I really like the idea that magic is like a nuclear energy that is powerful but can have dramatic consequences I have seen similar in previous games and it works well. I also like the dragon getting so powerful it is like a titan going after the town I hope they keep that too. If they keep the “magic styles” separated so they take different resources/buildings/character classes it would make it very difficult to become powerful in all different magics. I dunno if they want to get that in depth with magic classes or if players will be adding some with mods? Mages of any style would be difficult to acquire and they no longer do menial labor so it uses some population towards casters.
Demon magic - lots of people like demons they could have like a dark acolyte/demon summoning class. There could be matching dark altars, dark temple, buildings devoted to demons, they could demand treasure/gold or even high level boss demons could require humans to eat like Lord of the Pit from MTG. As the demon gets souls he can become more powerful until hes no longer controllable and could be a Titan or slash some rifts to the netherworld triggering nasty enemy encounters difficult to survive.
Necromancy - they could have a separate line of black arts devoted to undead maybe necromancer an even turning your little guy into a lich? You could have necromancy lair and have to build dark libraries. Maybe you need bodies of foes to raise up your army? If you go all out you could have an undead horde of skeletons,zombies,wraiths,vampires. Maybe you have to raise enough animals to keep the zombies fed or the more powerful undead like vampires or wraiths find the occasional peasant victim. If you don’t keep up with the growing upkeep of your undead army they could turn on your own town and cause a real mess. Both evil arts could make your humans not very happy morale wise.
Elemental magics - could be mages or archmages? You may need high quality libraries for you to search for knowledge maybe some sort of elemental magical building to tap into power sources? Spells could run off of some elemental system you need to gather/recharge. White Wolfs mage had a great negative system set up where humans aren’t meant to tap such power alone and if you use too many spells that are powerful they can backfire and have great negative impacts like lighting your own town on fire. Maybe the mages have a chance to go crazy or start powerful experiments that go awry such as summoning Titan elementals they cannot control.
Divine magics - Could go with one good god or a mythology style different ones. Priests may have to spend time praying, more powerful magic takes big fancy churches, maybe altars, maybe you have to provide food/animal sacrifices or even human to appease the god or gods? If they become unhappy or their priests get killed in battle they could punish with natural disasters, workers struck by lightning, sending down angels or maybe even a celestial titan to punish them.
Maybe that many magic styles is too grandiose? I kept it pretty broad strokes and modifiable I know from playing D+D people have their favorite type of caster and following with the theme of magic is powerful but it has dangers I tried to make each demise of your town unique that whatever you are going for. I saw a few posts similar related about religion and spells and necroman