Governor Strategies to Align Economic Development and Energy Planning

In June of 2025, the National Governors Association and McKinsey & Company, with support from the U.S. Department of Energy Office of Electricity, partnered to host the Experts Roundtable on Aligning State Economic Development and Energy Planning. This discussion-oriented forum convened state energy and economic development leaders alongside industry and NGO experts to explore both the causes and implications of load growth and the solutions that Governors can implement to ensure reliability and affordability while continuing to grow their economies.

Held at McKinsey & Company's Washington D.C. office, the event combined expert presentations, interactive discussions, and peer-to-peer exchanges focused on aligning the energy and economic development sectors. Those in attendance contributed to a series of discussions to answer the following questions:

1. Where are states seeing the greatest load growth and what is leading to that dynamic?
2. What challenges might new large loads pose to energy system stability and affordability?
3. What are the anticipated energy needs of new large loads like data centers and manufacturers?
4. How can Governors help their states reliably and affordably meet growing energy demand, including in the near term?
5. How can Governors support investments in energy systems that will attract new businesses to their states?
6. What are promising policy models that foster greater coordination between state energy and economic development leaders?

The event concluded with participants identifying a set of practical policy recommendations that Governors can implement to align economic development activities with the specific energy needs in their states.

Load Growth in Context and the Implications on Grid Infrastructure

US power demand is at an inflection point. After years of flat load growth, consumption is set to increase sharply by ~5,000 TWh through 2050, driven by data centers (~55% of growth), transportation electrification (~20%), and industrial / manufacturing reshoring (~25%). Overall, load is growing by approximately 2.8% per annum, nearly 4 times the rate from 2010 to 2020 (approximately 0.7% per annum).

According to the Department of Energy's Lawrence Berkeley National Laboratory, data centers alone consumed 4.4% of U.S. electricity in 2023. This consumption is projected to increase by 2028 to between 6.7 and 12% of total electricity used. These facilities can drive tax revenue and economic growth for states, but meeting new demand at this scale is a challenge that will require careful planning and early coordination.

This growth presents significant challenges for grid infrastructure, which will require new generation and transmission capacity, and which must adapt to meet increasing demand while maintaining reliability and affordability. Achieving the necessary grid build-out would require high levels of net new capital investment - at the tune of ~$4.9 trillion by 2040, 60% of which would focus on transmission and distribution infrastructure.

Summary of Findings

Through focused dialogue, key solutions were identified that Governors can take action on, discussed below under the following categories:

• Design an Energy System that Attracts Business - Governors can support policies that enable non-utilities to co-invest in or build transmission and generation, accelerate near-term deployment of technologies that expand system capacity, engage institutions to collate financing solutions, and streamline regulatory processes (e.g., permitting, environmental reviews).
• Ensure Reliability and Affordability Under Growing Load - Governors can support the development of scalable demand-side solutions, coordinate regionally for more holistic planning across state borders, and facilitate improved coordination across gas and electric systems to minimize total energy system costs to customers and mitigate stranded asset risk.
• Coordinate Energy and Economic Development Planning - Governors can create forward-looking plans to project economic growth, reduce information asymmetries, align economic development planning with energy planning, and require regular collaboration among energy and economic development entities.
• Alleviate Workforce and Supply Constraints to Facilitate Energy Build-Out - Governors can identify sector workforce shortages and develop educational programs, support apprenticeships, and identify and incentivize manufacturing for power grid and generator components.

A more detailed description of how Governors can implement these solutions is below.

Governor Solutions

Designing an Energy System that Attracts Business

Governors are taking action to enable or support development of new infrastructure, both public and private. Example tools include clarifying siting authority, fostering innovation of new technologies, and enabling long-term contracts or cost-recovery mechanisms that de-risk private capital.

Identify and support advanced transmission technologies that can be deployed and increase capacity in the near-term.

• Grid-enhancing technologies (GETs) can be a helpful way to build additional transmission capacity within existing infrastructure. Examples of Grid-Enhancing Technologies (GETs) include Dynamic Line Ratings (DLRs), which measure the real-time capacity of power lines so they can carry more electricity safely when conditions allow; Ambient-Adjusted Line Ratings (AARs), which adjust line capacity based on changes in air temperature; Topology Optimization, which uses software to find better ways to route electricity and reduce congestion on the grid; and Advanced Power Flow Controllers (APFCs), which help direct the flow of electricity to where it's needed most, improving both reliability and efficiency. States such as Indiana and New Mexico are requiring grid operators and planners to consider the costs and benefits of GETs in their resource planning processes. In certain cases, accelerated deployments of these tools can help unlock additional capacity and bridge longer-term resource buildout at a limited cost.
• Oregon's grid enhancing technology (GETs) initiative, primarily driven by legislation that requires electric utilities to implement technologies where cost effective that increase the capacity and efficiency of existing power lines instead of solely building new ones. In certain cases, accelerated deployments of these tools can help unlock additional capacity and bridge longer-term resource buildout at a limited cost. Importantly, GETs can often be constructed along existing rights of way and utilizing existing transmissions assets and corridors, offering a more economical and faster deployment than greenfield transmission, when possible.

Support policies that enable large load customers to directly support electric infrastructure buildout.

Energy infrastructure is traditionally built by a mix of utilities, private companies, and government financing. However, as the need for more generation increases due to data center demand, some states are creating mechanisms for large load customers to contribute directly to the buildout of energy infrastructure.

• Oregon encourages private companies to invest in their own clean energy projects, thereby reducing the burden on public utilities and households. The Protecting Oregonians with Energy Responsibility (POWER) Act was signed into law by Oregon Governor Tina Kotek in August 2025. This legislation sets up a special rate category so large users, such as data centers, can cover their own costs.
• The Indiana utility regulatory commission (IURC) approved a tariff that requires new large load customers to make long-term financial commitments proportional to their size to ensure that costs are not passed down to existing customers.
• Other concepts include thoughtful approaches to providing lower cost of service for data centers that operate with some degree of on-site or off-site demand flexibility. For instance, a data center could utilize changes in its own operations in times of grid stress, as required in Texas, to mitigate contribution to peak demand on the system, thereby lowering overall utility system capex requirements. The use of behind the meter generation and storage can be utilized as a grid asset for the same purpose. Emerging solutions, such as investment by a large load in aggregated off-site customer energy efficiency, demand side management, or electrification could serve as an alternative to traditional grid investments, potentially at lower cost, with the added benefit of direct support for community members and mitigation of rising utility costs.

Identify opportunities to streamline permitting and approval processes for energy infrastructure.

Streamlining durable permitting for sources of generation can help meet the needs of U.S. economic development and competitiveness. Many states are working to thoughtfully streamline processes while still ensuring appropriate levels of review over environmental and reliability impacts. Mechanisms that Governors can utilize to streamline permitting and approval processes include:

• Implement strict timelines for permit decisions: Ohio has proactively sought to support accelerated resource deployment by implementing a 90-day behind-the-meter (BTM) approval process to expedite the deployment of new energy solutions on existing industrially zoned land. This rapid deployment capability is particularly appealing to fast-moving businesses like data centers and manufacturing plants that require on-site resources.
• Identify opportunities for expedition and improvement within state regulatory processes: In 2025, Arizona Governor Katie Hobbs signed the 'Reducing Barriers to Delivering Affordable Energy for Arizona' Executive Order requiring that the Arizona State Land Department identifies ways to streamline processes to lease or sell land for energy infrastructure.
  • Arizona has established the 'Arizona Energy Promise Taskforce' to identify opportunities and policy frameworks to affordably grow infrastructure development while minimizing cumbersome regulatory processes through common sense reforms.

Ensuring Reliability and Affordability Under Growing Load

As states face rapidly growing electricity demand, maintaining the integrity and performance of the grid is essential. Growing load can exacerbate the stress on an already-strained electric grid, risking power outages or leading to higher costs to generate and deliver adequate power. The following strategies can support coordinated planning to mitigate those grid impacts and more strategically plan and site new load:

Support the development of industrial-scale demand-side solutions, such as demand-response and data center energy efficiency.

Demand response solutions and distributed energy resources (DERs) can be helpful in enhancing grid flexibility by allowing utilities and customers to curtail energy use when demand spikes. To support this development, Governors can encourage energy offices to work with utilities and independent system operators (ISOs) and regional transmission organizations (RTOs) to integrate demand response into resources adequacy and reliability planning. Governors can also advance the deployment of demand-side solutions by voicing support for legislation, fiscal policies, and programs that aid in the development of these resources.

• In 2024, New York Governor Kathy Hochul launched the "Grid of the Future Study" in which the Public Service Commission staff were directed to engage with stakeholders to develop a plan establishing targets for the deployment of flexible resources, such as virtual power plants.
• In 2025, Ohio Governor Mike DeWine signed H.B. No. 15 establishing a "mercantile customer self-power system." This enables behind-the-meter generation and storage facilities for large customers like data centers. This legislation may encourage the deployment of microgrids for industrial parks and clusters of large load customers.

Establish state transmission authority to facilitate build-out.

Insufficient transmission capacity can be a significant barrier to large load interconnection. To encourage proactive planning and build out of transmission, Governors can establish state transmission and siting authorities to review and authorize new projects.

• In 2021, Colorado Governor Jared Polis signed Senate Bill 21-072 into law which established the Colorado Electric Transmission Authority (CETA). Developed as an independent, political subdivision of the state, CETA was created to provide more tools to build transmission in Colorado to meet clean energy goals and reliability needs. Similar authorities exist in Idaho, New Mexico, and North Dakota.

Coordinate regionally for more holistic planning across state borders.

The electric grid is not limited to political boundaries, meaning generation and load can be balanced across wide geographic regions. Governors can coordinate with one another on joint regional initiatives to increase planning across state lines, allowing excess supply in one state to support demand in another, yielding economic benefits to both.

• An example of this regional coordination is the Mid-Continent Independent System Operator (MISO) Multi-Value Projects (MVPs). MISO's MVPs are regional transmission solutions that enhance reliability in the region and are eligible for regional cost sharing.
• Eleven out of thirteen Governors part of the PJM Interconnection (PJM) region signed a joint statement of intent to work towards the development of a PJM Governors' Collaborative to promote greater state and consumer representation in the governance and decision-making process of PJM. This bipartisan group of Governors has the goal to ensure affordable, safe, and reliable electricity for the region's residents and businesses.
• The six New England Governors coordinate through the New England States Committee on Electricity (NESCOE), a nonprofit entity, on regional electricity matters. Coordination through NESCOE has proved effective for regional energy planning.

Facilitate improved gas-electric coordination.

Improved coordination between the gas and electric sector can reduce the risk of gas supply shortfalls during periods of high demand or during cold weather events. Governors can strengthen planning across these silos by convening key energy players, like utility commissions, pipeline operators, electric utilities, regional transmission organizations (RTOs) and independent system operators (ISOs), to develop shared planning models. This could include a more robust integrated resource planning (IRP) process that looks across resources.

One new resources is the November 2025 Gas-Electric Alignment for Reliability Task Force report, released in November 2025.

• ISO-New England collaborates with the Northeast Gas Association on an Electric-Gas Operations Committee to promote greater reliability and coordination between the electric and natural gas systems in the region.
• In 2024, MISO, ISO-NE, PJM, and Southwest Power Pool (SPP) released a report on strategies for enhanced gas-electric coordination. The purpose of the report was to identify issues and inform solutions for state and federal policymakers to better coordinate the gas and electric sectors.

In November 2025, the National Association of Regulatory Utility Commissioners (NARUC) Gas-Electric Alignment for Reliability Task Force released a comprehensive report making recommendations across nine key areas to better align the gas and electric industries. Recommendations included expanding natural gas pipeline infrastructure, growing gas storage, deploying market tools to enhance performance supplier performance, and others.

Coordinating Energy Planning and Economic Development

Create forward-looking plans to project economic and rate growth, overlayed with current utility capacity.

Governors can support development of comprehensive models that take into account anticipated load growth, potential new industries, and existing infrastructure capabilities. With better load projections and data transparency, states can create forward-looking plans to project economic and load growth overlayed with grid carrying capacity.

• In Texas, Competitive Renewable Energy Zones ('CREZ') were used to accelerate development of transmission that connected low-cost wind power with load centers, supporting the state's overall economic growth and low-cost power.
• The State of Colorado called on multiple departments, including the Department of Economic Development, the Public Utilities Commission, and the State Energy Office to coordinate together on how to best advance beneficial electrification
• In Nevada, legislators took a multistep approach to encourage responsible growth for the state's natural gas infrastructure to meet growing demand across the state. A unanimous bill in 2015 authorized the state's natural gas utilities to expand consistent with economic development programs and subject to Commission approval. A subsequent unanimous bill in 2023 established a long-term planning process for the state's natural gas utilities ensuring proactive alignment, transparency, and oversight.

Reduce information asymmetries between utilities, customers/ developers, and the state.

Often, utilities, customers, developers, and state agencies operate with different sets of data, leading to misaligned expectations and planning inefficiencies. State and local decision-makers can lack a clear view of where private investment is happening, which hampers coordinated planning efforts. By encouraging improved data sharing and transparency, states can create a more cohesive planning environment. For example:

• AEP Ohio has published hosting-capacity heat maps, which can identify areas with excess power capacity and help prioritize regions for investment.
• In Michigan, Consumers Energy has developed a set of 'Power Ready Sites' that are available for interconnections.
• Duke Energy's Site Readiness Program exists to identify, assess, improve, and increase awareness of industrial sites across its seven state service territories in collaboration with state and regional development organizations.
• Working with third parties to centralize this information is another solution. SEPA's Database of Emerging Large-Load Tariffs (DELTa) helps track regulatory activity across the country, a useful tool for customers seeking to identify potential sites.

Require regular discussion and collaboration between energy and economic development entities in the state.

With the increased pace of new large load siting in some regions and the criticality of energy to support those new customers, economic development officials and energy officials are increasingly collaborating on an earlier and more regular basis. This can include adding economic development offices as core members or any energy planning team and bringing state energy leaders early into economic development discussions with new prospective companies.

• Colorado has established the 'Heat Beneath our Feet' initiatives through the Western Governors association, which seeks to explore geothermal as a potential energy source while creating jobs and economic growth in the region
• To better align economic development and energy planning regarding nuclear energy, Governors included economic development leaders on NGA's 2025 nuclear retreat planning teams.

Designate 'power-ready' industrial districts with pre-engineered substations, planned corridors, and standardized studies-paired with land-use/permitting templates to compress cycle times for large projects.

Many states are creating 'parks' to help integrate large new loads. Pre-planning for data centers through the development of energy/utility parks is an effective strategy to attract and accommodate large energy consumers. These parks are designed to provide the necessary infrastructure and resources to support data centers and other energy-intensive industries.

• A proposal for Colorado has started to view data center conversations as integral to energy planning, recognizing the broader implications of such decisions. By creating dedicated zones with pre-built infrastructure, states can streamline the process for businesses looking to establish data centers, thereby reducing the time and cost associated with site development.
• The Virginia Economic Development Partnership administers the VA Business Ready Sites Program (VBRSP) Grants which partners with localities, utilities, and state agencies to fund infrastructure improvements that build operations-ready sites for manufacturers ready to expand in the Commonwealth. In addition to developing project-ready sites, the VBRSP assembles permits and approvals to expedite the construction process.
• In 2025, West Virginia Governor Patrick Morrisey signed H.B. 2014 to spur the development of microgrids in the state. The bill incentivizes direct agreements between large load customers and utilities while protecting residential rate payers from incurring costs driven by commercial load growth.

Alleviate Workforce and Supply Constraints to Facilitate Energy Build-Out

As the need for more energy production grows, so does the need for skilled workers in the energy sector. Governors are taking action to address workforce needs and supply constraints in the energy sector through the following mechanisms:

Identify sector workforce shortages and develop state university programs accordingly.

By identifying gaps in the energy workforce and aligning state university programs accordingly, Governors can support both economic development and energy goals. States can work with workforce organizations and academic institutions, including public universities, community colleges, and trade schools to tailor curriculums, certifications, research initiatives, and organize education and training pathways around energy career clusters to ensure a robust and skilled workforce for emerging energy fields and strengthen in-state talent pipelines.

• Maryland Governor Wes Moore launched the Higher Education Clean Energy Grant Pilot Program in 2024. The competitive, state-wide program supports the integration of strategic energy planning into academic curricula at Maryland's higher education institutions to prepare students for careers in the clean energy sector.

Supporting work-based learning solutions.

Apprenticeships, pre-apprenticeships, and on-the-job training are useful tools to build a skilled and adaptable energy workforce. The youth apprenticeship model and career and technical education (CTE) can be utilized as a key pipeline into the energy workforce. By partnering with industry and educational institutions, Governors can create apprenticeship pathways that align with evolving energy technology and infrastructure needs.

• Montana Governor Greg Gianforte has been a strong leader in promoting apprenticeships to meet the state's workforce needs. To date in 2025, over 680 Montana businesses from across 100 industries, including energy, partnered with the Montana Department of Labor & Industry's Registered Apprenticeship Program. Active apprenticeships in Montana's energy sector include industrial maintenance mechanics, power plant operators, and powerline installers/repair. To encourage businesses to enroll in the program, Governor Gianforte proposed and implemented the Montana Trades Education Tax Credit (MTEC) in 2021, nearly doubling the reach of the credits in 2023.
• In 2023, former Washington Governor Inslee and the WA legislature passed the Clean Energy Service Workforce Programs bill (H.B. 1176). The legislation created a Clean Energy Technology Workforce Advisory Committee (CETWAC) to conduct research and form policy recommendations regarding clean energy technology workforce development within the state. The Advisory Committee's role is to gather business, labor, education training, and apprenticeship partners to anticipate and respond to clean energy workforce needs.

Incentivize manufacturing for power grid and generator components.

Encouraging the domestic manufacture of power grid and generator components both support state economic development and alleviate supply constraints on materials. By aligning manufacturing incentives with energy policy goals, Governors can encourage quicker build out of energy infrastructure while strengthening state manufacturing industries.

• Former New Jersey Governor Phil Murphy signed A5687/S4407 in August 2025 which created a $500 million tax credit program that incentivizes manufacturing investment. The Next New Jersey Manufacturing Program is designed to drive substantial investment, create jobs, and position the state as a leader in the manufacturing economy. The program encourages a wide range of manufacturing activities, including the production of components for clean energy technologies such as offshore wind, solar, geothermal, green hydrogen, nuclear energy, fuel cells, battery storage, and other sustainable clean energy solutions.
• In September 2025, Hitachi Energy announced that they will expand the company's domestic power transformer production with a new manufacturing facility in Virginia. The facility will produce large power transformers that can support applications such as high-voltage transmission, power generation, AI data centers, and large-scale industrial applications. The investment will boost economic growth in the state while bolstering the electrical equipment supply chain in the U.S.

Conclusion

Load growth is expected to grow across the country due to various factors including data centers, new manufacturing, and electrification. The timing and degree of this growth varies geographically, but the need for solutions to meet this growing load is imminent. There is no silver bullet, but Governors can consider a range of solutions to meet load growth, including increasing generation, building out more transmission and distribution infrastructure, and utilizing demand-side solutions to shave peak load. Identifying the appropriate solution requires deliberate policy, flexibility, and early and regular coordination with economic development, energy, and the private sector.

Though various needs were recognized during the Roundtable, other potential considerations include:

• Bolstering state staffing efforts to support future grid planning needs.
• Examining the role Governors can play in attracting manufacturing for critical components with current long lead times, such as transformers and turbines.
• Alleviating siting and permitting barriers that prolong the time it takes to build energy infrastructure.

The Experts Roundtable on Aligning State Economic Development and Energy Planning identified several opportunities for state leaders to align the economic development and energy planning sectors. As new large loads may pose a challenge to energy systems, there is immense opportunity that Governors can take advantage of to boost economic development in their state.