The rapid buildout of data centers across the United States is requiring vast amounts of new electricity to fuel the AI boom. Data centers currently use 4% to 5% of U.S. electricity, and that percentage is only expected to grow. Data center developers need to power up quickly to stay competitive, but utilities face challenges meeting their timelines. The magnitude of this new demand, combined with how quickly data centers’ needs are met, presents considerable risk for electric power companies.
To help investors navigate these risks with power companies in their portfolios, Ceres has released the Investor Guide to Addressing Electric Power Risk from Data Center Growth. The guide identifies seven key areas of risk as well as solutions that utilities can pursue to address them.
“The explosion of AI will be the defining test for the electric power sector in the next three to five years,” said Colette Lamontagne, senior director, electric power at Ceres. “Utilities that treat this moment as an opportunity for smarter, cleaner grid investment will create lasting value for shareholders and customers alike. Our guide doesn’t just identify the risks but provides solutions and key questions investors can ask utilities, and power producers to gauge how well each is managing the risks from data center expansion.”
Among the risks:
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regulatory and reputational risk from community affordability and environmental concerns
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missed value opportunities due to delays to upgrading and expanding current grid infrastructure
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cost recovery risk if grid infrastructure built for data centers is underutilized
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credit risk exposure from counterparties
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operational, regulatory, and reputational risk from both relying on water for generation in water-stressed areas and contributing to water scarcity and pollution
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impact on corporate carbon reduction goals
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impact on grid reliability and resiliency
Among the solutions:
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supply-side solutions such as building more renewable energy contract design that allows data centers to accept reduced power during grid emergencies and ensure everyday customers are protected from financial risk
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demand-side management that includes using distributed generation and demand response programs
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grid assets like energy storage, smart-grid technology, and virtual power plants
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planning to identify grid needs and ensure reliability and affordability
For example, one solution highlights investment in clean energy generation and transmission upgrades. New solar, wind, and storage resources can often come online faster than fossil-fuel plants, making them preferable for meeting data centers’ urgent demand for power. Investment in clean generation can also support power and technology companies in achieving their carbon reduction goals. For vertically integrated utilities that own generation, it carries the added benefit of creating long-term shareholder value.
The report also points to transmission as the single largest bottleneck to both serving data center load and building a cleaner grid. Accelerating and expanding the development of both new high voltage bulk transmission lines and upgrading existing transmission line capacity with advanced grid technologies is critical for utilities to provide large-scale and rapid access to clean energy for data center operations.
Data centers are urgently trying to build and procure power amid rising electricity demand and surging prices. This pace has clear implications and has fueled a national pushback, with local opposition backing bills in almost every state to halt or slow data center construction. Ceres is neither supporting or opposing these data centers, but as data centers proliferate in the U.S., it is crucial that new facilities are built in ways that are fair, affordable, efficient, and clean, while protecting the electric grid, local watersheds, community interests, residents, and local businesses and involving communities in the proposed build out.
This guide is part of Ceres’ broader body of work on sustainable data centers. Earlier this year, we published a resources page that includes our latest research and expert analysis, including our recently released Sustainable Solutions for Data Centers and Drained by Data: The Cumulative Impact of Data Centers on Regional Water Stress.
At Climate Week NYC 2026, Ceres will host an event, Powering the Digital Economy: Sustainable Data Centers, that will explore risks and opportunities and highlight practical approaches for scaling digital infrastructure responsibly and efficiently. The event is open to the media. Click here for more information.