Utilities Must Reinvent Themselves to Harness the AI-Driven Data Era
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Serving surging data center power consumption could require more than $2 trillion in new energy generation resources worldwide, according to Bain analysis.
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US energy demand could outstrip supply within the next few years; meeting demand would require utilities to boost annual generation by up to 26% by 2028.
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Big investments in data center projects come with risks, but there’s also risk in missing out on the growth opportunity.
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Leading utilities are developing feasible resource plans that protect existing customers while working to make their organizations nimbler and more collaborative.
Facing potentially overwhelming demand from data centers, US utilities are grappling with a challenge few executives anticipated: After years of navigating flat or shrinking demand, many organizations have forgotten what it takes to grow. What’s more, they’re finding that capitalizing on this new opportunity will require a rapid, unprecedented transformation of their operating and business models.
For nearly two decades, efficiency and operational nimbleness were paramount while US electricity demand plateaued as a result of advances in energy efficiency and distributed generation offsetting economic growth. But the era of stagnant demand is over. The late 2022 breakthrough in generative AI and the ensuing data center boom blindsided utilities just as demand was also rising because of repatriated manufacturing, industrial policy, and vehicle electrification.
Now, US utilities are bracing for demand to outstrip supply during the next few years, with data centers accounting for the bulk of the increase (see Figures 1 and 2). Supply, both in generation and transmission, will take years to catch up under all but the most conservative scenarios. By 2028, utilities would need to increase annual energy generation by between 7% and 26% above the 2023 total to meet projected demand. That’s far beyond the largest five-year generation boost of about 5% that US utilities achieved from 2005 through 2023.
