Working Paper Revision
Processing Power: The Effect of Data Centers on Wholesale Electricity Markets
Abstract: Data centers are reversing two decades of flat U.S. electricity demand. We estimate their effect on wholesale electricity markets using an hourly, unit-level dispatch model in which 23 U.S. regional markets trade over capacity-constrained interfaces. Data centers raised wholesale prices by 6.9 percent nationally by 2025 and by 15.0 percent in northern Virginia; under our preferred scenario, the national effect reaches 12.3 percent by 2028. Trade spreads these effects to regions hosting few data centers. Roughly half the increase in generator payments is a transfer to inframarginal generators. We derive sufficient statistics for when load growth lowers retail rates.
JEL Classification: L94; P18; Q41; Q42; Q48;
https://doi.org/10.24149/wp2606r1
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Provider: Federal Reserve Bank of Dallas
Part of Series: Working Papers
Publication Date: 2026-10
Number: 2606
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- Working Paper Revision (2026-10) : You are here.
- Working Paper Original (2026-03-20) : Processing Power: The Effect of Data Centers on Wholesale Electricity Markets