The second energy crisis in four years is further eroding Europe’s industrial competitiveness as energy costs are spiking again and undermining the European ambition to compete with the United States and China to attract AI and data center developments.Energy costs in Europe are so much higher than in the U.S. or Asia, and the grid stability is so fragile and in dire need of modernization and upgrades that many European countries are out of the competition for hosting new data/AI centers. In addition, Europe’s already congested grid means new connections could take up to 10 years in some places to hook up to the grid. Ten years is a millennium in the AI world, where advances are measured in days.Europe’s Energy Costs SurgeEurope started losing competitiveness as early as in 2022, when the energy crisis following the Russian invasion of Ukraine hiked gas and power costs. After two years of relative stability in prices – still at levels much higher than before the crisis – the new energy crisis is raising European energy costs again.The energy-intensive industries in Europe are once again hamstrung by the spike in gas and electricity prices. Developers of energy-intensive data centers and AI infrastructure are looking at power costs and inflationary pressures, as well as geography, when they pick areas to position their new developments. And Europe is rarely the first choice.Electricity prices are going up globally, due to the return to demand in developed economies after years of stagnation, but the prices in Europe exceed those in the U.S. or China, by a mile.Related: Equinor and Eneco Sign New Long-Term Gas Supply DealLast year, before any indication that the Strait of Hormuz could be closed for months, electricity prices for energy?intensive industries in the European Union remained elevated, the International Energy Agency (IEA) said in its annual Electricity 2026 report earlier this year.EU electricity prices again averaged over twice U.S. levels and nearly 50% above those in China, similar to 2024, adding competitive pressure to the bloc’s energy?intensive industries, the IEA said weeks before the Iran war began.The average EU wholesale price in 2025 was up by some 10% year over year to about $95/MWh, in line with the 9% increase in the Title Transfer Facility (TTF) natural gas price at the trading hub in the Netherlands. Average EU wholesale electricity price remained the highest among the markets the IEA analyzed in 2025 – roughly twice that of the United States and India, and markedly above levels in Australia (65% higher) and Japan (25% higher). Higher gas prices in Europe put upward pressure on power futures in 2025.Power prices spiked again this year, after the Middle East crisis and the sudden disappearance of about 20% of global LNG flows led to another major surge in gas and electricity prices in Europe.The European Commission is scrambling to implement plans to further de-couple power prices from gas prices. But the reality amid the worst oil and gas market disruption ever is that Europe’s power prices are closely connected to the gas prices and despite the surge in renewables, wholesale power prices remain much higher compared to the U.S. and China—the key competitors in the AI race.US Leads Global Data Center Power Demand Currently, data centers consume about 2% of the world’s electricity, up from 1.7% in 2024 and 1.9% in the middle of 2025, the International Data Center Authority (IDCA) said in a report earlier this month.The U.S. is by far the world’s largest data center location, with 43% of global consumption. Data centers consume about 6% of the nation’s electricity.The U.S. is followed by China, at 8.5 GW data centers consuming 0.8 percent of the nation’s electricity. Germany, the EU’s biggest economy, follows at 5.5 GW, but consumes a massive 9.5% of the nation’s electricity.Higher energy prices in Germany, as well as in the UK, could discourage new data center developers.Europe is losing the AI race on three key fronts, Chris Seiple, vice chairman of Wood Mackenzie’s power and renewables division, told CNBC.“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.”Moreover, the cost of securing data center capacity in Europe’s five largest markets – the so-called FLAPD markets (Frankfurt, London, Amsterdam, Dublin and Paris) – is set to jump by an average of 12% in 2026, driven by supply constraints and increasing development costs, new research from CBRE showed last week.“Larger, more technically complex data centres require advanced cooling systems and higher-specification infrastructure, which significantly increases build costs,” commented Kevin Restivo, Director, European Data Centre Research at CBRE.“As demand for these environments grows and availability tightens, providers are increasingly passing these costs on to customers.”Not all of Europe is equal in terms of access to power markets and energy costs. Analysts note the relative advantage of the Nordic markets – Norway, Sweden, and Denmark – as well as France, where electricity costs are not as high as in the rest of Europe. The Nordics have large hydropower and other renewable energy electricity generation, while France is a European leader in nuclear power generation. That means that gas plays little to no role in the power system and pricing mechanisms, largely insulating these markets from spikes in fossil fuel prices.By Tsvetana Paraskova for Oilprice.comMore Top Reads From Oilprice.comNigeria Needs New Export Markets as UAE's Exit Rattles OPECGermany Launches Formal Sale Process for UniperIran’s Floating Oil Stockpile Jumps 65% as U.S. Naval Blockade Bites