NASHVILLE, Tenn. (WOKI / WVLT)— A new report from ThinkTennessee finds that Tennessee’s expanding data center industry is placing new demands on the electrical grid and may be contributing to higher power bills for residential customers in communities where the facilities are located.
The report, titled “Powering the Boom,” examined the impact of data center growth across Tennessee and found electricity usage in the Tennessee Valley region has increased more than 7.2 times over the past five years as new facilities have come online.
Researchers found that while electricity costs have risen in areas with data centers, the burden has not been shared equally among customers.
According to the report, residential customers in communities hosting data centers saw their average monthly power bills increase 3.2% between 2023 and 2024, reaching an average of $149 per month. During the same period, commercial customers — including data centers themselves — saw their overall electricity bills decline slightly. Statewide, the average power bill increased 1.3% over the same timeframe.
ThinkTennessee Research Director Chris Candelaria said the findings highlight challenges that could become more common as Tennessee continues attracting large-scale technology investments.
“Tennessee’s data center growth is arriving faster than the rules designed to manage that growth,” Candelaria said. “Our report isn’t saying whether data centers are good or bad. Instead, we’re trying to highlight the issues that communities and policymakers need to know about.”
Researchers say the impact is particularly noticeable in the areas where data centers are already operating.
“Residents are seeing these higher prices and that’s associated with where the data centers are located,” Candelaria said. “We know that the data centers are coming, and the report is really forecasting that this situation may play out in more places across the state.”
The report describes Tennessee as an emerging national hub for data centers, fueled by growing demand for cloud computing, artificial intelligence and digital storage. For roughly 15 years, the state’s electricity consumption remained relatively flat before beginning a sharp rise around 2020.
ThinkTennessee estimates that data centers operating, under construction or planned across the state represent approximately 2,177 megawatts of demand capacity — enough electricity to power more than 1.3 million homes for a year. Many of those projects are concentrated in the Knoxville, Nashville and Memphis regions.
The report also raises concerns about the electrical grid’s ability to handle continued growth. Researchers point to experiences in other states showing that excessive strain on power infrastructure can increase the risk of costly outages if adequate investments and planning are not made.
Those concerns have become part of ongoing discussions in Middle Tennessee, where residents have pushed back against some proposed data center projects. Opponents worry about impacts on neighborhoods, infrastructure and utility costs.
Candelaria said policy decisions being considered now — including zoning, utility planning and rate structures — will play a major role in determining whether Tennessee residents benefit from the industry’s growth or shoulder more of the costs.
He noted that data centers can also bring jobs, tax revenue and economic development opportunities, creating a need for balance between growth and protecting ratepayers.
ThinkTennessee plans to release a second installment of its “Powering the Boom” series that will focus on policy options aimed at managing future growth while limiting impacts on residential utility customers.
