Are Data Centers Worth the Energy Cost?

When the CEO of one of New England's largest utilities states that data centers offer "no value" to any customer and will only drive up energy prices, that's not a throwaway comment. That's a signal.

Eversource Energy CEO Joe Nolan didn't mince words: "It's only going to drive up the price of energy." For an industry that has spent years positioning AI infrastructure as an unambiguous economic win, that kind of blunt pushback from a major grid operator deserves serious attention.

The Load That Changes Everything

Data centers aren't like other commercial electricity customers. A big-box retailer draws predictable, modest load. A manufacturing plant has seasonal rhythms. A hyperscale data center — the kind being built to power AI model training and cloud computing — can consume anywhere from 20 MW to 500 MW continuously, 24 hours a day, 365 days a year, with almost no tolerance for interruption.

That distinction matters enormously for how utilities plan their grids. When a utility like Eversource builds out transmission infrastructure, it's sizing transformers, substations, and interconnection capacity around a projected load mix. A single large data center campus can blow past those projections in ways that force expensive, years-long grid upgrades — and someone has to pay for them.

The entity that typically pays isn't the data center. It's every other customer on the rate base.

This is the mechanism Nolan is pointing to. Infrastructure development to accommodate a new industrial-scale electricity consumer gets socialized across all ratepayers — residential, commercial, industrial — whether they benefit from that data center's presence or not.

Eversource's Stance Is Unusual, But Not Irrational

Utilities don't often pick public fights with large commercial customers. Load growth is generally good news for a regulated utility: more kilowatt-hours sold, more potential capital investment to earn a return on, and more justification for rate increases. So when Nolan goes on record calling data centers a net negative, it reflects something real happening inside Eversource's planning models.

New England's grid situation is particularly acute. The region is already navigating the retirement of fossil fuel generation, constrained transmission capacity, and some of the highest electricity rates in the continental United States. Massachusetts residential customers already pay among the steepest per-kilowatt-hour rates in the country — hovering well above the national average of around 16 cents per kWh.

Layering massive new load onto a grid under that kind of strain doesn't just push prices at the margin. It can trigger cascading infrastructure investment requirements that take a decade to resolve and cost billions.

For infrastructure developers and investors evaluating data center siting decisions, the regulatory and utility relationship isn't a formality — it's one of the most consequential variables in the deal.

Nolan's comment is a preview of what that relationship can look like when a utility decides the math doesn't work in its customers' favor.

How Data Centers Actually Move Energy Prices

The mechanism is straightforward, even if the politics around it are not.

Data centers drive energy pricing through two primary channels. First, raw demand growth. When large loads come online faster than generation capacity can be added, wholesale electricity prices rise. The PJM interconnection — which covers the Mid-Atlantic and parts of the Midwest — has already flagged data center proliferation in Northern Virginia as a significant factor in its capacity market price spikes. Auction clearing prices in some PJM zones jumped dramatically in recent capacity auctions, driven in part by the sheer concentration of data center load in the region.

Second, transmission and distribution infrastructure costs. This is the slower-moving but arguably more durable impact. When a utility has to build new substations, upgrade transmission lines, or add interconnection capacity to serve a data center campus, those capital expenditures go into the rate base. The return on that investment is paid by ratepayers — often over 20 to 30 years.

A 100 MW data center requiring $200 million in grid upgrades creates a cost allocation problem. The data center may negotiate a direct interconnection agreement that limits its share of those costs. The remainder gets distributed across the broader customer base. Multiply that by dozens of data center projects across a single utility's territory, and the arithmetic becomes uncomfortable fast.

The Hidden Costs Nobody Advertises

The economic case made by data center developers to local governments and utilities typically emphasizes jobs, tax revenue, and regional competitiveness. Those benefits are real, but they're frequently overstated and poorly distributed.

Data centers are not labor-intensive operations. A facility that draws 200 MW of power — roughly equivalent to the residential load of a mid-sized city — might directly employ 50 to 100 people once it's operational. The construction phase brings temporary jobs, but the ongoing economic multiplier is modest compared to other industrial users of similar scale.

Meanwhile, the environmental cost is becoming harder to ignore. Cooling a data center at scale requires either significant water consumption — millions of gallons annually in some configurations — or energy-intensive air cooling systems that add to the facility's already massive electricity draw. In regions where the grid still runs substantially on fossil fuels, that electricity demand has a direct carbon footprint that doesn't disappear because the data center operator signs a renewable energy credit agreement.

The gap between a data center's advertised green credentials and its actual grid impact is one of the more consequential disconnects in infrastructure development right now.

Renewable energy credits don't generate electrons on demand. A data center drawing power at 3 AM in January from a grid running on natural gas is running on natural gas, regardless of what certificates are sitting in someone's account.

What Developers and Investors Should Take From This

Nolan's comment isn't an argument against data centers as an asset class. It's a warning about where the bodies are buried in the business model — and who ends up paying for them.

For developers, the practical implication is that utility relations and grid interconnection strategy need to be treated as first-tier concerns, not permitting afterthoughts. Siting a data center in a region with constrained transmission, high existing rates, and a utility leadership that views large load additions as ratepayer burdens is a recipe for expensive delays, hostile regulatory proceedings, and community opposition that compounds both.

Some developers are responding by co-locating data centers with dedicated generation — on-site solar paired with battery storage, or direct access to gas peaker plants — to reduce their dependence on the distribution grid and their exposure to the cost-allocation arguments Nolan is making. It's more capital-intensive upfront, but it insulates the project from the political and regulatory friction that comes with being a visible driver of rate increases.

There's also a longer-term structural question that the industry hasn't fully grappled with: as AI infrastructure build-out accelerates and data center load growth continues, the utility pushback visible in New England today is going to appear in more markets. Grid operators and state utility commissions are watching what's happening in Northern Virginia and asking hard questions about whether they want the same dynamic in their territory.

The data center developers who thrive in that environment won't just be the ones with the best access to cheap power — they'll be the ones who've figured out how to make the grid relationship work for everyone, not just themselves.

That's a harder problem than finding land and signing an interconnection agreement. But it's the problem that actually determines whether a project gets built, stays online, and generates returns over a 20-year horizon.

The utilities are starting to say the quiet part loud. Smart capital is already listening.

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