Wood Mackenzie highlights advantage of regulated utilities amid data centre boom

In the United States, regulated electric grid operators hold a decisive advantage in connecting new data centres to the grid, now representing 134 GW of projects, according to a Wood Mackenzie report published on June 19.

Share:

The rapid growth of data centres in the United States is driving significant increases in electricity demand, and regulated utilities appear currently better positioned to satisfy it, according to the latest study by energy analytics firm Wood Mackenzie.

Spectacular rise in electricity demand

The report entitled “US power struggle: How data centre demand is challenging the electricity market model” reveals a substantial rise in data centre projects, now totalling 134 gigawatts (GW), up from only 50 GW one year ago. This increase corresponds to a potential 12% growth in overall US electricity demand. Regulated operators appear particularly adept at responding to this rise, due to their vertically integrated model that enables better coordination in planning both power generation and distribution.

Chris Seiple, Vice Chairman of Energy Transition and Power & Renewables at Wood Mackenzie, pointed out persistent challenges in meeting this new demand: “There are bottlenecks for critical equipment, numerous coal-fired power plants are scheduled for closure, and the waiting times for grid interconnections remain particularly lengthy.”

Strengths of regulated utilities

Faced with these constraints, regulated utilities hold several decisive advantages, according to the report. Among them is the capacity to carry out integrated load and generation planning processes, enabling optimal management of new energy projects.

“Regulated utilities have greater flexibility to accelerate connections,” explained Seiple. They also benefit logistically from owning strategic sites, notably former coal-fired power plant locations already equipped with transmission infrastructure essential for new data centre projects.

Risks and limitations of the regulated model

However, Wood Mackenzie’s report also identifies certain potential risks associated with this model. High infrastructure costs required for data centres could, if growth projections fail to materialize, end up being transferred to existing customers. Additionally, the energy offerings of regulated utilities may not always align with data centre operators’ expectations, particularly regarding renewable energy and contractual flexibility.

Meanwhile, deregulated markets are struggling to respond swiftly to rapidly increasing demand. “Current energy and capacity prices are insufficient to attract new entrants,” noted Ben Hertz-Shargel, Global Head of Grid Edge at Wood Mackenzie. These market constraints increase the risk of power grid disruptions and political interventions aimed at limiting rate increases.

Sector development outlook

According to Wood Mackenzie, this context requires energy sector players to deeply reconsider their future strategies. “Regulated utilities are facing an unprecedented challenge,” concluded Chris Seiple. “They must now balance significant revenue opportunities generated by data centres with reliability requirements and associated financial impacts.”

Final energy consumption in the European industrial sector dropped by 5% in 2023, reaching a level not seen in three decades, with renewables taking a growing role in certain key segments.
Réseau de transport d’électricité is planning a long-term modernisation of its infrastructure. A national public debate will begin on September 4 to address implementation methods, challenges and conditions.
The Spanish Parliament has rejected a package of reforms aimed at preventing another major power outage, plunging the national energy sector into uncertainty and revealing the fragility of the government's majority.
The U.S. government has supported Argentina’s request for a temporary suspension of an order to hand over its stake in YPF, a 16.1 billion USD judgment aimed at satisfying creditors.
The United States Environmental Protection Agency extends compliance deadlines for coal-fired power plant operators regarding groundwater monitoring and the closure of waste ponds.
Eskom aims to accelerate its energy transition through a new dedicated unit, despite a USD22.03bn debt and tariff uncertainties slowing investment.
Several major U.S. corporations announce investments totaling nearly USD 90 billion to strengthen energy infrastructure in Pennsylvania, aimed at powering data centers vital to the rapid growth of the artificial intelligence sector.
Nearly USD92bn will be invested by major American and international groups in new data centres and energy infrastructure, responding to the surge in electricity demand linked to the rise of artificial intelligence.
Nouakchott has endured lengthy power interruptions for several weeks, highlighting the financial and technical limits of the Mauritanian Electricity Company as Mauritania aims to widen access and green its mix by 2030.
Between 2015 and 2024, four multilateral climate funds committed nearly eight bn USD to clean energy, attracting private capital through concessional terms while Africa and Asia absorbed more than half of the volume.
The Global Energy Policies Hub shows that strategic reserves, gas obligations, cybersecurity and critical-mineral policies are expanding rapidly, lifting oil coverage to 98 % of world imports.
According to a report by Ember, the Chinese government’s appliance trade-in campaign could double residential air-conditioner efficiency gains in 2025 and trim up to USD943mn from household electricity spending this year.
Washington is examining sectoral taxes on polysilicon and drones, two supply chains dominated by China, after triggering Section 232 to measure industrial dependency risks.
The 2025-2034 development plan presented by Terna includes strengthening Sicily’s grid, new interconnections, and major projects to support the region’s growing renewable energy capacity.
Terna and NPC Ukrenergo have concluded a three-year partnership in Rome aimed at strengthening the integration of the Ukrainian grid into the pan-European system, with an in-depth exchange of technological and regulatory expertise.
GE Vernova has secured a major contract to modernise the Kühmoos substation in Germany, enhancing grid reliability and integration capacity for power flows between Germany, France and Switzerland.
The National Energy System Operator forecasts electricity demand to rise to 785 TWh by 2050, underlining the need to modernise grids and integrate more clean energy to support the UK’s energy transition.
Terna has signed a guarantee agreement with SACE and the European Investment Bank to finance the Adriatic Link project, totalling approximately €1bn ($1.08bn) and validated as a major transaction under Italian regulations.
India unveils a series of reforms on oil and gas contracts, introducing a fiscal stability clause to enhance the sector’s attractiveness for foreign companies and boost its growth ambitions in upstream energy.
The European Commission is launching a special fund of EUR2.3bn ($2.5bn) to boost Ukraine’s reconstruction and attract private capital to the energy and infrastructure sectors.