Power Costs for Data Centers Across the U.S.: 2026 Edition

Power remains the lifeline of the data center, but the story has changed dramatically since we first wrote about this topic in 2017. Back then, the conversation was almost entirely about rate: which state or utility offered the cheapest cents per kilowatt-hour. Today, rate is still critical, but it has been joined, and in many markets surpassed, by a second, more urgent variable: availability. AI-driven demand has made power the binding constraint on where data centers can be built at all, not just where they're cheapest to run.

Power still represents up to 70% of a data center's total operating costs, so site selection built around low-cost, reliable energy remains foundational. But in 2026, the more consequential question for many projects is no longer "what will I pay per kWh?" It's "can I even get the megawatts, and how many years will I wait?"

Demand has moved from a projection to a national grid event

The acceleration since 2023 has been driven almost entirely by AI. Globally, Gartner's June 2026 forecast puts data center electricity consumption at 565 TWh for the year, a 26% jump from 447 TWh in 2025, with the U.S. alone accounting for roughly 204 TWh of that total. Worldwide data center peak power demand is expected to climb to 132 gigawatts in 2026, up from 104 GW in 2025, en route to a projected 290 GW by 2030. AI-optimized servers, which made up 31% of data center power draw in 2026, are expected to overtake conventional servers' share of consumption by 2027.

The upshot for site selection: power availability, not chip supply, is now the practical ceiling on how fast AI capacity can be built, and that has fundamentally reordered how hyperscale and colocation operators approach markets.

Electricity rates in 2026: still wide, still moving

Rate dispersion across states hasn't gone away. If anything, it has widened as data center and EV load push regional grids in different directions. According to the U.S. Energy Information Administration's most recent full-year state-level data (2024, EIA Form 861), the national average industrial electricity rate stands at 8.13 cents/kWh. Rates by state still range from about 5.4 cents/kWh in New Mexico to over 34 cents/kWh in Hawaii, a spread that, for a large data center user, still translates into a swing of hundreds of thousands of dollars annually depending on location.

For a large continental U.S. data center user, that low-to-high spread (excluding Alaska and Hawaii) still plays out dramatically:

(Assumes a continuous 1,000 kW load, or 8,760,000 kWh annually.)

State rankings based on average industrial electricity rates (2024, EIA)

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Source: U.S. Energy Information Administration, Electric Power Industry Report (2024 data, most recent full-year state-level figures available).

A few notable patterns stand out: Texas sits in the top five nationally on industrial rate, reinforcing its dual appeal of cheap power and scale. Virginia, now the largest data center market in the world by installed capacity, sits mid-pack on rate (37th, 8.99¢/kWh), a reminder that Northern Virginia's dominance has never been about having the cheapest power—it's about fiber density, community adoption, land and speed to power. California and the Northeast corridor remain the most expensive industrial power in the continental U.S., a gap that continues to widen.

Power availability is now the dominant site selection filter

In 2026, several dynamics define site selection more than rate alone:

Interconnection queues have become the real gating factor. PJM, the regional grid operator spanning 13 mid-Atlantic and Midwest states plus D.C., including Northern Virginia's "Data Center Alley," received 811 project requests totaling 220 GW of proposed capacity in the first cycle of its reformed interconnection queue (May 2026). Average wait times for a 100 MW connection in Northern Virginia now stretch to roughly seven years, and PJM is projecting a 6.6 GW reliability shortfall for the 2027 to 2028 delivery period. Nationally, interconnection queues held approximately 2,600 GW of proposed generation and storage projects as of early 2026.

Capacity prices are repricing the grid in real time. PJM's capacity auction cleared at under $30/MW-day for the 2024/2025 delivery year; by 2026/2027 the same auction cleared above $325/MW-day, more than a tenfold increase, driven substantially by data center load growth. Those costs flow through to all commercial and industrial ratepayers in the region, not just data centers.

ERCOT (Texas) tells a different but related story. Texas's large-load interconnection queue stood at roughly 410 GW as of early 2026, with data centers representing over 70% of that pipeline. West Texas has become a release valve, with developers increasingly building behind-the-meter natural gas generation as bridge power while they wait on transmission buildout and grid interconnection.

Speed-to-power has become a competitive differentiator in its own right. Markets with available substation capacity, co-located generation options (existing gas, nuclear or hydro assets), or utilities willing to fast-track large-load service agreements are commanding real premiums over unentitled land, even where headline power rates are unremarkable. "Powered Land" sites, in industry parlance, are now underwritten and priced as a distinct asset class from raw land.

Regional advantages in 2026: rate and access have diverged

Some familiar regional patterns persist, but the calculus behind them has shifted:

Northern Virginia remains the largest data center market globally by installed capacity, but its advantage today is legacy infrastructure and fiber density rather than either cheap power or fast access. The region is now one of the more constrained markets in the country for new interconnection.

Texas (Dallas-Fort Worth and increasingly West Texas) continues to combine relatively low industrial rates with an ERCOT market structure that allows more flexible generation arrangements than PJM, though its own queue is now similarly congested.

Eastern Washington (Quincy, East Wenatchee) still benefits from cheap hydroelectric power and continues to host large hyperscale and colocation footprints, though growth here has moderated relative to markets with more headroom on the grid.

Emerging and secondary markets, including parts of Ohio, Pennsylvania, Wyoming and the broader PJM and MISO periphery, are increasingly absorbing demand that can no longer be sited in saturated primary markets, often because they offer available substation capacity or proximity to existing baseload generation (including nuclear) rather than because they offer the lowest published rate.

Conclusions

Reliable, affordable power is still the lifeblood of the data center. What has changed is that "reliable" now competes with "available" as the harder constraint to solve for. Enterprises and colocation operators evaluating sites today need to underwrite not just the delivered cost of power, but the realistic timeline to get it, the risk of capacity price escalation over a facility's operating life, and the durability of any incentive package against a backdrop of tightening grids.

At Site Selection Group, we know that navigating this market requires more than a spreadsheet of utility rates. It takes direct utility relationships, real-time visibility into interconnection queues and capacity markets, and the ability to underwrite power risk alongside land, incentives and construction costs as part of a single decision.

Strategic site selection isn't just about finding a site with power. It's about finding the right site, in the right market, with a realistic and defensible path to energization that will hold up over a project's full lifecycle. Our team works alongside hyperscale users, colocation operators, enterprise companies, and global investment firms to bring clarity to what has become one of the most consequential decisions in the field.

Data sources:
U.S. Energy Information Administration (Electric Power Industry Report, 2024; Short-Term Energy Outlook; Annual Energy Outlook 2026); Gartner (June 2026 data center electricity forecast); PJM Interconnection (2026 Long-Term Load Forecast, Cycle 1 interconnection results); ERCOT large-load interconnection queue data (April 2026)