Rapid electricity demand growth, fueled by data centers and industrial development, is already outpacing initial forecasts. This swiftly shifting landscape underscores the urgent need for utilities to act to keep pace with surging growth. To help utilities better adapt, ICF set out to refresh projections, assess implications for utilities and the grid, and identify key actions required to meet this moment.
Demand Accelerates Nationwide
AI, cloud-based services, and crypto require new data centers and immense computing power. Consumers and businesses are increasingly choosing electric vehicles, heat pumps, and other electricity-hungry products. As a result, energy stakeholders are confronting a sobering reality: U.S. energy demand could increase by 25% by 2030 and 78% by 2050, with peak demand climbing by 14% by 2030 and 54% by 2050.
On the generation side, new power-producing capacity additions need to rise to roughly 80 gigawatts per year from 2025 to 2045—around double the pace of the past five years.
Affordability Challenges
Affordability remains a foundational priority for utilities and other grid stakeholders. As demand continues to grow, so too will wholesale electricity and capacity prices that ultimately get passed on to consumers.
In ISO/RTO regions, retail rates are expected to jump both due to higher consumption and increased capacity payments. Across a sample of four utility service territories, residential retail rates are projected to increase 15% to 40% by 2030 from 2025 levels. By 2050, retail rates could potentially double.
Despite these challenges, several near-term solutions are within reach. Demand-side management programs could meet 10% or more of electricity demand by 2030, up from just 8% in 2025. These include demand response systems, energy conservation measures, and behind-the-meter capacity solutions that can provide fast, affordable alternatives. Thanks to low distribution costs and faster deployment processes, demand-side programs can help utilities manage uncertainty without compromising reliability.
All-of-the-Above Approach
Meeting future demand reliably and affordably will require an all-of-the-above strategy that leverages diverse technologies and fuels as well as customer-focused programs.
By 2050, natural gas, onshore wind, solar, and energy storage are expected to account for most of the installed capacity. Alternative sources like nuclear and fossil fuels with carbon capture and sequestration will also remain essential, although technologies like nuclear continue to face hurdles such as high capital costs. Notably, new natural gas plants that were once largely absent from generation forecasts are now becoming increasingly important, especially for powering data centers, which are emerging as a major driver of demand.
Equally as important, demand-side management (DSM) programs will remain critical for helping utilities manage affordability, reliability, and customer satisfaction. Energy efficiency and load management programs have a long track record of reducing annual and peak demand, while also lowering monthly bills for customers.
The U.S. energy system is at a critical juncture. As electricity demand accelerates, utilities must respond with innovative, diversified strategies. By drawing from a broad mix of generation resources and demand-side solutions, utilities can continue to deliver affordable, reliable power in a rapidly changing energy landscape. Utilities can better assess the effects of growing demand and identify the necessary resources required to address it by using strategies like integrated system planning and scenario-based risk analysis.