A new Senate bill would shield consumers from data centers’ rising energy costs. The instinct is right. The diagnosis is wrong.
Data centers now account for roughly 7% of U.S. electricity demand, roughly equivalent to powering every home in California and Texas combined, up from about 1% just 15 years ago — the equivalent of powering every home in California and Texas combined. That curve is still steepening. The four largest hyperscale tech companies are projected to spend a combined $650 billion in capital expenditures this year alone. When numbers get that big, it’s natural to ask whether the current system makes sense.
But this bill treats data centers as the problem. The truth is more interesting than that. Data center challenges are a symptom of a grid that has been underbuilt and undermodernized for decades, but the right data centers, designed the right way, can actually help solve these same problems. And the right data centers, designed the right way, can actually help fix it.
The Real Problem Is the Grid Itself
The real issue, the thing actually driving electricity costs upward, is that our electrical grid is structurally limited. It was built for a 20th-century world of slow, predictable demand growth, an era when utilities could forecast load years in advance and build generation to match. That world is gone.
But data centers are only one reason why.
Electric vehicles are transforming how and when millions of Americans draw power. Heat pumps are changing residential electricity patterns. Industrial electrification is accelerating across manufacturing and chemicals. Each of these shifts represents genuine economic progress — new industries, new jobs, new capabilities. But each also places new strain on a grid that was never engineered to accommodate them. None of them are “the problem.” Neither are data centers.
Data centers are the most visible new source of demand, making them a convenient political target. But singling out one sector for the grid’s collective modernization challenge is a bit like blaming traffic congestion on the newest cars when the roads were already too narrow.
The transmission bottlenecks, the interconnection backlogs, the outdated planning models that make it so hard to bring new capacity online: these problems were building long before the current wave of AI-driven data center construction, and they will continue to build with or without it. Every year we delay modernizing the grid, we raise the cost of the growth our economy needs.
Three Things Policymakers Should Actually Do
So what should legislators, in this legislation and beyond, actually do?
1. Treat demand flexibility as a grid resource.
First, they should orient energy policy around demand flexibility as a grid resource. A series of reports from Duke University’s Nicholas Institute has found that curtailing just 0.25% to 1% of annual electricity consumption during the most stressed hours of the year could allow U.S. grids to absorb up to 100 gigawatts of new load — roughly the entire capacity of America’s nuclear fleet — without requiring major new generation or transmission investments. A follow-up study estimates that if large data centers shifted a portion of their computing to off-peak hours, the country could avoid up to $150 billion in power plant, fuel, and transmission costs over the next decade.
A significant share of the capacity we think we need to build already exists. We just aren’t using it well. Legislation should direct regulators and grid operators to value flexible demand alongside traditional supply in resource adequacy planning.
2. Incentivize data centers that help the grid.
Rather than restricting grid access, legislation should require that data centers be designed for grid interactivity — the ability to dynamically adjust energy consumption in coordination with the grid’s needs. The technology to do this is real and deployable today. Data centers can be built with integrated battery storage that provides services to the grid during normal operations and backup power during outages, curtailing load within minutes of a utility signal while maintaining customer uptime.
Recent work validated with national laboratories has demonstrated this flexibility at full scale: these facilities can curtail 100% of their grid load within one minute of a utility signal, provide firm dispatch capacity back to the grid through battery storage, and reconnect seamlessly when conditions stabilize. Data centers designed this way aren’t a burden on the grid. They are an asset to it.
The same principle applies across the demand landscape. Virtual power plants already coordinate millions of residential devices — thermostats, water heaters, home batteries — to shift consumption during peak hours~~, providing gigawatts of dispatchable capacity~~. The Department of Energy estimates that scaling these networks could meet 10 to 20% of peak demand by 2030, saving $10 billion annually in avoided infrastructure costs.
3. Modernize interconnection and planning processes.
Today’s frameworks were designed for a slower era. They assume all new demand requires a corresponding amount of new supply — and that the systems consuming energy cannot also supply it. Both assumptions are increasingly wrong. Flexible loads, intelligent storage, and advanced demand coordination should be treated as capacity resources in grid planning, with regulatory frameworks updated accordingly.
The Risk of Getting the Framing Wrong
These aren’t speculative ideas. These are proven capabilities being deployed now. The question is whether legislators will build on them or continue to frame the challenge as a zero-sum contest between data centers and consumers.
Legislation that isolates data centers may score political points, but it leaves untouched the structural limitations that will keep driving costs up for everyone. The grid needs modernization that accommodates all 21st-century loads intelligently: EVs, heat pumps, industrial electrification, and yes, data centers. Building walls around one category of demand while the underlying system remains brittle will not protect consumers. It will delay the reforms that actually would.
The instinct to shield ratepayers from rising costs is exactly right. The way to honor it is to build a grid capable of meeting the historic opportunity ahead.
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