Energy & Utilities Roundup: Navigating Demand, Nuclear, and DERs in 2025

The energy and utilities sector entered 2025 as a standout performer, driven by rising demand from data centers, nuclear power’s resurgence, and the integration of distributed energy resources (DERs). Utilities are balancing grid modernization, workforce challenges, and regulatory shifts while navigating unprecedented growth in electricity consumption. Here’s a deep dive into the trends shaping this critical industry.

1. Data Center Demand: A Growth Engine with Grid Strains

Data centers now consume 6–8% of U.S. annual electricity, a figure projected to surge to 11–15% by 2030 as AI and cloud computing expand. This demand is pushing utilities to invest in grid upgrades and innovative tariffs. For example:
- Georgia Power secured regulatory approval to extend two coal plants and build three gas facilities to meet rising baseload needs.
- Utilities like AEP Ohio are shifting transmission costs from residential users to large industrial consumers like data centers via new rate structures.

2. Nuclear Power’s Comeback: Tax Incentives and SMRs

Nuclear energy is reemerging as a clean baseload solution, fueled by federal tax incentives and advanced reactor technology:
- The 30% investment tax credit and $27.5/MWh production tax credit are spurring investments, with Constellation Energy issuing the first U.S. nuclear-focused green bond.
- Small Modular Reactors (SMRs), like those supported by the DOE’s $2.5B Advanced Reactor Demonstration Projects, offer flexible, scalable power.
- Over 128 GW of potential nuclear capacity could be deployed at repurposed coal plant sites, leveraging existing infrastructure.

3. DERs and Grid Resilience: Microgrids and VPPs

Utilities are integrating DERs to enhance grid reliability and reduce emissions:
- Xcel Energy proposes solar-storage hubs to defer infrastructure upgrades.
- SDG&E’s microgrids with 180 MWh of storage capacity enable islanding during outages.
- Virtual power plants (VPPs), aggregating EVs and smart thermostats, are gaining traction, though FERC Order 2222’s inconsistent implementation remains a hurdle.

4. Workforce and Policy Challenges

• Skills Gaps: Utilities added 1,600+ employees (e.g., Consolidated Edison) to address shortages in nuclear engineering and AI-driven grid management.
• Regulatory Delays: Permitting bottlenecks for nuclear projects and slow DER market integration in ISO regions persist.

5. Investment Considerations

• Top Performers:
• TotalEnergies (TTE.F) led sector gains with a 9.9% Q1 return, benefiting from commodity price strength.
• Public Service Enterprise Group (PEG) is expected to report a 9% annual EPS rise to $4.01 in 2025.

• Risks:
• Cost Allocation: Utilities need to recover $36–$60B for grid upgrades, requiring equitable tariff structures.
• Permitting Delays: Nuclear and grid projects face regulatory hurdles, especially in states resisting fossil fuel transitions.

Conclusion

The energy and utilities sector is at an inflection point. With data centers driving ~15% of U.S. electricity by 2030, utilities must prioritize grid modernization and cost-effective solutions like SMRs and advanced conductors. Nuclear’s revival, supported by $2.5B in federal funding, and DER integration—despite technical and regulatory hurdles—position the sector for sustained growth. Investors should favor companies with exposure to tax incentives (e.g., PEG, Constellation Energy), strong DER partnerships (e.g., Xcel), and scalable nuclear projects. However, the path remains fraught with risks, including cost recovery disputes and regulatory uncertainty. For now, the sector’s 9.9% Q1 outperformance signals resilience, but the next 12 months will test its ability to balance demand, innovation, and policy headwinds.

Stay informed, and invest wisely.