Europe aims to become a leader in artificial intelligence (AI), but must first catch up with the United States and China. A central part of the strategy is expanding computing capacity through new data centres and other critical infrastructure. Experts warn that rising and uneven electricity prices across Europe could undermine these investments.
Why data‑centre projects are particularly vulnerable
Data centres consume large amounts of power, so investment decisions are highly sensitive to electricity prices. Michael Brown, global investment strategist at Franklin Templeton, told CNBC: “If you’re doing energy‑intensive investments, you go where the power is cheapest. If I were to build the next $7 billion data centre, it would be in the United States or China.”
Olivier Darmouni, a lecturer at HEC Paris specialising in energy transitions, found that rapid growth of data centres can raise regional electricity costs by 20–40 percent in areas such as Texas and Virginia in the United States, and Slough in the United Kingdom and Paris in France.
Numbers and comparisons
According to the International Energy Agency (IEA), prices for energy‑intensive industries in Europe were on average roughly twice as high last year as in the United States, and about 50 percent higher than in China and India. In May, average electricity prices were $111.65 per megawatt‑hour in the United Kingdom, $88.97 in Germany, $44.19 in France and $28 in the United States, per the IEA.
The International Data Center Authority (IDCA) reported on Wednesday that data centres now account for about 2 percent of global electricity consumption. The IDCA also notes that community and political opposition typically rises when data‑centre consumption exceeds 5 percent of a country’s total electricity use. The United States is approaching a 6 percent threshold, the United Kingdom is at 5.8 percent, and Singapore is at 19.5 percent.
Reasons for Europe’s lag and the consequences
Chris Seiple, vice president for energy and renewables at Wood Mackenzie, told CNBC there are three main reasons Europe trails in data‑centre development: energy costs, the geographic location of companies building data centres, and the speed of market entry — specifically the time needed to build infrastructure and connect to the grid.
Darmouni summed up Europe’s current data‑centre volume as roughly a 1 to 100 ratio compared with the United States. That imbalance risks pushing investments toward lower‑cost energy regions within or outside Europe, creating winners and losers. Vladimir Prodanovic, senior programme manager at Nvidia, said at an April conference in Denmark that “Central Europe has already lost the game,” citing high electricity costs in countries such as Germany and the United Kingdom.
Darmouni also warned that future price discrimination in AI services is likely, since the marginal cost of providing many AI services is linked to electricity prices.
Winners and losers within Europe
Scandinavian countries and France are frequently mentioned as better‑placed to attract AI investment because of lower electricity prices and a diversified energy mix. Vili Lehdonvirta, a professor at the Oxford Internet Institute, pointed out that Finland has experienced negative electricity prices on some winter days—meaning suppliers paid users to consume power.
Even regions once considered ideal for data centres are rethinking expansion as grid capacity limits emerge. Denmark has suspended new grid connections after incoming demand far exceeded the country’s current electricity system capacity, putting a brake on what had been a preferred data‑centre destination.
Policy implications: integration and energy strategy
Darmouni argues that Europe needs greater cross‑border integration of transmission networks, generation and storage to move toward more uniform energy prices. Geographic factors make integration harder in places such as the United Kingdom, Scandinavia, the Iberian Peninsula and Italy, whereas France and Germany are relatively more integrated because of neighboring connections.
Experts stress that stabilising power systems is essential not only for affordability and inflation control, but also for the competitiveness of European companies and the continent’s technological ambitions in AI.
(Synthesis based on reporting in CNBC and findings cited by the International Data Center Authority.)
