BNP Paribas economists Anis Bensaidani and Pascal Devaux warn that US electricity inflation, driven partly by AI-related data centers and structural constraints, is set to remain elevated into 2026. They highlight regional disparities, pressures on household budgets, and risks of second‑round inflation effects, while noting that limited generation capacity and ageing infrastructure will cap AI expansion at least until 2030.

AI demand collides with power constraints

"The rapid development and geographic concentration of data centers linked to the AI boom is placing significant pressure on local electricity markets. In fact, it is leading to sharp increases in household electricity prices, even as inflation has yet to return to its target after peaking at its highest level in over 40 years."

"This issue is impacting business competitiveness as companies are already grappling with rising input costs due to additional tariffs, thus facing a new risk. It also burdens households, which are directly exposed to rising electricity bills and tighter budgets."

"Paribas indicate that the available energy generation capacity and the electricity grid will limit data centers and AI development until at least 2030. The implementation of new power generation capacity faces multiple constraints, including insufficient gas supplies, lengthy nuclear development timelines, regulatory limitations on renewable, and restrictions on imports of key components such as transformers and battery components."

"Another important factor - albeit indirect - is the fluctuation of natural gas prices on the US market. Wholesale price of electricity is determined by the marginal cost of the last energy source used, which, according to the U.S. Energy Information Administration (EIA), is predominantly gas nationwide."

"For businesses, we expect the impact of electricity inflation on competitiveness to remain broadly contained. The U.S. EIA projects that industrial electricity prices will increase by 1.8% over the whole of 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)