Electric Utilities: The Best of Times and the Worst of Times

Posted on Saturday, April 25th, 2026

Electric Utilities: The Best of Times and the Worst of Times

David Tennant, PE, PMP, MBA

Electric utilities have traditionally followed a standard playbook with a core mission: to “provide safe, reliable power at a reasonable cost.” This was achieved by maintaining a diverse mix of fuel sources, ensuring both reliability and cost efficiency. If the price of natural gas increased, for example, utilities could shift generation to other fuel sources such as coal, hydropower, nuclear, renewables, or, to a lesser extent, fuel oil.

Today, utilities face three key challenges:

1. The growing energy demand from data centers and electric vehicles (EVs) is straining an aging grid infrastructure.
2. The transition from fossil fuels to renewables, alongside the push for distributed generation.
3. An uncertain and evolving regulatory environment. 

Increased Energy Demand

Every time you save a photo, make an online purchase, or store documents in the cloud, that data is housed in a data center. The sheer volume of digital storage needs has led to data centers proliferating across the country. Businesses, governments, and industries also rely on them extensively.

Data centers vary in size, with some starting at around 25 megawatts (MW) but potentially scaling up to 300 MW. For comparison, a large grocery store consumes about 1 MW. This means a single large data center could require as much energy as 300 grocery stores. In some regions, multiple data centers are concentrated near major population centers, raising the question: Where will this additional energy come from?

EV adoption has been seen as a positive development for utilities, as it provides a more consistent energy demand, particularly during off-peak hours. However, both EVs and data centers add significant loads to the grid, potentially challenging utilities’ ability to balance supply and demand.

The Transition from Fossil Fuels to Renewables

Twenty-five years ago, coal accounted for about 70% of electricity generation in the Southeastern U.S. Today, coal usage has dropped to roughly 12%, with most power now generated by natural gas and nuclear power plants. The reduction in coal usage has been largely driven by concerns over carbon emissions, which are cited as a primary contributor to climate change. While natural gas is significantly cleaner than coal, it remains a fossil fuel and is finite.

Renewable energy sources such as wind and solar are now playing a greater role in power generation. These sources do not emit carbon and are considered sustainable. However, they have limitations.

• Solar Power: While large solar farms contribute significantly to renewable energy production, they require substantial land—approximately four to six acres per MW. A typical solar farm generates between 25 and 50 MW, whereas a traditional power plant can produce anywhere from 500 MW to 4,000 MW. Additionally, solar energy is intermittent; it is unavailable at night and less effective on cloudy days. Battery storage technology, once it is more advanced and cost-effective, will help mitigate these issues.
• Wind Energy: Wind power has become more efficient and cost-effective in the past decade. While individual wind turbines are typically under 5 MW, large wind farms may contain hundreds of turbines. Some offshore installations take advantage of consistent wind patterns, improving efficiency. However, like solar, wind energy is intermittent and location dependent.
• Geothermal Power: This energy source harnesses the Earth’s natural heat to generate electricity. However, geothermal plants must be located near tectonic plate boundaries, limiting their widespread deployment.
• Nuclear and Hydropower: While nuclear power does not emit carbon, it is not typically classified as renewable due to its reliance on uranium, a finite resource. Hydropower, on the other hand, is renewable, but its expansion is limited by geographic constraints and environmental concerns.

Distributed Energy and the Economic Impact

Historically, electric utilities have operated as regulated monopolies due to the immense capital investment required to build and maintain the power infrastructure. This includes power plants, transmission lines, and substations—all of which together cost billions of dollars. For example, a single power plant may require an investment ranging from $3 billion to $30 billion.

Recently, independent power producers have sought to sell electricity directly to large consumers, such as data centers, bypassing traditional utilities. While this model may reduce costs for those customers, it does not account for the shared investment in grid infrastructure. If independent producers do not contribute to grid maintenance, the financial burden may shift to traditional utility customers, leading to potential rate increases. This issue requires careful consideration by regulators, policymakers, and industry stakeholders.

Regulatory Uncertainty

The United States lacks a cohesive, long-term energy strategy. Shifts in political leadership often bring changes in energy policy, creating uncertainty for utilities planning major projects. Given that large power plants can take five or more years to design and build, utilities must navigate regulatory risks, such as policy changes affecting return on investment and plant permitting and approval processes.

Conclusion

The energy sector is undergoing a fundamental shift. Utilities must address rising power demand driven by data centers and EVs while navigating a changing regulatory landscape. Significant investments in grid infrastructure and cybersecurity will be essential to ensure a reliable and resilient power supply.

Both renewable and traditional energy sources have advantages and limitations, impacting overall costs—costs ultimately borne by consumers. A well-informed and balanced approach is necessary to meet future energy needs while maintaining reliability, affordability, and sustainability.

David Tennant has over 30 years in the utility/energy industry as an executive and consultant.  His expertise is in engineering, operations and leadership with engagements around the world.