EU electricity prices averaged over twice U.S. levels and nearly 50% above those in China in 2025 , the International Energy Agency reported earlier this year. Then came the Iran war. Now Europe faces a second energy crisis in four years, and this time the casualty list includes something the continent can't afford to lose: its artificial intelligence ambitions.
The cost of securing data center capacity in Europe's five largest markets is set to rise by 12% in 2026 , according to CBRE. That's on top of electricity prices that already make the continent uncompetitive. "If you're making energy-intensive investments, then you're going to go to where the cheapest energy is," Olivier Darmouni, an associate professor at HEC Paris, told reporters Tuesday. "If I were making the next $7 billion data center, it would be in the U.S. or China."
The math is brutal. Data centers now consume 2% of the world's electricity, up from 1.7% in 2024 , per the International Data Center Authority. The largest technology companies' capital expenditure exceeded $400 billion in 2025 and is expected to jump by another 75% in 2026 — now larger than global investment in oil and natural gas production , the IEA noted. Almost none of that is heading to Europe.
Can Europe Compete Without Fixing the Grid?
The problem isn't just price. It's physics. In established European and North American hubs, the average wait time for a new large-scale grid connection is now between seven and 10 years , according to Brookings Institution research. Grid connections can take up to a decade in some European markets , the World Economic Forum confirmed. Compare that to deployment cycles under 18 months in the data center industry.
The scale of U.S. data center development compared to Europe "is like 1 to 100," Darmouni said. "Europe is really, really behind." The numbers bear him out. Europe has produced just three foundation AI models against the U.S.'s 40 and China's 15 , per World Economic Forum analysis. U.S. hyperscalers control nearly 70% of the European cloud market .
Wood Mackenzie's Chris Seiple identified three barriers: "One is the cost of energy, two is the geographic location of the companies developing data centers, and three is the speed to market — the amount of time it takes to build the infrastructure and get connected," he told CNBC. These "make Europe a little bit more challenging to do data center development."
Not all of Europe is equally disadvantaged. The Nordic markets and France, where electricity costs are lower thanks to hydro, renewables, and nuclear power, are emerging as relative winners , OilPrice.com reported. But the FLAPD markets — Frankfurt, London, Amsterdam, Paris, and Dublin — face acute constraints.
Why Is the U.S. Asking Europe to Delay Its Methane Rules?
Just as Europe's energy costs spike, a regulatory fight is freezing new gas contracts. American LNG suppliers want the EU to push back enforcement of its methane emissions rules until at least 2028, with Charlie Riedl of the Natural Gas Supply Association saying Tuesday that some U.S. companies have told commercial teams not to sign long-term contracts with European buyers until there is more clarity , OilPrice.com reported.
The timing is terrible. The United States became Europe's largest LNG supplier after Russia's invasion of Ukraine upended pipeline flows in 2022. Since then, Europe has leaned heavily on U.S. gas to plug a massive supply gap . Now, amid the Iran war and severe disruption to global LNG markets, Europe suddenly needs reliable gas suppliers even more .
Starting January 1, 2027, the regulation will require importers of LNG into the EU to prove their gas meets the same monitoring, reporting and verification standards imposed on EU producers — or face penalties , S&P Global explained. The problem? U.S. LNG export facilities source gas from a vast pipeline network, with supplies commingled from different production basins with varied methane intensities — making producer-level tracking nearly impossible.
U.S. Energy Secretary Chris Wright said in September: "If you want to move US natural gas into the European Union, you've got to change the legal regulatory framework. The regulations as they are written now, you would not see any more US LNG coming to Europe — none."
In 2024, the U.S. supplied the EU with about 36.6 million metric tons of LNG , according to S&P Global data.
European Commissioner for Energy Dan Jørgensen has ruled out withdrawing the bloc's methane regulations or rolling back climate rules to satisfy U.S. concerns, with many EU lawmakers warning that exemptions for U.S. producers would undermine European climate credibility , the German Marshall Fund noted.
