Energy Supply and Infrastructure on the Brink: Can We Meet Surging Demand?

How a perfect storm of data center power demand, lower oil prices, and policy shifts could jeopardize supply and increase gas and power prices

A domestic energy supply crunch may be at our doorstep as market and policy shifts threaten to inhibit the United States’ ability to meet an unprecedented demand for power. A perfect storm of energy policy and economic challenges will likely constrain near-term power supply and increase prices. This would defy energy affordability, reliability, and sustainability goals and render unattainable the new administration’s “energy dominance” objectives.

The following sections set forth these challenges and then evaluate potential implications.

1. Insatiable, Rapid Power Demand Growth

Demand for electricity is already surging and will continue to surge due to increasing industrial consumption, expanded use of electric vehicles (EVs), and, above all, the seemingly insatiable appetite for new data centers.

After more than two decades of stagnant growth,[1] electricity demand in the US is projected to increase by 25 percent between 2023 and 2030.[2] This implies that the compound annual growth rate of power demand will increase from only approximately 0.57 percent during 2000–2022 to ~3.2 percent during 2023–2030.

Data centers needed to sustain the artificial intelligence boom are expected to account for nearly half of this spike in demand by 2030, and projections estimate data center demand to account for 4.6 to 9.1 percent of total US electricity consumption by then.[3] This new demand will be for firm power supply that is always available, whereas prior buildout of renewables was primarily to replace marginal, variable generation from coal and natural gas.

2. Emerging Near-Term Power Supply Constraints

To meet these needs, the US will have to double the pace of new electricity generation installations.[4] Most of this will come from renewables and natural gas. However, development of new supply for both renewables and natural gas faces major policy and economic roadblocks.

Before the effect of new policies and emerging economic developments:

• In 2023 and 2024, respectively, developers brought online a total of 40.4 GW and 48.6 GW of new utility-scale generation and battery energy storage system (BESS) capacity, of which wind, solar, and BESS additions together accounted for 88 percent in 2023 and 93 percent in 2024.[5]
• Projections for 2025 show that renewables and BESS will account for a combined 93 percent of electricity capacity added to US grids this year, with the remainder provided by natural gas,[6] mirroring global trends.

Because renewables provide power intermittently, at annual capacity factors that typically range from 21 percent for solar to 48 percent for wind (averaging around 30 to 35 percent across wind and solar combined), each MW of installed capacity provides substantially less than half the power output of dispatchable natural gas combined cycle power plant (CCGT) generation, which recorded average capacity factors of 59 to 60 percent in 2023 and 2024[7] and can operate at 100 percent capacity when needed. Therefore, intermittent renewable generation requires backup supply from BESS and/or nimble, dispatchable natural gas generation.

These substantial additions have been stimulated by the increasingly low cost of renewable energy infrastructure and generation and the tax credits in the Inflation Reduction Act (IRA). Renewable energy generation and BESS also rely on substantial equipment imports from China, Japan, South Korea, and other Southeast Asian and European countries, where many renewable components have been manufactured—prior to and even during the ongoing effort to build critical supply chains inside the US.

That’s changing, however, as policies pursued by the White House, Department of Energy (DOE), and Congress seek to stall or stop the massive installation of renewable energy. The stated goal is to refocus on the installation of fossil fuel generation from natural gas, coal, and nuclear power sources.

For instance, higher tariffs have raised the costs of importing critical components and minerals, with one analysis suggesting that the total cost of a domestic solar project using imported cells could rise by 15 percent on average.[8]

Even if some or all of these tariffs are blocked on legal grounds, the recently approved House omnibus bill would repeal most clean energy tax credits and add significant, albeit unclear, regulatory impediments to sourcing renewable energy equipment from “foreign entities of concern” such as Chinese exporters. The latest version of the bill passed today by the Senate in a tiebreaker vote would delay the end of some tax incentives and remove a House stipulation forcing energy projects to start construction within sixty days of the bill’s enactment, but it would still phase out solar and wind production and investment tax credits over the coming few years, along with credits for residential energy efficiency and construction of solar panels, heat pumps, and battery storage.[9] The Senate’s provisions for the aforementioned “foreign entities of concern” appear to be clearer, but still create a material compliance burden.[10] The revised Senate bill now goes back to the House for any final modifications and a final vote.

These policies are just beginning to have an impact. Through April 2025, $14 billion in clean energy projects have been cancelled or delayed, while the DOE has begun revoking loan guarantees for projects, including one led by solar energy giant Sunnova, which recently filed for bankruptcy protection.[11] Another 794 clean energy generation facilities could lose subsidies as well based on the original House bill. Although the version passed by the Senate would likely scale back these losses, hundreds of developers would still lose tax incentives if they don’t start building soon.[12]

Meanwhile, and for similar reasons, the cost of natural gas-fired generation is increasing even more than renewables. Higher tariffs, coupled with a shortage of natural gas turbines, are raising the costs of natural gas power generation. The costs of building a new gas-fired plant are twice or even three times more expensive than just a few years ago.[13]

Further, it typically takes longer to develop and commission natural gas generation than renewable generation:

• Starting from scratch today, a natural gas generation developer would probably not be able to complete and commission a new gas plant before 2031–2032, and nuclear and hydro generation developments typically take even longer.
• By comparison, a new solar and BESS system might be completed in 2028–2030, depending on location.[14] But the remaining lead time to commercial operation is commensurately shorter for renewable and BESS developments already in the interconnection queue.

In fact, as of April 2025, more than 153 GW of renewable energy capacity was in various states of construction, permitting, and planning (of which solar and wind accounted for 98 percent).[15] This generation capacity is placed at risk by the anti-renewable provisions of the bill just passed by the Senate.

Any reduction or cancellation of this critical supply at a time of rising demand and absence of new natural gas generation options before 2030 will produce a near-term generation supply crunch and electricity price increases. Consequently, we may be entering a five-year period in which trade and energy policy substantially reduces the growth in renewable energy supplies before new infrastructure for natural gas generation can be developed, financed, constructed, and commissioned for operation.

3. Sustained Low Oil Prices Impede Oil and Gas Production and Increase Gas Prices

Even existing US natural gas generation plants will see significant emerging supply and pricing risks on the horizon.

Ongoing changes to US trade policy and tariffs on imports, mounting expectations of slowing economic growth in major oil-consuming economies, and increased OPEC+ oil production quotas and output levels have conspired to sink oil prices toward $60 per barrel (bbl)—with some institutional analysts (including Morgan Stanley[16]) projecting in early June 2025 that oil prices could fall well below $60 per bbl later this year.[17]

The recent temporary spike in prices from Israel’s and the United States’ attacks on Iranian nuclear infrastructure appear to have been short-lived (unless they eventually lead to a broader regional war jeopardizing oil production and trade flows).[18]

In the US, a massive amount of associated oil and natural gas production has been driven by sustained high oil and correlated liquid fuel prices (e.g., in the Permian Basin and the Marcellus and Eagle Ford shale plays). At the same time, higher tariffs on steel, aluminum, and a variety of critical equipment likely will further increase the cost of oil and gas production and delivery.

With oil prices down and declining and production costs up and increasing, the outlook for fresh investments in oil and gas production has become unfavorable. If oil prices are sustained at prices below $60 or even $50 per bbl, producers will pull back on drilling operations even more: as of May 16, US oil and gas rig count was already down 3 percent year on year (YOY) and the lowest since January.[19] If this pullback continues or intensifies, one result will be a substantial constraint on future associated natural gas production. At the global level, the IEA predicted that upstream oil and gas investment will fall materially in 2025 (by 4 percent YOY) even as overall energy investment rises by 2 percent to approximately $3.3 trillion.[20]

These trends are occurring at an inconvenient time given the sharp increase in demand for feedgas supply via the expected doubling of US liquified natural gas (LNG) export capacity by 2030.[21] This increase is virtually guaranteed because it will come from LNG export terminals already approved and under construction prior to 2025. With current LNG feedgas requirements having recently reached 15 Bcfd, LNG export growth could double this demand toward 30 Bcfd by the early 2030s. Further, these results do not include additional terminals that have been approved and may begin construction over 2025 or the coming years.

If low, decreasing oil prices significantly reduce natural gas production levels at a time of rapidly increasing demand for LNG exports, gas prices should rise as a result. This will further elevate the cost of natural gas-fired generation, which, combined with reduced supply of renewable energy, will drive power prices even higher.

4. Inadequate Power Transmission Grid Resilience

In addition to the market and policy trends noted above, it is becoming increasingly urgent that the US invest in enhanced electricity transmission capacity and grid resilience to serve the tremendous load growth expected over the coming years from data centers and EVs on the demand side and new thermal and renewable generation sources on the supply side.

Some estimates suggest that modernizing the US grid could bear a price tag in the trillions of dollars.[22] As the IEA notes, “Grid connection queues for both supply and consumption projects, including data centres, are long and complex. Building new transmission lines can take four to eight years in advanced economies and wait times for critical grid components such as transformers and cables have doubled in the past three years.”[23]

Roughly one-fifth of planned data center projects could be delayed if these risks aren’t addressed.[24] In the last three years, both the Biden and Trump administrations launched policy initiatives directed at improving transmission infrastructure and grid resilience as well as increasing the availability of generation and storage capacity. These include $13 billion from the Bipartisan Infrastructure Law, $250 billion in loans for projects that reduce emissions from existing energy infrastructure via the IRA, and an April 2025 executive order aimed at boosting reserve margins by (among other things) expediting regulatory review and approval of “applications by electric generation resources seeking to operate at maximum capacity” and preventing “critical” resources from exiting service.[25] However, the impact of these efforts remains in question, particularly as the current administration seeks to dismantle key energy provisions in the IRA.[26]

The Emerging Power Generation Crunch and Price Increases

The prevailing market and policy trends that define the US energy panorama put the country on the brink of an energy supply and pricing crisis over the coming years:

• On the demand side, electricity demand is poised to grow rapidly to serve data centers and industrial growth; and natural gas demand is expected to boom to provide feedgas for LNG exports and supply industrial and power generation growth.
• On the supply side, however, renewable energy and battery storage confront a hostile policy environment; replacement generation from new natural gas, coal, or nuclear plants and critical transmission infrastructure will not be available until 2030 or later; and natural gas production, availability, and pricing have mounting risks.

These challenges are physical, technical, and economic in nature. They cannot be resolved simply by reducing and/or removing environmental and regulatory requirements. The only realistic solutions can come from 1) a dramatic change in policy that produces more realistic, achievable supply solutions over the remainder of this decade; and/or 2) a market breakdown and price blowout that impedes demand for data centers and/or LNG exports and revives hydrocarbon production and supply.

Unfortunately, policy changes do not seem likely, and a market breakdown would be extremely disruptive. As a result, we expect the future energy risk profile to be high. Likely developments over the coming few years include:

• An increase in business failures, bankruptcies, and restructurings for smaller independent oil and gas producers and renewable and battery storage developers that rely on (expensive, tariffed) imported components and typically have shallow balance sheets.
• A surge in legal disputes related to project failures, delays, supply chain disruptions, and changes in equipment and construction costs, market conditions, and prices.[27]
• Energy supply and grid reliability constraints and cost and price increases that decelerate or halt construction of data centers.
• Energy price blowouts, which are inflationary as well as harmful to the economic competitiveness of US manufacturing and exports.
• An eventual cessation or deceleration of US LNG export growth if low oil prices have the dual effect of driving global LNG prices down and US natural gas prices up, such that the price differential erodes to levels that do not support exporting US liquefied gas to global markets.

Such challenging energy industry conditions will impact all energy suppliers and consumers. Navigating these stormy waters will require updated systemic analyses about the relationship between market conditions and policy actions—and conditions are likely to change significantly and frequently in the months and years to come.

 

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[1] NERC, 2024 Long-Term Reliability Assessment (December 2024), p. 31.

[2] L. Batra et al., Rising current: America’s growing electricity demand, ICF (May 2025).

[3] International Energy Agency (IEA), Energy and AI: World Energy Outlook Special Report (2025a), p. 14; M. Schipper & T. Hodge, “After more than a decade of little change, U.S. electricity consumption is rising again,” US Energy Information Administration (EIA) (May 13, 2025); EPRI, Powering Intelligence: Analyzing Artificial Intelligence and Data Center Energy Consumption (May 2024), p. 17.

[4] Batra et al. (2025).

[5] EIA, “Solar, battery storage to lead new U.S. generating capacity additions in 2025” (February 24, 2025).

[6] EIA (February 2025).

[7] EIA, “Electric Power Monthly,” Table 6.07.A., “Capacity Factors for Utility Scale Generators Primarily Using Fossil Fuels” (last accessed June 9, 2025)

[8] FTI Consulting, Solar Shock: How New Tariffs Could Reshape U.S. Utility-Scale Deployment (May 22, 2025).

[9] K. Brugger & A. Picon, “Senate megabill more lenient with some climate law credits,” E&E News (June 16, 2025); J. Davis et al., “Amendments to IRA Tax Credits in the Senate Budget Bill,” White & Case (July 1, 2025).

[10] D. DiGangi, “Senate Finance Committee reduces House IRA cuts, but few changes for wind and solar,” Utility Dive (June 18, 2025).

[11] C. Marshall, “‘Major blow’ for clean energy: Project cancellations snowball,” Energy Wire (May 29, 2025); C. Marshall, “DOE axes $3B Sunnova loan,” Energy Wire (May 29, 2025); T. Dhumal, “Sunnova files for bankruptcy on residential solar woes,” Reuters (June 9, 2025).

[12] K. Tamborrino & J. Blaeser, “Megabill could derail hundreds of planned clean energy projects,” E&E News (June 20, 2025).

[13] R. Elliott, “Why a Plane-Size Machine Could Foil a Race to Build Gas Power Plants,” New York Times (May 6, 2025).

[14] For instance, projects located in the ERCOT region (which covers most of Texas and is overseen by the Texas independent power system operator) tend to be subject to shorter interconnection waiting times on average than projects located in the PJM region (which covers the Mid-Atlantic and small portions of the Midwest).

[15] BRG analysis of EIA Form 860M (April 2025).

[16] Y. Chin, “OPEC+ Quota Hikes Yet to Deliver Oil Surge, Morgan Stanley Says,” Bloomberg (June 8, 2025).

[17] D. Wethe, “Banks Cut 2025 Oil Price Forecast Below $60, Survey Shows,” Bloomberg (June 4, 2025).

[18] A. Reiter, “Why is the oil price not surging?” Financial Times (June 16, 2025).

[19] C. Savage, “U.S. Oil and Gas Drillers Backing Off or Slowing Down,” Energy News Beat (May 17, 2025).

[20] IEA, World Energy Investment 2025, “Executive Summary” (June 2025).

[21] R. Stewart, “US LNG exports could swell 152% by 2030s, says DoE official,” Upstream (May 6, 2025).

[22] J. Knutson, “Why the high price of modernizing the U.S. power grid is worth it,” Axios (July 11, 2023).

[23] IEA (2025a), p. 15.

[24] IEA (2025a), p. 96.

[25] DOE, “Biden-Harris Administration Announces $13 Billion To Modernize And Expand America’s Power Grid” (November 18, 2022). DOE, Inflation Reduction Act of 2022 (September 22, 2023); The White House, “Strengthening the Reliability and Security of the United States Electric Grid,” executive order (April 8, 2025).

[26] The White House, “Unleashing American Energy,” executive order (January 20, 2025); N. Portuondo, “Energy and Commerce unveils broad climate law rollbacks,” E&E News (May 12, 2025).

[27] C. Goncalves & A. Tria, “The Energy Transition and the Future of Energy Disputes,” BRG ThinkSet (Fall 2024).