For the first time in decades, the US power industry is set to experience significant electricity demand growth, driven by the rise of data centers, a resurgence in manufacturing, and greater electrification in transport and heating.
According to Wood Mackenzie’s latest Horizons report, “Gridlock: the demand dilemma facing the US power industry,” electricity demand is expected to grow between 4 percent and 15 percent through 2029, with individual utilities facing even steeper increases.
Data centers, artificial intelligence, and energy-intensive manufacturing, including battery, solar wafer, and semiconductor production, are leading the surge. A projected 25 GW of new data center capacity and 15,000 MW of manufacturing demand will heavily strain the grid. Electric vehicles and electrolysis systems are also contributing to this demand growth.
- Data Centers and Artificial Intelligence (AI): The rapid expansion of data centers and the AI industry has become one of the largest contributors to increased power demand. Since January 2023, 51 GW of new data center capacity has been announced, and Wood Mackenzie forecasts a mid-range growth of 15% annually over the next five years. This equates to about 25 GW of new capacity needed to power these data-driven industries.
- Resurgence in US Manufacturing: Energy-intensive manufacturing is making a comeback in the US, particularly in sectors like battery production, solar wafer and cell manufacturing, and semiconductors. These industries are expected to add up to 15,000 MW of demand in the next few years, putting further pressure on the grid.
- Electrification of Transport and Heating: The broader push toward electrifying the economy, especially with the growth of electric vehicles (EVs) and electrolysers for hydrogen production, will be another major driver. These emerging technologies could add an additional 7,000 MW of demand by 2030.
This rising demand presents major challenges for utility companies, which face capacity constraints from aging infrastructure, coal plant retirements, and bottlenecks in transmission and permitting. Renewable energy projects, while expanding, are struggling to keep pace with the required growth, raising concerns over the power sector’s ability to meet decarbonization goals.
Chris Seiple, Vice Chairman of Power and Renewables at Wood Mackenzie, warns that electricity prices could rise as utilities and regulators scramble to meet demand. Seiple compares the current situation to the surge in demand during World War II, emphasizing the need for a coordinated national effort to address these challenges and secure future energy supply.