Tipsheet

The Biggest Myth About AI Data Centers Just Fell Apart

Dmitri Bolt
Dmitri Bolt  |  July 15, 2026 2:30 PM

America has fallen for this trick before: believing that new technology is destined to do more harm than good. Even if that's not a belief you hold consciously, it's the assumption baked into today's anti-data-center rhetoric, or the push to protect jobs threatened by this new technology. The worst part is that the panic has outrun the evidence. The research on AI infrastructure and electricity prices is still new, but what does exist points in the opposite direction of the popular narrative.

According to an analysis of these studies by the Manhattan Institute, data centers are not what's making your electricity bill more expensive. Comparing residential electricity prices to data center concentration across all 50 states, researchers found that poor state energy policy, not artificial intelligence, is the far better predictor of rising bills.

Here's more from Shawn Regan, a senior fellow at the Manhattan Institute:

“Have Data Centers Raised Your Electric Bill?” That’s the question a new working paper by Asa Watten and Geoffrey Blanford of the Electric Power Research Institute (EPRI) and John Bistline of Watershed asks. Their answer, surprisingly, is no: data centers pushed residential rates modestly down between 2015 and 2024. After accounting for the possibility that developers simply chose states where electricity was already likely to remain cheap, the authors estimate that doubling a state’s data-center capacity caused residential rates to fall about 3.5 percent. The average American lived in a state where data-center capacity grew 160 percent between 2019 and 2024, leaving rates roughly 6 percent lower than they otherwise would have been.

A June paper from Columbia University’s Center on Global Energy Policy surveys the literature and finds that recent price increases were driven not by demand from new users such as data centers but by a host of other factors. These include grid hardening and expansion, disaster recovery, volatile fuel prices, and regulatory mandates. States with greater load growth generally saw smaller price increases, or even price declines. A recent analysis from Lawrence Berkeley National Laboratory reached similar conclusions.

How is this possible? The explanation comes down to fairly simple economics. Most utility providers across the country operate as regulated monopolies, meaning rates aren't based on any single customer's individual usage. Instead, a utility's total fixed costs are spread across all the electricity it sells, and every consumer pays a rate built from that average. When a large new customer, like a data center, enters the picture, those same fixed costs get divided across a much larger amount of electricity sold, which lowers, not raises, the average cost of supplying each kilowatt-hour. 

Data centers, in other words, are enormous, steady customers, and steady customers are good for a grid's math. A utility can sell far more power through the infrastructure it has already paid to build, bringing in more revenue while spreading its fixed costs over a larger base. That's actually how the American electric grid operated for most of the 20th century: demand climbed nearly every year, and real electricity prices, adjusted for inflation, actually fell.

So what actually does influence electricity prices? Precisely where conservatives should have been looking all along: poor economic policy, heavy-handed regulation, and more specifically, climate policy. 

The steepest utility cost increases in the country haven't come from the states building the most data centers. They've come from the West Coast, where state and local governments have spent the last decade waging war on fossil fuels: mandating renewable energy targets, forcing businesses to slash emissions, and squeezing out the very fuel sources that once kept electricity cheap.

The lesson here is one conservatives should have known all along, and simply didn't apply. Technology has never been the enemy of affordability, government has. Every time a new innovation frightens the public into demanding restrictions, the actual culprit quietly escapes: the regulator, the mandate, the policy that made things expensive long before the technology ever arrived. 

AI data centers are not raising energy costs. Climate mandates are. The next time something new and unfamiliar shows up promising to change the world, conservatives would do well to ask the harder question first, not "what is this technology doing to us," but "what has our own government already done, that we've been so eager to blame on something else."