likely push up wholesale power prices, especially in California, the Midwest and the mid-Atlantic region, they said. Utilities will increase spending on infrastructure to meet demand, which will be passed on to consumers, they said.
The AI industry’s role in electricity price inflation has become a major political flashpoint ahead of this November’s midterm elections. Democrats Mikie Sherrill and Abigail Spanberger won the 2025 New Jersey and Virginia gubernatorial elections, respectively, on promises to lower utility costs.
President Donald Trump has embraced the AI industry as a driver of economic growth, but increasingly sees power prices as a threat to the Republican Party’s political fortunes. In January, President Trump secured a promise from Microsoft that it would not allow data center price gouging.
The White House also signed agreements last month with several states that require tech companies to pay for new power plants on the PJM interconnector, the nation’s largest power grid.
Data centers play a particularly disruptive role in the PJM market, which covers 13 states, primarily in the Mid-Atlantic and Midwest. The cost of powering PJM has exploded in recent years, with data centers attributable to $23 billion, according to watchdog Monitoring Analytics. These costs are passed on to consumers.
This amounts to a “huge wealth transfer,” the watchdog group told PJM in a letter in November.
