The U.S. power sector is “entering a critical growth phase” as it prepares to meet the increasing demands from data centers, propelling natural gas back to prominence as it harnesses the fossil fuel as a needed power source, Rystad Energy said.
The research and analysis firm said U.S. power consumption will exceed 4,200 terawatt-hours (TWh) for the first time in 2025, up 2% from 2024, and just the beginning of even more growth. Data centers, which accounted for 22 gigawatts (GW) of capacity at the end of 2023, will add 60 GW to that total by 2035 based on announced projects. Their power use may reach 450 TWh, up from 130 TWh in 2023.
To help meet that demand, utility companies are planning 17.5 GW of new capacity in the coming years—the highest level since 2017. The report noted that utilities will also have to improve their aging transmission infrastructure.
Rystad said Virginia and Texas are attracting significant investment from data center developers. It cited Virginia’s advanced infrastructure and tax incentives and Texas’ favorable grid policies and abundant solar and wind.
The added demand is likely to increase the cost of power for consumers as utilities pass on higher transmission and distribution costs. Rystad said residential electricity prices averaged $165 per MWh last year, up 25% from 2020.