Families won’t see relief from rising electricity prices anytime soon, as demand from artificial intelligence data centers soars while power supply grows slowly, according to Goldman Sachs.
Electricity prices jumped 6.9% in 2025 year over year, more than double the headline inflation rate of 2.9%, Goldman analysts told clients in a research note published Wednesday.
Prices will continue to rise through the end of the decade, as data centers make up 40% of electricity demand growth, the analysts said. This will lower disposable income, drag down consumer spending and slightly slow economic growth in the coming years, they said.
Households will see electricity prices rise an additional 6% through 2027, the analysts said. Price inflation will then slow to 3% in 2028 on lower natural gas prices, they said. Consumer spending growth will fall 0.2% through 2027 and economic growth will slow 0.1% as a result, according to Goldman.
The trajectory of electricity prices, however, will vary widely across the U.S. based on different regional market structures and what regulatory choices are made, the bank said.
“The income and spending drags will likely be larger for lower-income households because electricity accounts for a greater share of their spending,” Goldman analyst Manuel Abecasis said. Households in regions with more data centers will also take a bigger hit, he said.
Higher electricity prices will increase core inflation by 0.1% through 2027 and by 0.05% in 2028 as businesses pass on higher costs to consumers, the Goldman analysts said.
The rapid growth of data centers is colliding with a constrained electricity supply as regulatory barriers as well as labor and material shortages make it difficult to build new power plants, the analysts said.
The tight supply-demand balance will push up wholesale electricity prices, particularly in California, the Midwest and mid-Atlantic, they said. Utilities will spend more on infrastructure to meet the demand and that will also be passed on to consumers, they said.
The role that the AI industry is playing in electricity price inflation has turned into a major political flashpoint ahead of the midterm elections this November. Democrats Mikie Sherrill and Abigail Spanberger won elections for governor of New Jersey and Virginia, respectively, in 2025 in part on promising to bring utility bills under control.
President Donald Trump has embraced the AI industry as an engine of economic growth, but he increasingly sees electricity prices as a threat to the Republican Party’s political fortunes. Trump secured a promise from Microsoft in January that it will not allow its data centers to drive up prices.
The White House also signed a pact with several states last month that calls for tech companies to pay for new power plants in the nation’s largest electric grid, PJM Interconnection.
Data centers are playing a particularly disruptive role in the PJM market, which covers 13 states, primarily across the mid-Atlantic and Midwest. The cost to secure power supplies in PJM has exploded in recent years, with $23 billion attributable to data centers, according to watchdog Monitoring Analytics. These costs get passed down to consumers.
This amounts to a “massive wealth transfer,” the watchdog told PJM in a November letter.
