Lots of demand, too little grid: The state of the US power sector

The current state of the U.S. power sector can be summed up in just a few words: too much demand for electricity; too small of a power grid.

In the past two years, electricity demand forecasts have risen dramatically, a sharp reversal after nearly two decades of little-to-no electricity growth.

The cheapest and cleanest way to meet most of this skyrocketing demand is by plugging new solar, wind, and battery projects into the grid. It’s also the only way to address this growth without undermining the emissions goals of states, the federal government, and the Big Tech firms whose data-center construction plans are driving much of this booming electricity demand to begin with.

But an underbuilt and overburdened U.S. power grid is preventing clean energy from getting built and connected — just when the grid needs it the most.

Solving this supply-demand mismatch will be the challenge for utilities, grid operators, regulators, and policymakers. After all, if it wasn’t AI data centers causing this reckoning now, it’d be electric vehicles or green hydrogen facilities or building electrification sometime in the near future.

In other words, the era of rising electricity demand is here to stay. Below is a by-the-numbers breakdown of why it’s so hard for the U.S. to meet that need with clean power. 

Load growth is getting out of control — but not everywhere 

The latest data on the surge in U.S. electricity demand is not just surprising, it’s ​“shocking.”

So says a December report from consultancy Grid Strategies that found that the five-year load-growth forecasts from utilities across the country have jumped almost fivefold from 2022 to late 2024, to nearly 128 gigawatts — a pace that would force the country to increase its capacity to generate and deliver electricity by nearly 16 percent by 2029. That’s an unprecedented growth rate in the modern era. 

This forecasted growth isn’t evenly distributed, however.

The lion’s share is concentrated in data-center clusters like Northern Virginia, which is already facing a strained grid and obstacles to further expansion. Parts of Georgia and Texas are dealing with an inrush of data-center developers and increasing demand from manufacturing and oil and gas extraction, respectively. Swaths of the mid-Atlantic and Midwest are also expecting gigawatts of new demand in the next five years; some utilities see enough proposed new development to nearly double their current electricity delivery capacity. 

The response from utilities has been to fall back on the status quo — fossil fuels. In the past year or so, utilities have dramatically expanded their plans for new gas-fired power plants, and some are proposing to delay planned closures of coal power plants.

The gridlock keeping clean energy from meeting the need

In a world where grid congestion wasn’t a problem, clean power could meet most, if not all, of that near-term growth in demand.

But that’s not the world we live in. Instead, the backlog of solar, wind, and battery projects now seeking to interconnect to U.S. grids has ballooned to nearly 2,600 gigawatts’ worth of generation capacity. That’s roughly twice the country’s existing generation capacity, per data from the Department of Energy’s Lawrence Berkeley National Laboratory. 

Only a fraction of those projects would likely be built even if the grid had room for them. Since 2000, just under one-fifth of all projects requesting grid interconnection have been completed, according to LBNL’s latest ​“Queued Up” report.

That’s partly due to energy developers crowding interconnection queues with multiple applications in hopes of finding at least one that will greenlight their project. But it’s also due to the multiyear wait times for projects seeking interconnection and the increasing cost of grid upgrades those projects are asked to pay once they do receive approval to plug into the grid. 

The missing grid problem

The interconnection backlog that’s preventing clean energy from meeting new demand is itself the consequence of a major underlying problem: The U.S. transmission grid isn’t expanding nearly as quickly as needed.

Even so, utilities are spending big on transmission these days. In fact, they’re investing more than ever, as shown in this chart from analysis firm Brattle Group using data reported by utilities to the Federal Energy Regulatory Commission.

Unfortunately, far too little of that transmission spending has gone to new long-range, high-voltage transmission lines to connect wind and solar farms in more remote parts of the country to population centers where that power is needed. Those projects have fallen off precipitously over the past decade, as highlighted in a July report from Grid Strategies and trade group Americans for a Clean Energy Grid.

Instead, utilities have prioritized transmission investments in ​“local” projects — smaller-scale power lines or upgrades to existing lines. These projects may address individual utilities’ needs for grid reliability and make expanded power-delivery capacity more reliable. But they’re also disconnected from larger regional power-sharing and load-growth trends, according to critics.

A November report from think tank RMI highlighted that most of these local projects are ​“self-approved” by utilities due to gaps in federal, regional, and state regulatory jurisdiction, giving regulators little or no oversight over whether these projects represent the best ​“bang for the buck” compared with more strategic regional transmission expansions.

Self-approved projects make up two-thirds to three-quarters of all transmission spending in many regions of the country, and in the territory of mid-Atlantic grid operator PJM, they have increased by 2,600 percent from 2009 to 2023 while larger-scale regional projects — also known as ​“baseline” projects — actually declined. 

Looking ahead

For now, it’s hard to know how much electricity growth is actually on the way. The reality might ultimately be more modest than ​“shocking.”

But what’s certain is that electricity demand is growing, and if the U.S. doesn’t respond with mostly clean energy, then its grid decarbonization progress will stall out. The country is already lagging when it comes to cleaning up the power sector. If utilities expand or extend the life of fossil-fueled power plants, it could doom any hope of meeting the country’s Paris agreement commitments altogether.

Avoiding this fate will require the U.S. to deal with the root causes of the current energy gridlock, and rapidly reform its interconnection and transmission planning, permitting, and cost-allocation processes.

The load-growth conundrum may actually enable just that. Utilities, regulators, policymakers, and the country’s most powerful industries are focusing on finding workable solutions to the underlying bottlenecks that have been building up for the past decade.

“It’s hard to think of an electricity industry process that is not affected by power demand, whether it’s utility integrated resource plans, rate cases, transmission planning, resource adequacy — you name it,” Rob Gramlich, president of Grid Strategies, said during a webinar presenting the consultancy’s latest data. ​“I think these numbers have major implications around the country.” 

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