December 15, 2025

Hi, everyone, this 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 talk about electricity, data centers, and the opportunities and challenges that are going to come along with it.

I’ve been sharing a lot of this data with some of the consulting clients that we work with, but I wanted to share some comments here with all of you. We are forecasting a higher inflation environment in 2026, both on the producer side and on the consumer side. And one of the trends we’re seeing that’s going to impact some higher costs is electricity prices. We look at the U.S. Electric Power Producer Price Index. That comes from the BLS. And what we’ve seen is some substantial rise in our electricity prices really in this post-pandemic world that we’ve been living in. And some of it has to do with where we’re at from an infrastructure standpoint on the grid. Our grid is just not ready to handle the increased in demand from the overall economy. But to layer on top of that, we see all this data center construction. If we look at the most recent data we have, we’re at about $38 billion worth of data centers over the last 12 months. And that puts a lot of pressure on electricity capacity in our country. That puts a lot of pressure, upward pressure on prices of electricity as a result.

So even though we’re very optimistic about the data center market, it’s a market that we expect to grow at a double digit pace for the next three years. There’s a challenge that’s going to come along with it, and that’s higher electricity prices. I’ve met with a few of our clients now that have said electricity prices are now reaching their top five input costs from just an overall perspective, which goes to show we’re really all starting to feel the impacts of these higher costs. Now, it also provides an opportunity. And my colleague Lauren, our chief economist, Brian, in their 2030 webinar just over this last week, highlighted that the electrification markets, whether it’s power transmission, distribution, generation, those are going to be some real markets of opportunity because we’re really going to need to increase our capacity. Otherwise, we’re going to be dealing with a lot higher electricity costs.

So really, again, the reason I share this with you is in 2026, we have higher inflation coming your way. I’m not saying the economy won’t grow. We have growth in GDP. We have accelerating growth in industrial production. There’s still a lot of growth out there to be excited about as it relates to 2026. But that growth will come at a higher cost, as we’ve discussed on some previous TrendsTalks episodes. And electricity costs are one of those higher costs that we’re going to face. So listen, we love data center construction. It’s a great market. It’s a big competitive advantage. But there are challenges that come along with it. So any way you can orient your business to the data center construction space, to the power transmission, distribution, the infrastructure type work that’s going to be needed to improve our electricity capacity, improve our grid, those are going to be big areas of opportunity.

So overall, there’s some markets that we’re very excited about, but we need to keep our eye on some of these higher costs that we’re going to face as we move into 2026. Again, some of this data is data we’d be happy to share. Some of this data is available in the recording of the 2030 presentation that my two colleagues gave. So please head over to our website if you missed that 2030 update, there’s still time to get a recording of that and digest some of this information. I’m optimistic with what 2026 holds as long as we can keep control of some of these costs.

I hope you found this information helpful. Thanks so much for joining me on this episode of TrendsTalk. Please like and subscribe to TrendsTalk wherever you get your podcasts. And I look forward to seeing you on the next one. Thanks so much, take care for now.