US data center power demand to hit 194 GW by 2035, consuming 20% of grid

BloombergNEF projects US data centers will consume 194 GW of electricity by 2035, or about 20% of the nation's total supply — an 83% jump from its December forecast that shows AI infrastructure is outpacing grid capacity.

"Every fifth kilowatt-hour generated in the US will flow into a data center," Lloyd Arnold, a BloombergNEF analyst and lead author of the report, said.

Data centers currently account for 5.9% of US electricity consumption, a share that will roughly double to 12% by 2030 before reaching 20% by 2035, BNEF estimates. The 194 GW projection — equivalent to the output of nearly 200 nuclear reactors — reflects an expanding pipeline of AI facilities that has forced analysts to repeatedly raise their forecasts. Even maintaining the historical peak interconnection rate of 71 GW per year, the grid will face a 19 GW supply-demand gap by 2035 under baseline scenarios, BNEF found.

The supply crunch is already reshaping energy markets and infrastructure investment. Bank of America analysts estimate the US needs more than 230 GW of new generating capacity over the next five years, with data centers alone adding roughly 125 GW of load. Yet regulated utilities are on track to add only about 93 GW of accredited supply, leaving a gap of more than 100 GW, BofA said in a July report. Large gas turbines are largely sold out through 2030, pushing developers toward onsite gas engines, battery storage, and extended coal plant operations.

A 19 GW Gap Tests Grid Capacity

The strain will be most acute in regions where data center development is concentrated. The PJM Interconnection, which covers 13 states including the Northern Virginia "data center alley," and the Texas ERCOT grid are expected to see data center power consumption far exceed the national average by 2035, BNEF said. Local governments in several states have imposed moratoriums on new large-scale data centers, citing energy consumption and environmental concerns — a political headwind that could slow the pace of new construction and affect project timelines for listed developers including Equinix, Digital Realty, and CyrusOne.

The interconnection bottleneck has also pushed data center operators toward behind-the-meter generation. More than 7.5 GW of data center projects with onsite power are already under construction, with another 60 GW-plus in pre-construction, BofA found. Rather than operating entirely off grid, these facilities combine self-generation with traditional grid connections to improve reliability and shorten project timelines.

Virtual Power Plants Emerge as a Stopgap

Utilities and technology companies are increasingly turning to virtual power plants as a faster, cheaper alternative to building new generation. VPPs aggregate distributed energy resources such as home batteries, electric vehicles, and smart thermostats, managing tens of thousands of devices in unison to maximize available power. US VPP capacity rose 13.7% in 2025 to 37.5 GW, according to Wood Mackenzie, with California, Texas, New York, and Massachusetts leading deployments.

Google in May signed a three-year agreement with Voltus to create a 100 MW VPP by aggregating batteries and smart thermostats. The following month, Sunrun, Tesla, and Renew Home announced plans for a 16 GW VPP that will provide energy to tech giants and utilities. Dominion Energy is developing a 450 MW VPP pilot program under legislation approved in Virginia last year. A 2023 Brattle Group report found that 400 MW of VPP resource adequacy costs $2 million annually, compared with $43 million for equivalent new gas plants and grid upgrades — a cost advantage that is accelerating enrollment.

For investors, the implications cut across sectors. Power utilities including Dominion, Duke Energy, and Southern Co. face massive capital expenditure requirements that could pressure returns but also create pricing power for existing assets. Natural gas producers and equipment makers such as Caterpillar and Wärtsilä stand to benefit from the gas turbine supply crunch and rising demand for reciprocating engines. Battery storage companies including Fluence and Tesla's energy division have a structural demand tailwind as developers pair solar and storage to bridge interconnection timelines. The 19 GW supply gap BNEF identifies implies that power prices in PJM and ERCOT could rise materially before new capacity comes online, benefiting merchant generators and independent power producers while raising costs for hyperscalers such as Amazon, Microsoft, and Google that are racing to secure capacity.

This article is for informational purposes only and does not constitute investment advice.