Think tank’s report examines how data center-driven demand is reshaping Tennessee’s energy landscape – and why acting now can better protect ratepayers
NASHVILLE – After more than a decade of flat or declining electricity consumption, Tennessee is experiencing its first sustained surge in energy demand, driven in part by a rapid influx of data centers. According to a new research report from nonpartisan think tank ThinkTennessee, data center electricity consumption in the Tennessee Valley region grew sevenfold between 2020 and 2025, reaching 8.3 million MWh – enough to power more than 661,000 homes.
The report examines how data center growth is transforming the state’s energy landscape, from electricity demand to affordability challenges. Tennessee now accounts for 16.7% of active data center construction capacity among emerging markets, and the pipeline of demand is already five times TVA’s current data center load.
According to the analysis, households are experiencing the largest increase in electricity costs. In areas of Tennessee that host data centers, residential electric bills rose 3.2% between 2023 and 2024, while commercial customers in those same areas saw bills decrease by 0.2%. Regional forecasts point to a larger trend: residential electricity prices in the East South Central region are projected to rise 5.1% by 2027 even as residential consumption growth lags far behind commercial consumption.
The report also flags grid reliability as a growing concern, which had already been a challenge in Tennessee. During 2026’s Winter Storm Fern, Tennessee led the nation in customers who lost power – 345,000 in total – with outages for some customers lasting up to nine days. Even without major weather events, Tennessee ranks near the bottom nationally on reliability metrics. A single hour of unserved electricity translates to an average of $35,685 in lost economic activity. Data centers in Virginia and Texas have already triggered emergency grid interventions when large loads abruptly disconnected.
“Data centers are very quickly changing the energy needs of our state,” said Erin Hafkenschiel, president of ThinkTennessee. “And the decisions made now about planning, pricing, and infrastructure will determine who bears the costs of this growth. If we don’t get it right, the potential risks to household energy costs might outweigh the positive economic growth impacts.
The research report is the first installment in a two-part series. Part II will outline policy strategies available to Tennessee to capture the economic benefits of data center growth while protecting ratepayers and ensuring a more resilient grid. The full report, Powering the Boom: Data Centers and What They Mean for Tennessee’s Energy Future, is available at thinktennessee.org/research/environment-energy.
