When the market heats up, they’re often told to place some of their funds in stocks or sectors that tend to be less affected when the road turns rough due to recessions or geopolitical storms. These elevated wholesale costs ultimately flow through to electric distribution utilities in PJM, creating political pressure around customer bills. The information in this report represent the opinions of the individual Research Analysts’ as of the date hereof and is not intended to be a forecast of future events, a guarantee of future results, or investments advice. We believe that the combination of strong utility fundamentals, and the potential for accelerated electric demand bode well for the relative performance of utilities.
Key inflection points will likely include the repeal or phaseout of certain clean energy tax credits, evolving tariffs, new foreign entity of concern–related procurement requirements, and the integration of AI into core operations. Utilities are expected to integrate multi-year, multi-vendor supply agreements, embed grid-enhancing technologies, and use digital tools to track supplier and inventory risks in real time. These include tariffs on steel (including grain-oriented electrical steel) and aluminum, and certain copper products, in addition to expanding probes into solar, wind, and battery supply chains.47 The recent tightening of domestic content and sourcing requirements further adds complexity. Over the past few years, lead times for critical grid equipment such as transformers and switchgear have stretched to multiple years (figure 3), while equipment and project costs continue to rise. However, initiatives like the National Association of Regulatory Utility Commissioners distributed energy resources security baselines and the Electric Power Research Institute’s Open Power AI Consortium are creating reference points for validation and digital trust.43
The ability to streamline regulatory approval may also lead to an acceleration of infrastructure construction in the transmission space, which has been challenged in recent years. By redesigning the end-to-end billing and payment journey and integrating digital invoicing with expanded payment options, utilities can simplify the most frequent customer interaction and build engagement. Meanwhile significant weather and emergency disruptions are putting a spotlight on critical gaps in today’s energy experience. Capturing load-growth opportunities, enabling local economic development and maintaining overall energy affordability while delivering great customer experience is critical for regulated utilities. Learn about the pivotal role corporations play as the paradigm shifts and progress reaches critical momentum. While the IIJA and IRA provide funding (often administered by the states), the P&U industry will need to navigate those decarbonization commitments.
US Utilities – State of Power Demand: Full Steam Ahead
- Once viewed as inflexible mega-loads, hyperscalers are now potential operational partners.24
- The value of investments and the income derived from them can go down as well as up.
- Some AI models are deployed on-premises to handle critical functions that cannot be moved outside of secure environments.
- Meanwhile significant weather and emergency disruptions are putting a spotlight on critical gaps in today’s energy experience.
- Distribution utilities passing PJM costs to consumers include Exelon, First Energy, PPL, Eversource, and Unitil.
Electric companies are expected to make massive investments to modernize the grid to address growing electricity demand. Together, these shifts will redefine reliability as the ability to sustain capacity, agility, and resilience while keeping power stable, flexible, and affordable. Utilities that set the pace will be those that embed financial, operational, and digital flexibility into their playbooks—delivering capacity where and when it’s needed while safeguarding affordability.
Electrification Key to Corporate Strategy After Iran War
- This week’s top stories include the IEA assessment of the oil market amid war in the Middle East & TotalEnergies pulling out of its wind leases in Germany…
- Access more insights for the aerospace and defense, chemicals and specialty materials, engineering and construction, industrial manufacturing, mining and metals, oil and gas, power and utilities, and renewable energy sectors.
- Utilities We believe the pause and reassessment makes sense given the tremendous amounts of capital that the hyperscalers are investing and the potential for winners and losers in the AI space and data-center market.
- This is caused not only by new technologies, but also by deferred maintenance needs, electrification, and the growth of new demand centers (e.g., re-shoring of manufacturing and data centers).
Additionally, in June 2024, Fervo Energy and Southern California Edison entered into the world’s largest geothermal PPA, totaling 320 megawatts at two projects set to become operational in 2026 and — another example of the power of clean energy PPAs. Interestingly, in the longer term, nuclear energy is undergoing a renaissance as a technology that can provide scalable baseload power supply. And 57% of P&U respondents say the same about their investments in decarbonization and energy transition, compared with 33% across sectors. Though energy producers continue to focus on energy efficiency through higher-productivity equipment and better data insights to manage operations, utilities are committed to meeting the needs of their commercial, industrial and residential customers. Electricity demand projections are growing for the first time in decades, driven by a combination of manufacturing onshoring, increased electrification and data center demand growth. For power and utilities (P&U) companies, envisioning a future of abundant and affordable clean renewable energy is much easier than devising a plan to achieve it.
State of Power Demand: Full Steam Ahead
Additionally, utilities are exploring federated learning techniques to improve models across sites while keeping data local, offering a secure path to expand system intelligence.36 Together, this infrastructure can help balance resilience, compliance, and scalability for https://clojure-android.info/the-art-of-mastering-20/ enterprise adoption. Some AI models are deployed on-premises to handle critical functions that cannot be moved outside of secure environments. Dynamic tariffs are likely to spread, exposing hyperscalers to real-time signals.
DOMINION ENERGY (D) D targets 5-7% EPS CAGR from 2025 EPS https://seoadder.info/the-key-elements-of-great-14/ and is currently the largest data center provider in the US. Utility management teams typically provide conservative EPS guidance given regulatory and political sensitivity to customer affordability. TXNM, BKH, NWE outperformed due to positive reactions to merger activity, Finally, recovering previous period underperformers, HE and ES, provided strong returns. Access more insights for the aerospace and defense, chemicals and specialty materials, engineering and construction, industrial manufacturing, mining and metals, oil and gas, power and utilities, and renewable energy sectors. Some utilities and regulators now require hyperscalers to share costs, provide telemetry, and demonstrate flexibility for faster interconnection.
Supply chain resilience: Ensure resilience through reshoring and diversification
Utilities are matching Silicon Valley’s capex boom to keep pace with Big Tech’s big power demands. Rocket Lab has also remained one of the most active launch providers in the sector. Ahead of this report, Nike warned that results would be flattered by a one-time tariff refund (now estimated at roughly $0.52 per share for the bottom line).
DIY investing? Trading? Professional advice?
- However, initiatives like the National Association of Regulatory Utility Commissioners distributed energy resources security baselines and the Electric Power Research Institute’s Open Power AI Consortium are creating reference points for validation and digital trust.43
- Because PUCs are political bodies, rate decisions are shaped not only by financial metrics but also by public pressure to keep customer bills affordable.
- These include tariffs on steel (including grain-oriented electrical steel) and aluminum, and certain copper products, in addition to expanding probes into solar, wind, and battery supply chains.47 The recent tightening of domestic content and sourcing requirements further adds complexity.
- AEE has executed electric service agreements (ESAs) totaling 3 GW (was 2.3 GW) with large load customers and has room for more with numerous sites with access to transmission, fiber, labor and water.
- Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
These issuances can be accretive when executed above book value and when regulators permit returns on the invested capital. More recently, utilities have pushed capital budgets and rate base growth to historic highs to meet surging demand, including long-term power contracts with mega-cap technology companies for AI data centers that can consume energy at the scale of small cities. In 2025 and during the third-quarter earnings season (late October/early November), several utilities raised long-term EPS growth targets, while others highlighted the potential for stronger growth pending finalization of large-load contracts.
Rocket Lab deal lifts space stocks
That implies the real benefits for utilities sector growth is when the house is under construction, not after it’s finished. One argument suggests investors see the current AI build-out like the construction of a building. Beta, which measures volatility of returns, has traditionally been quite low for utilities, less than half the 1.0 beta of the market as a whole. Big tech companies signed new contracts for more than 10 gigawatts of possible new nuclear capacity in the one-year period leading up to early 2025, and Goldman Sachs Research sees potential for three plants to be operational by 2030.
Linemen play a critical role in maintaining and restoring the… In a significant shift, the Federal Energy Regulatory Commission (FERC) has decided to abandon its transmission incentives policy, particularly the construction work in progress (CWIP)… This week’s top stories include the IEA assessment of the oil market amid war in the Middle East & TotalEnergies pulling out of its wind leases in Germany… A new decree from the Spanish Government forces mobile network providers to guarantee at least four hours of mobile coverage during blackouts and outages…
Distribution utilities passing PJM costs to consumers include Exelon, First Energy, PPL, Eversource, and Unitil. Merchant power beneficiaries included Constellation Energy (18 GW), Talen Energy (8.8 GW), Vistra (11 GW), and NRG. However, non-regulated states include major markets like Texas, Illinois, New York, and Pennsylvania. These assets provide scarce, carbon-free generation as electricity demand and corporate procurement accelerate. Key unregulated operators positioned to benefit include Constellation Energy (22 GW, 14 plants), Vistra Corp (6.4 GW, 4 plants), NextEra Energy (2.9 GW, 3 plants), Talen Energy (2.6 GW, Susquehanna), and PSEG (5.9 GW, 3 plants).
