It’s easy to take electricity for granted. After all, many of us don’t remember a time when we couldn’t flip a switch to turn on the lights. Most homes in the United States had electricity by the mid-1960s. Electricity doesn’t get to those homes by magic, just like “the cloud” is not an imaginary place in the sky. Data centers rely on electrical power just like the rest of us. Let’s take a look at some of the considerations around data centers and power, especially how they affect you as a consumer.
How Do Data Centers Use Power?
Data centers need power mostly to run their specialized IT equipment. The cooling systems that keep all of that equipment running optimally also require power. And, like all commercial buildings, data centers need electricity for overhead lighting, security systems, and other normal purposes.
Because power is so crucial to the operation of data center equipment (what would a data center be if it couldn’t run computers, after all?), data centers are often described in terms of their electrical capacity: 10 megawatts (MW), for example, on the smaller end, or 1 gigawatt (GW) on the end where AI and machine learning models are trained. A data center’s megawatt capacity refers to the amount of power available to support its computing equipment. A facility with a larger megawatt capacity will usually be bigger in terms of square feet, too.
Data Center Scale and Power Capacity
Data table version of scale comparison
| Data Center Type | Power Capacity | Building Size (Sq. Ft.) | Primary Function |
|---|---|---|---|
| Edge | up to 10 MW | 500-10,000+ | Smaller facilities close to users or networks that improve local performance and reduce latency. |
| Enterprise | 1-10 MW | 10,000-100,000 | Dedicated facilities for one organization’s IT, security, compliance, and business operations. |
| Colocation | 3-50 MW | 100,000-1,000,000+ | Multi-customer facilities providing secure space, power, cooling, connectivity, and physical protection. |
| Hyperscale | 100-300 MW+ | 200,000-1,000,000+ | Large campuses supporting cloud, content, network, storage, and high-volume digital services. |
| AI Data Center | 100 MW-1 GW+ | 300,000-1,500,000+ | High-density facilities built for advanced computing, specialized processors, and greater cooling demands. |
The amount of power a data center uses is only part of the picture. How efficiently it uses that power is important, too. That measure is known as Power Usage Effectiveness (PUE). PUE compares a facility’s total energy usage with the energy used by computing equipment. You want that number to be close to 1.0, which would mean that most of the energy is going toward the data center’s number one job: computing.
Remember, the computer equipment in a data center has to run all day, every day to support the digital services we all use. So unlike in our homes and offices, where we might turn off the lights or change the temperature while we’re away, data centers require a continuous supply of electricity, which is why the boom in data center growth has raised so many questions not only about their power usage in general, but also about the U.S. power grid.
Power Terms to Know
Text description of power terms
- Grid: The interconnected network that generates and delivers electrical power.
- Generation: The actual production of electricity.
- Substation: Equipment that changes voltages and routes electricity between parts of the grid.
- Transmission: Moving electricity across distances.
- Distribution: Delivering electricity from the grid to homes, businesses, etc.
- Load: The amount of electricity being used or requested from the grid by a consumer.
- Large-load tariff: Special rates and requirements for customers that use large amounts of electricity.
- Megawatt (MW): A unit used to measure power; one megawatt equals one million watts. You might also sometimes see gigawatt (GW), which is equal to one billion watts.
- Power Usage Effectiveness (PUE): A measure of data center efficiency that compares a facility’s total energy usage with the energy used specifically by computing equipment. A PUE of about 1.4 is considered good.
Data Center Growth and the U.S. Power Grid
The 2025 Report Card for America’s Infrastructure published by the American Society of Civil Engineers gave the United States a D+ in Energy. Much of the country’s electrical grid was built many decades ago and hasn’t had substantive updates since. So not only are electric providers trying to replace aging equipment, but they are also trying to expand in order to meet the increasing power demands of modern life. As large-load customers, data centers can place a strain on our power system. But they also present an opportunity to make upgrades that may have been deprioritized until now.
Data center developers work closely with local utility companies to perform power studies of the sites where they would like to build to determine how much load the existing infrastructure can provide. These studies may also reveal that enhancements or net-new equipment are needed in order to meet the data center’s needs. Responsible data center operators will often pay the full cost for these upgrades, which are durable infrastructure improvements that increase reliability and resiliency for the communities around them.
Utilities determine the rates that large-load customers like data centers and manufacturing facilities will pay. These rates often include a large-load tariff or an upfront payment that requires large customers to cover their fair share (or more) of the associated infrastructure costs.
Will Data Centers Make My Power Bill Go Up?
Electric utility rates are reviewed and regulated by local entities. No utility company can guarantee that rates will never go up, because utility rates are affected by factors outside their control. However, customers will not necessarily see their rates rise specifically because of a data center in their community.
A 2026 analysis of data center growth and electricity rates across the United States found that increased data center capacity did not cause residential rates to rise. The researchers found that an increase in data center capacity actually reduced average residential prices by about 3.5%.
That’s because electric utilities have fixed base costs for generation, distribution, and transmission. Adding large, consistent electricity users, like data centers, can spread those costs across more kilowatt-hours (the things we’re charged for on our electric bills) and make better use of existing infrastructure. Think of carpooling or adding more riders to a bus that would have been making the trip anyway. The cost of the trip doesn’t change, but it’s spread across more payers, making the cost for each user lower.
In other words, more electricity demand from data centers does not automatically translate to higher rates for residential customers. That doesn’t mean that rates will never be affected, but the outcome depends on how utilities plan for new demand and distribute the costs of serving it. As large-load customers become more common, utilities and regulators are adapting their rate structures and planning practices accordingly.
Data Center Growth and Clean Energy
Building more traditional power plants isn’t the only way to meet data centers’ growing demand for electricity. The constraints of the existing grid and compressed timelines for delivery are driving innovative research into other options. Solar and wind have traditionally been tricky for data centers to tap into because of their need for around-the-clock power, but they can be paired with battery storage to add new capacity. Advanced nuclear and geothermal sources are also options for next-generation data centers.
And remember PUE? Finding new ways to generate power is only part of the equation. Data center operators are also working to use that power more efficiently. Innovations like more energy-efficient computer chips and direct-to-chip liquid cooling, which removes heat right at one of its primary sources, can reduce the energy needed to operate and cool a facility.
Summing It Up
Data centers require electricity. That’s a fact. But electricity consumption alone doesn’t tell the whole story about the impact a data center will have on a community’s grid or your electric bills. The total picture includes what infrastructure is needed and who pays for it, how utilities plan for long-term growth, where the power comes from, and how efficiently it’s used.
Understanding data centers starts with understanding the role they play in everyday life. Explore the rest of our Data Centers 101 series to learn how these facilities are designed, operated, and integrated into the communities they serve.
