US Utilities Plan Massive Fossil Fuel Expansion to Meet AI Data Center Demand, Sierra Club Finds

Technology companies and utility executives have frequently framed the artificial intelligence boom as a catalyst for a modernized, clean-energy grid, arguing that corporate sustainability goals will drive renewable development. But according to a comprehensive review of long-term utility planning released on September 22, 2026, the nation's largest power providers are doing the opposite: responding to the data center surge by planning a massive expansion of natural gas and extending the life of aging coal plants.[4]

The Sierra Club’s 2026 "Dirty Truth Report" analyzed the integrated resource plans of 76 major U.S. electric utilities. The findings show that these companies, which collectively operate more than half of the country's fossil-fuel generation, are planning to build 140 gigawatts of new natural gas capacity by 2035. This represents the largest planned fossil-fuel expansion recorded in the report's six-year history, directly contradicting earlier industry commitments to phase out carbon-intensive infrastructure.[1][4]

Across the evaluated companies, only 25% of existing coal-fired generation is scheduled for retirement by 2030. This figure represents a steady decline in retirement ambitions, dropping from 35% in 2023, 30% in 2024, and 29% in 2025. Utilities are simultaneously scaling back their renewable energy targets. The report found that planned wind and solar projects will only replace 25% of existing fossil fuel generation and meet projected load growth through 2035, a decrease from 32% in 2025.[1][4]

This marks the first time since 2021 that the volume of planned clean energy has decreased year-over-year. The aggregate score for the 76 utilities in the Sierra Club's assessment fell to 7 out of 100, an eight-point drop from the previous year and the lowest collective grade ever recorded by the organization. More than 40% of the utilities studied have actively backtracked on their climate goals over the past two years.[1][4]

The mechanism driving this shift is unprecedented load growth, primarily from hyperscale data centers built to train and run AI models. While data centers currently consume roughly 4.4% of U.S. electricity, that share is projected to climb rapidly. In specific markets, the concentration is starker; NV Energy in Nevada, for example, projects that data centers will account for 64% of its total electricity sales by 2046.[4]

To meet these massive, concentrated load requests, utilities are turning to the dispatchable generation they know best. In Wisconsin, for example, We Energies has delayed the retirement of its Oak Creek coal plant for the third time and is planning to build 1.2 gigawatts of new gas power capacity by 2035, increasing its existing gas capacity by nearly 50%. Similar expansions are occurring across the Midwest and Mid-Atlantic, where utilities cite the need for firm power that intermittent renewables cannot guarantee without extensive battery storage.

This infrastructure buildout flows directly into consumer electricity rates. From January 2025 through August 2026, U.S. utilities sought or received permission to raise rates by a combined $101 billion. Average household electricity costs increased by approximately $116 in 2025, rising at more than twice the overall rate of inflation. Public utility commissions typically approve rate increases that spread these infrastructure costs across all customer classes, meaning residential ratepayers absorb a significant portion of the grid upgrades required for data centers.[3]

Utility trade groups maintain that these investments are necessary to maintain grid stability. Industry representatives argue that natural gas is currently the only viable option to provide the immediate, large-scale, round-the-clock power required by tech companies, especially as transportation and building electrification simultaneously increase baseline demand. They point out that failing to meet this demand could lead to rolling blackouts or stifle regional economic development.[3][4]

Consumer advocates warn that existing ratepayers are absorbing the financial risk of this expansion. “Utilities' failure to plan, combined with unprecedented load growth, is hitting us,” said Emma Pabst, a Sierra Club Beyond Coal campaign manager and co-author of the report. She noted that the consequences will be “more extreme weather, higher electric bills, higher insurance premiums, and more disaster costs passed on to families.” If the AI investment wave cools, residential and small business customers could be left paying off stranded assets—multi-billion-dollar gas plants with 40-year lifespans.[1][4]

The data exposes a widening gap in the U.S. energy transition: the digital economy's demand for power is currently outpacing the grid's ability to supply it without reverting to carbon-intensive fuels. As state regulators review the next wave of integrated resource plans, the physical utility infrastructure being built directly contradicts corporate clean-energy commitments.[1][4]