Power Demand: The Structural Shift Reshaping Energy and Materials

The structural shift in energy demand is now undeniable. While global electricity growth is moderating slightly, it remains robust, with consumption forecast to reach over 29,000 terawatt-hours (TWh) in 2026 after a 3.7% annual increase. This surge is being driven by a fundamental, multi-year strain from a single sector: data centers. Their voracious appetite for power is not a passing trend but a core driver reshaping grids and investment plans worldwide.

In the United States, the data center boom is accelerating at an extraordinary pace. Utility power provided to these facilities is projected to grow by 22% year-over-year in 2025, a figure that underscores the sector's immediate impact. The long-term trajectory is even more striking. By 2030, demand is forecast to nearly triple from current levels, with power consumption from these facilities expected to reach a range of 325 to 580 TWh per year. This would represent 6.7% to 12% of all U.S. electricity consumption-a share comparable to that of major industrial sectors today.

This isn't just about more servers. The scale of this demand is forcing a re-evaluation of grid planning and investment. The sheer volume of power required, coupled with the uncertainty around its precise timing and location, is creating a new layer of complexity for utilities and regulators. As one report notes, grid investments are forecast to increase by 23% between 2025 and 2030 to accommodate this surge, alongside the broader electrification of the economy. The data center is now a primary engine of the new power equation, and its growth curve will dictate the pace and scale of the next major infrastructure build-out.

The Capital Flood: Grid Investment and Utility Financials

The structural demand shock is now being met with a historic capital flood. U.S. investor-owned electric utilities are preparing to deploy a record more than $1.1 trillion over the next five years to modernize and expand the grid. This represents an unprecedented acceleration, with the industry on pace to spend nearly $208 billion this year alone. The scale of this investment is a direct response to a dual pressure: the explosive growth in data center power demand and the urgent need to replace aging infrastructure.

The modernization imperative is severe. A significant portion of the existing network is reaching the end of its useful life. According to industry analysis, 31% of transmission assets and 46% of distribution assets are beyond their useful life. This creates a fundamental vulnerability, as grids must simultaneously handle higher loads from data centers and manufacturing while maintaining reliability. The result is a capital cycle of staggering magnitude, with grid investments forecast to increase by 23% between 2025 and 2030. This isn't just a maintenance budget; it's a multi-year build-out to prepare for a fundamentally transformed energy landscape.

This massive investment plan is reshaping the financial profile and valuation of the sector. Despite a 19% gain in 2025, utilities are now trading at premiums to fair value estimates. The rally, which has kept pace with the broader market, was fueled by the narrative of AI-driven energy demand growth. Yet this defensive role is now challenged by the very macroeconomic conditions that once supported it. With interest rates at multidecade highs, the cost of financing this $1.1 trillion build-out is a persistent headwind, and the sector's traditional appeal as a low-volatility, high-dividend haven is being tested.

The bottom line is that utilities are caught between two powerful forces. On one side, they are being asked to fund a historic infrastructure expansion to meet soaring demand. On the other, they face a valuation environment where their growth potential is fully priced in, and their cost of capital remains elevated. This sets up a critical test: can the promised returns on this massive investment materialize fast enough to justify the current premiums and support the sector's financial health through the build-out? The answer will define the next phase of the power demand story.

The Materials Backlash: Critical Minerals Under Pressure

The structural demand shock is now hitting the upstream materials sector, creating a complex and often contradictory dynamic. On one hand, the energy transition is driving robust consumption. In 2024, lithium demand surged by nearly 30%, far outpacing the decade's average. For battery metals, the energy sector was the overwhelming driver, accounting for 85% of total demand growth. This growth is being fueled by the same forces reshaping the grid: electric vehicles, battery storage, and the massive new build-out of power networks.

Yet this strong demand is being met by an even faster supply response, which is exerting powerful downward pressure on prices. Major producers, led by China, Indonesia, and the Democratic Republic of the Congo, have rapidly scaled output. This swift increase in battery metal production has highlighted the sector's ability to expand supply more quickly than traditional metals. The result is a dramatic price correction. Following the sharp surges of 2021 and 2022, prices have continued to fall, returning to pre-pandemic levels. Lithium prices, which had surged eightfold during the peak, have fallen by over 80% since 2023.

This creates a critical tension. The current oversupply and low prices are dampening investment momentum at a time when future demand is expected to grow even faster. While the market is currently balanced or oversupplied for some metals, the forward-looking picture reveals a divergence. Under current policy settings, supply is projected to lag behind demand growth for both copper and lithium. This sets the stage for a future bottleneck, where the very materials needed to build the new power infrastructure may face renewed scarcity and price pressure. The backlash, therefore, is not just a cyclical correction but a signal of the structural challenges ahead: scaling supply fast enough to meet a multi-year demand ramp, while also navigating a market where today's low prices are disincentivizing the very investment needed for tomorrow's security.

Regulatory and Execution Risks: The 2026 Reckoning

2026 is shaping up to be a definitive year for the power sector, a "year of reckoning" where the structural thesis will be put to its first major test. The convergence of sweeping policy changes, intense state-level battles, and the ultimate validation of demand forecasts will separate execution from aspiration.

The most significant policy shift is the impact of the One Big Beautiful Bill Act, which has axed most subsidies for clean energy and electric vehicles. This forces utilities and developers to pivot quickly, testing their ability to execute massive capital plans in a less supportive financial environment. The act's changes will become more pronounced over the coming months, challenging the growth narratives that have driven recent investment.

At the state level, a fierce policy battleground is emerging over data center incentives and environmental regulations. Attention to these facilities has skyrocketed, with more than 190 bills introduced in state legislatures in the first 11 months of 2025. These bills, often introduced by Republican legislatures to offer locational incentives, clash with Democratic proposals focused on environmental risks and ratepayer protection. This creates a patchwork of regional rules that will directly affect the cost and risk profile for developers, leading to significant variations in where and how quickly projects can proceed.

The ultimate test, however, is the materialization of projected power demand. The sector faces a binary risk: overbuilding could strain utility returns, while underbuilding could trigger grid instability. Evidence of this tension is already visible. While long-term forecasts show an acceleration in demand, some utilities report falling data-center interconnection requests, such as a reduction in Ohio from over 30 GW to 13 GW of load. This attrition in the interconnection queue signals a market correction, as utilities implement new tariffs to manage speculative requests and ensure load commitments. The revised forecasts from firms like BloombergNEF, which have raised their 2035 outlook by 36% in just seven months, highlight the extreme volatility in these projections. The industry must now navigate this uncertainty, where the sheer scale of new projects collides with grid realities and the need for reliable, affordable power.