Dunne’s company stands to benefit.
Across the globe, a web of thousands of data centers is springing up, from “Data Center Alley” in Loudoun County, Va., to Richland Parish in the northeastern corner of rural Louisiana and Kolkata, India, and it forms the backbone of the AI and cloud-computing industries.
Global power usage by data centers is expected to grow from a current level of around 55 gigawatts to 84 gigawatts — equivalent to the power usage of roughly 70 million homes — in only the next two years, according to research from Goldman Sachs.
And the biggest names in tech are only increasing their plans for more.
In December, Meta (META) announced plans to spend $10 billion building the largest data center hub in the Western Hemisphere, 250 miles north of New Orleans. The site, which Meta chief Mark Zuckerberg has said will be bigger than the island of Manhattan, is expected to come online in 2030.
This year, Amazon, Alphabet, Microsoft, and Meta alone are expected to spend $364 billion in capital expenditures, much of it going toward AI technology development.
But the increasing demand from data centers that each require a power draw equivalent to thousands of homes is running up against an aging and largely stagnant North American grid, threatening stability.
“The size and speed at which large data centers, typically developed to support the computing needs for AI and cryptocurrency mining, are expanding across the country” represents a “significant near-term reliability challenge,” according to research from the North American Electric Reliability Corporation (NERC), a nonprofit deputized by the federal government to regulate the power grid.
To understand the problem, you have to understand how the grid works. At a basic level, electricity follows a roughly three-step process to reach a home, a data center, or any other endpoint.
A power source, such as the Linden Cogeneration Plant that lights up the night sky outside New York City or the soaring towers of Georgia’s nuclear Vogtle Electric Generating Plant, generates energy. That energy is then transmitted across power lines that crisscross the country. Once it reaches its destination, the electricity is distributed to the tangle of smaller lines that many Americans see running through their communities and that carry it to its final destination.
The generation sources, such as coal plants and solar farms, determine capacity, or how much power is actually available for use. And the market is already capacity-constrained.
“We’ve grown accustomed to several decades of pretty slow demand growth in the electric sector, and the last few years have really turned that on its head,” Brendan Pierpont, the director of electric modeling at the research organization Electric Innovation, told Yahoo Finance.
The gap has already begun to push tech developers to look abroad. While the US still claims the dominant share of data center power markets globally, the rest of the world is gaining ground. The Asia Pacific region has seen the lion’s share of added power supply over the last decade, according to Goldman Sachs research. Beijing is now the world’s second-largest market for hyperscaler power capacity, only behind the US’s northern Virginia region, according to reports from Synergy Research Group.
To be sure, North America is projected to have the largest amount of new power coming online in the next five years out of any global region. But fresh development takes a long time.
On the shorter end of the spectrum, Goldman Sachs utilities analyst Carly Davenport told Yahoo Finance, a company like NextEra could likely bring a solar or wind facility into service within 18 to 24 months. But if the goal is to bring on serious capacity through a project at the scale of a gas plant, where new builds on average have added four times the capacity of a new solar build, or a much larger capacity nuclear power plant, the timeline is much longer. In the meantime, hyperscalers may have to find other answers.
“If you are deciding today that you want to build new gas, you likely will not be able to take delivery of a turbine until 2029,” Davenport said. “If you’re wanting to build new nuclear, that’s something that we think is more [of] a mid-2030s type event to actually get that online.”
And once a new generation resource is built, it often has to sit in a years-long queue just to get connected to the grid. At PJM Interconnection, the grid operator of the largest power market in the US, the process to get grid-connected takes five years on average, according to the Lawrence Berkeley National Laboratory.
Only around a fifth of the generation projects that requested grid connection between 2000 and 2018 were in commercial operation by 2023, the Laboratory found.
Work on the infrastructure that brings power from source to destination — the transformers and power lines running throughout the country — has also remained largely stagnant.
Thirty-one percent of transmission equipment and 46% of distribution equipment in the US are within five years of the end of their useful life or have already passed that point, according to research from Bank of America. Across the country’s electric utilities, which deliver energy to customers and maintain the infrastructure required to do so, two-thirds of 2024 spending went toward replacing existing infrastructure, the bank found.
And the pace of new grid development has been slowing down.
The US built an average of 1,700 miles of transmission infrastructure per year through the first half of the 2010s, but the back half of the decade saw only 645 miles built on average per year, according to Grid Strategies.
To be sure, data centers are also not the only things pulling on the grid. Electrification mandates, electric vehicle development, and other power-hungry technologies like cryptocurrency mining all continue to exert pressure on a strained grid.
“I think what’s happening is sort of refocusing to people, ‘Hey, we have these assets that are now approaching 30 to 40 years [of operation], and not only do you need to replace them, you need to upgrade them,” Bank of America industrials analyst Andrew Obin told Yahoo Finance. “If you run the grid without real money for 20 years, things start to break.”
In response, the utilities industry is not sitting still.
GE Vernova (GEV), which supplies equipment to customers including AI and cloud-computing data center developers, utilities companies, and industrial-scale power projects, saw its orders for power-related equipment increase by more than 40% in Q2 2025 compared to Q2 2024, according to the company’s latest earnings report. The company has received $500 million in orders specifically for data center electrification this year, compared to $600 million throughout all of 2024, CEO Scott Strazik said on the earnings call.
But meeting the growing need will require an immense amount of both capital and labor.
Utilities are now expected to spend $800 billion over the next five years, compared to only $550 billion spent between 2020 and 2024, Goldman Sachs’ Davenport told Yahoo Finance, and the US is projected to need to add more than 500,000 jobs by 2030 in the electric sector.
Each year, PJM holds a capacity auction to determine the lowest pay-rate energy producers are willing to accept from the grid operator to guarantee that they will be ready to provide power at any time during the delivery period covered by the auction, usually several years out.
In this summer’s auction, generators offered an additional 2,669 megawatts of power supplies to be added through infrastructure upgrades and new builds.
It was the first time in the past four auctions that new capacity was added. But the additions only meet around half of the demand PJM is expecting to see over the coming three years. That impact will show up in Americans’ electricity bills.
In PJM’s 2024 auction, the utility’s clearing price — the end price that determines what it has to pay all participating power generators — was $269.92 per megawatt-day, an 800% increase from the previous year.
That December, after utilities companies warned customers in PJM-covered Pennsylvania that monthly bill prices could increase by $15, Governor Josh Shapiro filed a lawsuit against PJM, claiming the grid operator’s poor processing capabilities had harmed customers and created “potentially the largest unjust wealth transfer in the history of U.S. energy markets.”
In response, PJM filed a proposal with the Federal Energy Regulatory Commission to create a price collar for the coming auctions that was accepted and put into effect.
This year’s auction saw prices clear levels more than 20% higher, at $329.17 per MW-day, which is the price cap established by the PJM proposal. This is expected to raise consumers’ electric bills in PJM’s coverage area — 13 states across the mideast region of the country plus Washington, D.C. — by 1.5%-5%, on average, according to the operator.
This effect is not constrained to only the country’s biggest or fastest-growing markets.
If a developer cannot find power in one market or is unwilling to accept proposed timelines, several experts told Yahoo Finance, it will go elsewhere until it finds a market that suits its needs.
“The stress on every grid from increased electricity demand doled out by data center clusters is noticeable,” Brad Jones, managing partner of power-trading specialist hedge fund Standard Normal, told Yahoo Finance. “We are really and truly seeing it everywhere.”
Aaron Tinjum, the vice president of energy at the Data Center Coalition trade association, which counts Amazon, Microsoft, Alphabet, Meta and Oracle as members, told Yahoo Finance that while the industry has largely tried to “right-size infrastructure and minimize any unnecessary costs, the data center industry has also experienced the acute impacts of under-forecasting and insufficient communication” that have created “multi-year project delays in key data center markets.”
“While we recognize that grid planning and management is ultimately the role of utilities, grid operators, and regulators, the data center industry has been actively leaning in as a committed and engaged partner across the country to help advance and accelerate grid modernization and energy infrastructure to support American economic competitiveness and national security,” Tinjum said.
Over the long term, US capacity is largely expected to meet demand, Davenport told Yahoo Finance.
The NERC has projected that several hundred gigawatts of capacity from new generation are expected to arrive within the decade.
But in the meantime, the gap between supply and demand has pushed the biggest tech players to search for other solutions.
In March 2024, Amazon Web Services announced a deal worth $650 million with power producer and energy infrastructure operator Talen Energy (TLN). In return for that sum, Talen is set to provide Amazon with more than 19 gigawatts of energy from its Susquehanna Steam Electric Station, one of the largest nuclear plants in the country, to power a data center site directly adjacent to the plant.
Then in September 2024, Microsoft inked a deal with Constellation Energy (CEG) to purchase power that Constellation plans to generate by bringing one of two reactors at the decommissioned Three Mile Island nuclear plant back online by 2028.
Electricity Innovation’s Pierpont told Yahoo Finance that he expects hyperscalers and other large tech players to increasingly pursue deals like Amazon’s and Microsoft’s as they look at how much power they can generate themselves on-site — especially as data center development shows no signs of slowing down.
Alphabet recently announced on its Q2 earnings call that data centers and networking equipment made up a full third of its $22.4 billion in capital expenditures for the quarter, while Microsoft said it will spend $80 billion by the end of the year to “build out AI-enabled datacenters to train AI models and deploy AI and cloud-based applications around the world.”
“Helping accelerate growth while also making sure we pay our fair share for the electricity to serve our operations is critical for Google,” Alphabet said in a statement provided to Yahoo Finance. “Our priority is to help responsibly scale grid systems, making them more reliable, resilient and affordable for everyone.”
Amazon implied on its Q4 2024 earnings call that it will spend around $63 billion on capex in the second half of 2025, and Oracle predicted in its Q4 earnings call that the “vast majority” of its projected $25 billion-plus in capex will be spent on “equipment that is going into data centers and not for land or buildings.”
“We work closely with utilities and grid operators to plan for future growth,” Amazon said in a statement. “Where we require specific infrastructure to meet our needs (such as new substations), we work to make sure that we’re covering those costs and that they aren’t being passed on to other ratepayers.”
Tech players have begun to announce initiatives to ease some of the burden of their grid draw. Google recently signed agreements with two US utilities to operate a “demand response” model for its data centers that can “shift or reduce” power during peak demand times, which the company said will help to get new developments grid-connected more quickly, reduce the need for new capacity, and make it easier for operators to better manage power grids.
But activist groups like the Southern Environmental Law Center (SELC) say they haven’t seen the tech players live up to their claims.
“As state regulators respond to growing demand, the data center industry has demonstrated a lack of transparency about their energy use and an unwillingness to aggressively push for state and federal policy that would unlock barriers to the clean energy and transmission infrastructure needed to meet their stated goals,” SELC climate initiative leader Alys Campaigne told Yahoo Finance.
SELC has threatened Elon Musk’s xAI with lawsuits over its Colossus data center project in Memphis that activists say involved installing gas turbines without proper permitting. SELC has also worked with other activist groups to block data center developments.
Microsoft, Meta, and Oracle did not respond to requests for comment.
For its part, the energy industry is likely to push back plans to retire existing gas and coal plants that can provide steady capacity, even if they are at or near the point of decommissioning, Goldman Sachs’ Davenport and Bank of America’s Obin told Yahoo Finance.
“You could push those [retirement timelines] out and to the right to a degree to try to bridge the gap,” Davenport said. “They’re not getting pushed out to the right by 10 years, but could you see two, three-year push-outs? I think that’s absolutely reasonable.”
The industrial sector is also likely to push harder on existing infrastructure that might not be operating at its full capacity limit, Obin said.
And regulators such as the Federal Energy Regulatory Commission are finding ways to step in, including by forcing PJM to reform its grid connection queue process to make sure new energy resources like the more than 100 GW of solar capacity currently in its pipeline can get plugged in more effectively.
In the meantime, as the grid works to grow and manage increased loads, the major tech developers will be forced to adapt, the experts who spoke with Yahoo Finance said.
If renewable energy sources such as new solar and wind developments remain stuck in connection pipelines, some companies may join xAI in looking toward non-renewable solutions like gas turbines that they can quickly bring online.
“A lack of capital is not the most pressing bottleneck for AI progress,” Dan Dees, Goldman Sachs’ co-head of global banking and markets, said in a report from the bank on AI’s energy demand. “It’s the power needed to fuel it.”
Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at [email protected].
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