EIA Forecast Growth in Fossil Fuel Electricity Generation due to Data Centers

According to the U.S. Energy Information Administration (EIA) Electricity demand has been rising steadily  after nearly two decades of remaining essentially flat. Between 2020 and 2025, U.S. electricity demand, as measured by net energy for load, grew about 1.7% annually compared with 0.1% annual growth between 2005 and 2019. EIA expects U.S. electricity use to grow by 1% this year and 3% in 2027. The driving factor behind this surge is increasing demand from data centers.

from EIA

In the Mid-Atlantic, the PJM Interconnection grid is facing "a capacity crunch of epic proportions" as data center demand grows by approximately 5 gigawatts (GW) annually through 2030. This surge is centered in Virginia’s "Data Center Alley" but is rapidly expanding into Maryland, Pennsylvania, and Ohio. Continued development of these “hyperscale” computing facilities and growth from expanded industrial use of electricity are likely to continue driving growth in U.S. electricity demand in the near term.

When EIA explored the potential impact of faster-than-expected electricity demand growth, on the forecast generating capacity the February 2026 Short-Term Energy Outlook (STEO) they identified growth in demand exceeding growth in generating capacity.

Using the latest forecasts published by grid EIA forecast that U.S. electricity load will increase by 1.9% in 2026 and 2.5% in 2027. The EIA projects annual load growth in ERCOT to average 10% between 2025 and 2027. Demand growth  in PJM is forecast to be more moderate. Demand in the PJM region is expected to grow by an average of 3% annually through 2027.

This demand growth is also expected to have an impact on prices. Wholesale prices at the ERCOT North hub are forecast to increase by 45% in 2026 and could reach an increase of 79% in 2027. In PJM where capacity pricing was capped,  the allowed rise could lead to retail price increases of over 15% (over the current approved increases) consumers. ERCOT manages the grid covering most of Texas, and PJM manages the grid covering all or part of 13 states (Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia) and Washington, DC.)

Grid managers are responsible for regulating the interconnection of new generating capacity and new large load customers to ensure that future electricity demand can be accommodated by the available supply of power. If demand were to grow faster than supply, the stresses on the grid would be evident in spikes in wholesale power prices or even periods of rolling blackouts or in Virginia times of the data centers stepping off the grid and operating on backup generators.

EIA focused on the potential for faster-than-expected growth in U.S. electricity demand in the near term along with the potential effects on electricity generation and prices. The results indicate that most regions can accommodate higher-than-expected electricity demand growth, but the modeled price effects in ERCOT and PJM highlight some of the challenges of load increases in the near term.

PJM region's growth is driven by massive "hyperscale" developments that require constant, high-density power.  Home to 35% of the world’s hyperscale data centers. Amazon (AWS) maintains the largest footprint in the region and continues to expand in Northern Virginia. Google and Meta also haver large-scale projects underway in Virginia.