President Donald Trump wants technology companies to “build, bring, or buy all of the energy needed for building and operating data centers, paying the full cost of their energy and infrastructure” to protect Americans from higher electricity prices.
His concern stems from projections that electricity demand from data centers could double or even triple by the end of the decade, while the grid is poorly positioned to absorb such rapid growth, as electricity projects often wait more than four years to connect to the grid.
To create new electricity supply quickly without raising costs for people, lawmakers should allow new utilities to generate and sell electricity directly to customers like data centers under voluntary contracts — without connecting to the highly regulated grid and with a light regulatory touch.
This approach would protect existing ratepayers from higher costs by placing the financial risks on the companies and utilities that voluntarily entered into these contracts. It would also speed up new power generation to meet rising demand and reduce stress on the traditional grid system.
At the same time, state lawmakers should repeal an outdated government distortion that forces the wrong type of power onto the grid in this AI revolution while also driving up electricity costs. In 29 states and the District of Columbia, renewable portfolio standards require a certain share of electricity to come from intermittent renewables, even though the new surge in demand is mainly coming from data centers that rely on around-the-clock power (currently, that’s mostly natural gas). They also raise energy costs for American households and businesses. Nine of the 10 states with the highest electricity prices have RPS regulations.
Unfortunately, in 2026, 92% of new electric generating capacity is projected to come from intermittent wind and solar, along with short-duration batteries. In contrast, 99% of the 11 gigawatts of planned retirement this year will come from reliable coal and natural gas power plants.
Federal lawmakers can also accelerate energy projects to power AI and lower electricity costs through permitting reform. The Standardizing Permitting and Expediting Economic Development Act, which passed in the House of Representatives in December 2025, offers an encouraging starting point to make the government’s environmental review process for projects more effective and faster. The bill’s reforms include requiring agencies to only evaluate the environmental effects directly connected to a project rather than speculative or remote ones, limiting judicial review, and establishing a quicker timeline to complete the review process.
More broadly speaking, permitting reform should be technology-neutral rather than favoring politically preferred renewables and transmission lines, and it should address multiple relevant statutes, including the Endangered Species Act, the National Environmental Policy Act, the Clean Water Act, and the Clean Air Act.
Lawmakers should also repeal all energy subsidies, including tax credits, loans, and loan guarantees, at every level of government. Lavish subsidies for wind and solar have incentivized the expansion of intermittent power, which conflicts with the new surge in demand that seeks constant electricity. Fundamentally, no energy source should be subsidized to satisfy political preferences at the expense of taxpayers.
What Washington shouldn’t do is impose a federal moratorium on data center construction, as Sen. Bernie Sanders (I-VT) and some state lawmakers proposed. While artificially suppressing electricity demand may temporarily restrain prices, such a misguided proposal would harm the United States in the long run. It would obstruct the infrastructure buildout needed to compete in the AI race, risking an economic and military edge for China over the U.S.
Instead of putting America behind, the appropriate response to rising electricity consumption from AI is not to restrict demand but to roll back tried-and-failed policies — subsidies, mandates, and overregulation — that hinder efforts to quickly expand reliable energy.
Nor should lawmakers require data centers to secure their own off-grid supply. Government should not single out one industry for special restrictions, thereby picking which American businesses deserve access to the grid more than others. The proper role of the government is to allow firms to decide how to obtain electricity, whether on or off the grid, with less red tape.
THE U.S. SHOULD HOLD THE KEYS TO THE STRAIT OF HORMUZ
Whether projections of electricity demand from AI data centers materialize or fall short, the principle does not change: The U.S. should pursue free-market reforms that allow reliable energy supply to expand quickly wherever and whenever demand arises. A responsive system would help keep electricity affordable for American households and ensure that domestic industries remain competitive.
Austin Gae is a policy analyst at Advancing American Freedom.