Key Takeaways
Deloitte has examined the increasing demand for electricity and concluded that utilities will need to spend as much in the next five years as they have in the preceding 12 years: $1.4 trillion.
Levels of spending will remain high for the next two to three decades to meet demand, driven by increased manufacturing and the electrification of large parts of the economy.
Challenges to meeting demand include supply chain issues, high interest rates, and the ability to get rate increases.
Ratepayer resistance to rapidly escalating bills is a growing concern, as these new investments are likely to be passed on to consumers, whose bills have increased by 23% between 2019 and 2024.
Some large consumers, such as AI data centers, are seeking their sources of reliable, dispatchable electricity in the form of nuclear, gas, and even coal.
The Trump administration has been taking steps to reduce the regulatory burden that has been driving these costs higher, and some states have taken steps to cease the closure of existing, amortized plants to protect consumers.
Electricity demand is growing in the United States due to the expansion of artificial intelligence (AI) data centers, the reshoring of manufacturing, and increased electrification resulting from Biden’s climate initiatives. To fulfill this need, a report by Deloitte, “Funding the Growth in the U.S. Power Sector,” finds that power sector investments may need to reach $1.4 trillion between 2025 and 2030, driven by a 10% to 17% increase in electricity demand from 2024 levels. That level of investment is equivalent to the total capital expenditure of the U.S. power sector over the preceding 12 years. The U.S. power sector is expected to require sustained capital investments at this level over the next two to three decades, and consumers will face higher bills as a result.
Deloitte estimates that data centers alone could contribute an additional 44 gigawatts to the national electricity demand by the end of the decade. The push to revitalize domestic manufacturing and bolster supply chain resilience through reshoring manufacturing is projected to add another 10 gigawatts of industrial power demand. Policy-driven initiatives, such as the adoption of electric vehicles, the shift toward electric heat pumps for residential and commercial heating, and the electrification of various industrial processes, could collectively add another 20 gigawatts of new electricity demand by 2030.
This increase in electricity demand needs an expansion of the existing power infrastructure. In 2024, capital investment reached a record of about $179 billion. With a compound annual growth rate exceeding 8.5% over the past five years, capital expenditure by the largest utilities is projected to climb even further, reaching at least $194 billion in 2025. Investments include new generation capacity, transmission and distribution networks, and the integration of advanced technologies such as smart meter deployment, smart grid systems, cybersecurity measures, and battery storage for backing up an increasingly intermittent generating system.
Challenges Abound
Challenges exist that include supply chain constraints and global inflation stemming originally from the COVID-19 lockdowns that increased the costs of materials, labor, shipping, and fuel in the power sector. For instance, turbine builders are indicating that they cannot keep up with power demands. According to Mitsubishi’s U.S. industrial division, the current supply chain for generators cannot keep up with the booming demands of AI. The surge in AI-driven data centers and industrial re-shoring has dramatically increased the demand for power generation, but the supply chain for gas-fired and combined-cycle generators has struggled to keep up. Over the past decade, much of the investment in power generation has shifted toward wind and solar due to government policies, leaving manufacturers with reduced capacity to produce traditional turbines that are now in demand as customers want reliable power.
Other challenges include high interest rates due to the industry’s relative capital intensity as well as cost increases due to tariffs. Solar equipment, for example, largely gets imported from China, where tariffs have been applied since 2012 in an attempt to develop an American solar manufacturing industry. China has tried to skirt U.S. tariffs by manufacturing them in other Southeast Asian countries. In response, U.S. trade officials with the Department of Commerce placed tariffs on most solar cells from Malaysia, Cambodia, Thailand, and Vietnam, after they found that China was manufacturing them there for export to the United States to avoid tariffs. The tariffs on solar cells from these countries range from 41% to over 3,500%.
Utilities have traditionally requested rate increases to fund major projects that have raised utility bills. These rate increases, along with inflation, have resulted in electricity bills rising 23% between 2019 and 2024, largely to cover rising costs for grid maintenance, upgrades, and decarbonization. How many more rate increases customers can tolerate is another issue that will challenge the U.S. utility industry and its need to secure reliable power to meet growing demand.
To help ensure reliable baseload power and to meet growing demand, some utilities are considering extending the life of existing coal units, bringing shuttered nuclear plants back online, and building new gas-fired capacity. After years of championing renewable energy, major tech companies are beginning to realize that wind and solar power may not meet their needs due to their intermittency, prompting a shift toward reliable nuclear energy. Tech companies have entered into agreements with nuclear plant operators and developers to supply energy for their data centers. Microsoft, for example, struck a deal with Constellation Energy to reactivate the closed Three Mile Island nuclear power plant in Pennsylvania. New small modular reactors have also attracted attention and funding, as has fusion nuclear energy.
The Trump administration is pursuing a coal renaissance. Interior Secretary Doug Burgum wants to restart coal plants that were shuttered due to regulations from the Obama and Biden administrations. Secretary of Energy Chris Wright has advocated for stopping the closure of coal-fired power plants as part of his and the president’s “all-of-the-above” approach to increasing energy production. Environmental Protection Agency (EPA) Administrator Lee Zeldin’s agenda includes reviewing and essentially reversing Biden’s Power Plant Rule that shuts down existing coal-fired plants unless they add technology that is commercially unavailable, as well as other rules affecting coal-fired power plants.
Some states have also begun to take steps to halt the premature closure of coal-generating plants to ensure ratepayers are receiving affordable electricity. As of February 2025, Arkansas, Wyoming, West Virginia, Kentucky, Nebraska, and Utah passed laws to protect existing power generation.
Conclusion
Due to the growing demand for electricity from AI data centers, increased manufacturing, and greater electrification from cars, heat pumps, and other applications, Deloitte is expecting utilities to invest $1.4 trillion between 2025 and 2030 in generating capacity, transmission, distribution networks, and other equipment. While the need is there, there are challenges to meet the demand due to supply chain issues, high interest rates, tariffs, and the ability to get approvals to charge customers increased rates. In the meantime, utilities are looking to extend the life of existing coal plants and bring shuttered nuclear plants online to obtain reliable generating capacity.
