Will Power Limit U.S. Growth

These changes come on the heels of a prolonged decline in energy demand and prices. Decades ago, utility companies overbuilt their generation capacity based on projections of future demand that were too high. The U.S. economy shifted away from energy-intensive industries, while electric appliances, from light bulbs to refrigerators, became more efficient. Research and investment in new power plants languished, and electricity bills were stable. Changing course from a managed decline to rapid growth is a challenge for any sector, especially regulated utilities.

Policy remedies for this imbalance will be elusive. Reducing demand is a non-starter; AI investment has been too important to market performance and construction employment. An agenda of industrial reshoring will only add to demand in the longer term. The White House has pushed for lighter regulation to support more natural gas-fired power stations; however, a stance against renewable energy will not help supply. Nuclear power has come out of hibernation, but deployment of any new nuclear facilities remains years away. And the aging, regionally-oriented grid will need investment to allow more electricity to be carried over greater distances.

After a run of unfettered growth, some data center projects are now encountering resistance. Local residents have pushed back against the natural resource needs of proposed data centers. Some states like Ohio have forwarded a data center "tariff," requiring technology firms to absorb more of the strain they place on the electricity supply. Even the oversight body for the PJM Interconnection grid has suggested a halt to new data centers, in the face of rising wholesale prices in its territory. Developers are now adding their own on-site power plants rather than connecting to public grids.