October 20, 2025

Hi everyone, my name is Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of TrendsTalk. We at ITR are your apolitical and unbiased source of economic intelligence, and today I wanted to discuss electricity, energy, and the path forward.

One thing that I’m constantly discussing with our consulting clients or from the stage is this relationship between electricity prices and data center construction. Listen, we’re very excited about the growth we’ve seen in data centers. It’s now, over the last 12 months, we’ve seen data center construction reach $37.2 billion, it’s a very big and fast growing industry. But one of the challenges or consequences that has come along with all this data center investment is the fact that our electricity prices are rising faster than they ever have before. I often share with folks in 10 years of being an economist, I haven’t really discussed electricity prices all that much until the recent, I’d say 12 months. It’s because if you look at our US Electric Power Producer Price Index, it’s soaring and soaring at record highs.

So one of the concerns that we have, that I have moving forward is that we are going to continue to see rising electricity prices because of all the data center investment, not to mention just the fact that our grid, our infrastructure here has not been able to keep up. In a presentation that our CEO and president gave about a year ago now, they highlighted that the demand from data centers, AI and cryptocurrencies has been significant over the course of the past five years. And in order to keep up with the demand from 2026 and beyond, if we project this electricity demand, we have to add roughly the equivalent to a Sweden, a Germany or a Japan worth of energy just to keep up with the demand that we expect to come down the pipeline. So yes, listen, our high tech industries, they’re great industries, great competitive advantages for all of us here in the US, but it is coming at a cost, which is a lot higher electricity. And as a result, we’re sharing with clients, we really need to have a solution to this moving forward. Higher electricity costs are here to stay, if anything, we expect them to continue to move higher. And as a result, we need to find ways to offset this problem.

That had me interested, and I was looking into the different electric generation capacities that we have here in the US. In 2023, about 43.6% of that electric generation came from natural gas. And second place was coal at 16%, wind at 11.6%, nuclear at 8%, hydro at about 8%, and solar also at about 8%. Now there’s a number of others in there with a smaller market share, but those were the primary sources in 2023. And then when we looked at the capacity that was added in 2024 in terms of megawatt hours, about 77% of the capacity added was solar, wind came in at 12.5%, natural gas at 7.73%. So that’s what was added in 2024. You saw a lot of companies, governments, making the investment really tailored towards solar.

But the question is, how does this shape up moving forward? With the One Big Beautiful Bill, folks might not be as optimistic about, you know, the solar or renewable energy tax credits. So it’d be interesting to see how this shapes up moving forward. But overall, we need more electricity, we need more infrastructure, just to keep up with the demand that we expect to see over the next few years. So again, we’re very excited about these emerging technologies, these emerging spaces like data centers. There’s a cost that comes along with that type of growth. And for us, it’s higher electricity costs. So you better have a plan to take that on as we move over these next few years. It’s going to make up a bigger part of your cost of goods, your bill of materials, is those electricity costs.

We are expecting higher inflation as we move into ’26, ’27 in the second half of this decade. And this is just one of those components detailing that, yes, we will grow, but we’re going to face higher costs along with that growth. Continue to keep you updated on important inflation costs, input costs, and metrics moving forward. But for now, I hope you found this information helpful. Please remember to like and subscribe to TrendsTalk wherever you listen to your podcasts. I look forward to seeing you all in the next one. Thanks so much. Take care for now.