Data Center Demand Fuels Unprecedented Utility Investment

Jun 30, 2025

US power utilities are projected to spend a record $212.1 billion in capital expenditures this year, primarily driven by the need to secure new electricity supply for data centers.

Investment in transmission and distribution infrastructure by US investor-owned utilities has nearly doubled in the past decade, reaching over $100 billion in 2025, but faces challenges like supply bottlenecks for equipment such as transformers.

There is a significant increase in planned gas generation projects within the utility sector to provide reliable baseload electricity for data center operators, with current plans at 17.5 GW.

U.S. power utilities are set to spend $212.1 billion in capex this year, which would be a 22.3% increase on the year as they race to secure new electricity supply for data centers, the Financial Times has reported, citing data from Jefferies.

Compared to 10 years ago, the rise in investment stands at an impressive 129%. According to the investment bank, capex in the power utility sector in the United States will hit an all-time high in 2027, at $228.1 billion.

“Companies are investing in generation and transmission to reindustrialise the economy,” Jefferies power utilities analyst Julien Dumoulin-Smith told the FT. “Over the last couple of decades, we’ve seen a relative paucity of new investment . . . we’re now seeing a very meaningful shift, and should see a sharp uptick as data centre deployment accelerates,” he added.

Last week, Wood Mackenzie reported that annual investment in transmission and distribution infrastructure by U.S. investor-owned utilities has nearly doubled over the past decade, from just over $50 billion in 2016 to more than $100 billion in 2025. However, challenges were surfacing, such as supply bottlenecks amid a surge in demand for various equipment.

In just one example, WoodMac expects demand for three-phase, pad-mounted transformers in the United States to surge by 145% from now until 2034. But there is already a serious and increasingly severe shortage in transformers on a global scale. The wait times for transformers have extended from four-six weeks in 2020 to as much as three years now, thanks to the surge in demand from the data center sector.

There is also a race to build more gas-fired generation capacity to secure reliable baseload electricity to data center operators. Rystad Energy reported earlier this year gas was making a strong comeback after years od wind and solar power purchase pledges from tech majors, noting that “The inventory of planned gas generation projects within the utility sector – with the exclusion of independent power producers – has increased from 6 GW in late 2023 to a staggering 17.5 GW currently, the highest since 2017.”

Oilprice.com