Throughout 2024, there was rising attention given to the need for the electric grid in the United States to be greatly expanded, as the current grid output faces significant challenges due to the increasing demand for energy driven by the rise of artificial intelligence (AI). The rapid buildout of data centers across the country is a primary catalyst. The roughly 2,700 data centers, mostly run by Amazon, Microsoft, Google, Meta and Apple, consumed more than 4% of all electricity in 2022, with that figure set to rise to 9% by 2030.
This surge in demand comes at a time when America’s power grid is aging after decades of underinvestment in new infrastructure. Just one example, a ChatGPT query uses nearly 10 times the electricity of a typical internet search. “It’s gonna take innovation to really think about how we are going to scale this faster to keep up with the pace of growth,” said Amanda Peterson Corio, global head of Google’s data center energy. According to McKinsey & Co., a single data center can use as much power as 80,000 U.S. homes. Peterson Corio said it will be a challenge to make that kind of electricity use sustainable.
According to Grid Strategies, the projected growth in electricity demand for AI-related activities is expected to increase by 38 gigawatts, which is enough to power approximately 12.7 million homes. The nine-year projected growth forecast for North America has essentially doubled from where it stood last year, as companies begin construction on AI-hosting facilities that make the demands of traditional data centers look miniscule. “The U.S. electric grid is not prepared for significant load growth,” Grid Strategies warned.
Google and the other hyperscalers are investing heavily in sourcing power to provide the juice needed to meet the growing demand while also reducing emissions. Aside from wind and solar projects, there is growing interest in building geothermal power plants and nuclear power plants, the latter taking considerably longer to bring online. It can take 10 years or more to activate a new nuclear power plant compared to roughly three to five years to activate a geothermal plant.
Tapping into the Earth’s natural heat stored below the Earth’s surface has many benefits that make for a viable option to coal and gas-fired plants, but, again, the utility industry finds itself suddenly behind the curve.
The surge in future demand for electricity caught most long-term forecasters off guard, as the nation’s utilities up their projections for power output. Georgia Power, which is the chief energy provider for that state, recently had to increase its projected winter megawatt demand by as much as 38%. That’s, in part, due to the state’s incentive policy for computer operations, something officials are now rethinking. Meanwhile, Portland General Electric in Oregon recently doubled its five-year forecast for new electricity demand.
This emerging energy crunch makes for a hugely attractive investment theme for 2025 and beyond. The power plant engineering and construction market is on solid footing, with tremendous upside revenue and profit potential. Whether the building of natural gas, coal, nuclear, solar, wind or geothermal power infrastructure is selected by America’s utility companies, the engineering and construction providers are set to enjoy a secular bull market for the next five to 10 years.
With the power plant engineering and construction sector, there are roughly a dozen pure plays that are publicly traded, making for an easy short list to work with. With all the uncertainty going outside the U.S. borders involving wars, government leadership upheaval, volatile currencies, economic contraction in Europe and China and the new administration’s agenda regarding trade deals and tariffs, it argues well that investors can lean into the domestic electric grid infrastructure theme with confidence as well as sleep well at night weighting in one’s portfolio.
The U.S. needs abundant amounts of additional electricity and those companies that build out the grid should thrive in 2025.
