U.S. Data Center Power Demand Set to Triple by 2035 as AI Expansion Strains Electrical Grid

Data center power demand surges faster, analysis finds

Why it matters: That's a 36% upward revision from its April outlook, "illustrating just how quickly the sector is expanding," the analysis said. * One gigawatt can power about 750,000 to 1 million homes. Yes, but: Even that bigger 2035 projection is still pretty conservative compared to estimates from Goldman Sachs, BCG, McKinsey and several others. The big picture: The study highlights big, interlocking trends. * Development is moving away from urban areas as facility sizes grow. "Today, US data centers are typically located in suburban areas within 30 miles of major cities," it finds. * Just 10% of existing data centers exceed 50 megawatts of capacity, yet most in development are north of 100 MW. A handful of gigawatt-scale sites are coming online in the next few years, with more to come later. State of play: Big tech and the Trump administration are all-in on the AI race. * One data point: Barclays estimates that Meta, Google, Amazon, Microsoft and Oracle will have roughly $390 billion in combined capex this year, a 71% year-over-year rise with more on the way. * The Energy Department and Federal Energy Regulatory Commission are working on a new policy to speed up data center grid connections. * The tech and data center industries are scrambling to find new power sources -- including re-start of shuttered plants -- to supply electricity for training and using AI models. Friction point: The boom is bringing fears of localized grid strains and wider power system problems as overall energy demand rises. * "These pressures point to an inflection moment for US grids: the desire to accommodate AI-driven load without undermining reliability or driving up power costs," BloombergNEF said in a summary of the report. What we're watching: The simmering data center backlash in some regions as electricity prices rise for a host of reasons.

Data center power demand to triple by 2035

BloombergNEF forecasts that data center electricity demand will increase 2.7 times by 2035, reaching 106 gigawatts from the current 40 gigawatts, driven by AI expansion and a surge in announced projects, primarily in rural U.S. areas within the PJM Interconnection and Texas ERCOT regions. The report details how this growth reflects the sector's rapid evolution, with planned construction adding substantial capacity over the next decade. Facilities are shifting toward rural locations because urban sites are becoming limited as data centers expand in scale. This relocation allows for larger builds away from densely populated zones, accommodating the infrastructure needs of modern computing demands. Current data center power usage shows that only 10 percent of facilities consume more than 50 megawatts. In contrast, the average new data center coming online over the next decade will require more than 100 megawatts. This shift underscores the increasing size of installations, with Qnearly a quarter of these new facilities exceeding 500 megawatts in power draw. A small number will surpass 1 gigawatt, representing the largest hyperscale operations planned for high-performance computing tasks. Alongside size increases, operational efficiency will improve, as utilization rates for data centers rise from 59 percent today to 69 percent by 2035. This uptick stems from greater demand for compute resources, particularly in artificial intelligence applications. AI training and inference processes will account for nearly 40 percent of total data center compute by that year, optimizing existing infrastructure and justifying the power expansions. Global investment in data centers has reached 580 billion dollars this year, exceeding worldwide expenditures on developing new oil supplies. This funding supports the construction and equipping of these facilities, enabling companies to meet rising computational needs. The investment surge aligns with efforts by AI firms to deploy more powerful systems, fueling the overall capacity buildup. The BloombergNEF report marks a significant update from its April publication, with projections revised upward based on recent developments. A key factor is the increase in newly announced projects since that time. As the report states, "With an average seven-year timeline for projects to come online, developments in earlier stages affect the tail end of our forecast the most." This means early-phase announcements influence long-term estimates, extending their impact into the 2030s. Early-stage projects have more than doubled in number between early 2024 and early 2025. These differ from committed or under-construction initiatives, representing potential future capacity that bolsters the forecast. The seven-year average timeline covers planning, permitting, construction, and grid integration, during which projects progress from concept to operation. New capacity planning concentrates in specific U.S. regions. Virginia, Pennsylvania, Ohio, Illinois, and New Jersey form the core of the PJM Interconnection area, which also includes Delaware, West Virginia, and parts of Kentucky and North Carolina. The PJM Interconnection operates the electrical grid across these states, managing transmission and ensuring reliability. Texas's ERCOT grid, the independent system operator for most of the state, will host a substantial portion of additions as well, drawn by available land and energy resources. The PJM Interconnection faces examination from Monitoring Analytics, its independent monitor. This group submitted a complaint to the Federal Energy Regulatory Commission, asserting that PJM must limit new data center connections to instances where grid capacity suffices. Monitoring Analytics emphasizes PJM's reliability obligations, writing, "As part of its obligation to maintain reliability, PJM has the authority to require large new data center loads to wait to be added to the system until the loads can be served reliably." The complaint further recommends establishing a load queue to sequence additions systematically. Data centers contribute to elevated electricity prices in the PJM region currently. Monitoring Analytics attributes this to the influx of high-demand loads without corresponding grid upgrades. The organization criticizes PJM's approach, stating, "PJM's failure to clarify and enforce its existing rules and to protect reliable and affordable service in PJM is unjust and unreasonable." This filing highlights tensions between rapid data center growth and grid management practices.

AI Data Centers Are Driving US Power Crunch -- And Even Record Grid Spending Isn't Enough, New Research Finds

Enter your email to get Benzinga's ultimate morning update: The PreMarket Activity Newsletter The United States could face mounting reliability risks as electricity demand from data centers climbs far faster than grid capacity, according to two new BloombergNEF (BNEF) reports released on Monday. BNEF now expects U.S. data-center power demand to reach 106 gigawatts (GW) by 2035, a 36% jump from its previous forecast just seven months earlier, while grid investment, despite hitting record levels, remains too slow to ease transmission bottlenecks. Data-Center Load Forecast Surges On AI Expansion BNEF attributes the sharp upward revision to both the sheer volume and escalating size of new projects. Of nearly 150 developments added to the research firm's tracker this year, almost one-quarter exceed 500 megawatts, more than double last year's share. The new wave is fueled by AI workloads that require massive compute density and consistent power availability, BNEF research found. See also: Amazon Runs 900+ Data Centers To Fuel AI Demand: Report Major Regional Grids Warn Of Tightening Supply Two of the country's largest power markets -- PJM and ERCOT -- are showing signs of strain. PJM operates the grid across 13 U.S. states from New Jersey to Illinois, supplying nearly 65 million people. BNEF forecasts that data-center capacity in PJM could reach 31 GW by 2030, nearly matching the 28.7 GW of new power generation the Energy Information Administration expects in the same period. ERCOT, which manages the grid covering about 90% of Texas, faces a similar challenge. Reserve margins there could fall into "risky territory" after 2028 as long-term power supply lags behind accelerating demand from AI and industrial growth, the report said. Meanwhile, Northern Virginia's long-dominant data-center market is nearing saturation, pushing new development into central and southern Virginia, according to BNEF. Georgia is expanding beyond metro Atlanta as land and power availability tighten. Texas stands out as developers convert former crypto-mining sites into AI data centers near major population centers and fiber routes. Record Grid Spending Still Failing To Solve Bottlenecks BNEF's Grid Investment Outlook 2025 found that global grid capital spending will exceed $470 billion this year, with the U.S. contributing $115 billion, the most of any country. Yet even with double-digit growth, supply-chain constraints, permitting delays, and labor shortages continue to slow transmission expansion. BNEF warned that demand-side connection queues, driven heavily by data centers, are rising rapidly and remain a major structural challenge. "With data centers and industrial electrification driving sharp increases in power demand, investors need to factor in how essential timely grid expansion is for not only connecting new demand but also connecting all of the generation we will need to ensure a secure and reliable supply to this demand after over a decade of stagnation," said Peter Wall, Head of Grids Research at BloombergNEF. READ NEXT: Gene Munster Says Apple's AI Chief Was Probably Requested To 'Retire' By Tim Cook, As CEO Is 'Very Intense' About His Final Years Image via Shutterstock Market News and Data brought to you by Benzinga APIs