Anticipated demand and load growth are outpacing anything the utility industry has ever seen before. The U.S Department of Energy is projecting at least a 15-20% overall increase in electricity demand over the next decade. For certain jurisdictions, the growth trajectory is staggering, with an outlook that has changed dramatically in the last few years. For example, in 2022, Georgia Power was only projecting an increase of 300 megawatts between 2025 and 2030. That number has now exploded to more than 8 gigawatts.
This surge and the pace of this surge are largely being driven by data centers and increased manufacturing.
While many utilities were able to scale up infrastructure during previous demand and load surges, like what was required with widespread adoption of air conditioning, this moment in history is different. Unlike the past, we cannot assume there will be a “leveling out” coming after the initial scale-up that’s required. The world we’re living in now is much more uncertain, complex, and faster-moving. Layer on top of this the continued disruption to supply chain and labor markets, both of which add to the challenge of keeping pace with this level of growth.
In general, utilities are very well equipped to manage consistent growth and the execution of well-planned, long-range infrastructure projects. This has been at the heart of their business of making and moving energy for a long time. But what has worked in the past is insufficient in today’s environment.
In today’s world, where more adaptability is needed to keep pace, the traditional approach to large capital projects is very likely to fall short in five key ways:
- Integrated Resource Plans (IRPs) are too long-term and too reactive. Most IRPs are built around a 10- to 20-year outlook. This type of long-range assessment and planning is becoming more and more difficult because historical data is insufficient to help us predict what’s coming in the future. For example, we can make guesses about the expansion of data centers, but we don’t actually know what the ongoing pace will look like five years from now – or if there will be new technology that allows for a smaller footprint and lower draw on the grid. And, even though IRPs are revised on a regular basis (typically every 1-5 years), these revisions are far too often reactive. These new plans are also far too reliant on old models and data in terms of labor, supply chain timelines, partnership agreements, etc.
- Execution needs to happen faster than ever before. Data centers and new manufacturing sites are not going to be willing to wait for the infrastructure to be built to power them. Keeping pace with these expectations requires reimagining things like the entire end-to-end supply chain process, from sourcing (like completely revamping traditional RFP processes that can take months and months), to procurement, to ongoing vendor relationships. Utilities also need to find ways to balance high standards for safety and diligence with speed of design and construction.
- Collision of cultures and expectations between utilities and hyperscalers. Unlike some other partnerships, many hyperscalers are committing to covering the costs of new infrastructure, so they have real skin in the game. Utilities are notoriously slow and deliberate, while big tech companies are looking at rapid growth and innovation. At a recent leadership event, one speaker captured this dynamic well when he shared, “Highly regulated industries are very methodical and sensitive to risk. On the flip side, these tech companies have a ‘let’s experiment and break things until we find what works’ approach.”
- Maintaining affordability. While hyperscalers are committing to covering much, if not all, of the cost of the infrastructure needed to support the load growth caused by data centers, it is hard to imagine that at least some of the cost won’t get passed on to customers – particularly if projects overrun on budget and/or timelines. And, if utilities don’t manage the back office support for these capital projects, O&M can balloon and lead to skyrocketing rates. Many communities are already finding it difficult to keep up with their utilities bills, which makes reimagining cost management approaches even more critical.
- Communities are anxious. At the core, utilities are designed to serve their communities by providing safe, reliable energy. But many people are fearful of what’s to come with this surge in growth. Will my bill stay affordable? How will a new data center impact the dynamics and culture of my community? Are we undoing strides toward renewables and climate-focused solutions? All of these questions are valid and require utilities leaders to very intentionally work through how they engage with the communities they serve.
These challenges can feel overwhelming, especially because utilities don’t have the luxury of slowing down their response to this disruption. They have no choice but to challenge how things have always been done and embrace new innovations and approaches to executing these large projects. So, what are some ways to get started?
“Anticipated demand and load growth is outpacing anything the utility industry has even seen before.“
Intentional Scenario Planning
Rather than relying on 10-20 year plans and reactive adjustments, take the time to work through the most critical scenarios and/or levers that may require a shift in strategy. For example, what if there’s a trade war that impacts the cost of key supplies or the ability to get materials in time? What if regulations shift dramatically and allow hyperscalers to build their own infrastructure? In conjunction with these scenarios, it’s essential to identify the assumptions that underpin your current strategy, and how any changes in those assumptions (based on new data or inputs) would impact reactions to various scenarios.
Invest in Building Adaptability
Many employees in utilities have “grown up” in the industry and are not used to working in ways that are agile and adaptable. It’s critical to invest in teaching and cultivating these skills, so employees are able to question how things have always been done, while still maintaining high safety and reliability standards. This requires investing in both growing the skill sets, through formal training, on-the-job learning, and coaching/mentoring, as well as cultivating an adaptable culture. Adaptable cultures are ones that embrace appropriate risk-taking, engage in collaborative problem-solving, balance short- and long-term thinking, and take a multi-stakeholder view.
Take the Full Ecosystem into Account
When approaching large capital projects, utilities can’t just focus on shareholders or regulators. They need to consider all stakeholders – employees, partners, communities, suppliers, contract labor, etc. – and get them actively involved in the process early and often. Leaders need to reimagine how you work with each of these groups, finding opportunities to work differently to be able to accelerate timelines and improve processes. Don’t just treat each stakeholder as a separate group but take the time to create a true high-performing team.
Innovate around how you approach customer education to start to quell the fear they may have. Rethink the role of the project manager in helping to broker and cultivate these relationships to deepen trust and commitment to shared outcomes. This will help you catch (and mitigate) potential bottlenecks and interdependency risks much faster.
The era of “business as usual” for utilities providers is gone, replaced by a landscape that demands unprecedented agility and a fundamental rethinking of old ways of working. While the scale of anticipated demand and load growth presents significant hurdles, there is also a unique opportunity to transform the utility sector into a modern engine of innovation. By intentionally cultivating an adaptable workforce, embracing scenario-based planning, and fostering a collaborative ecosystem, leaders can do more than just keep the lights on.
They can build a resilient, future-ready infrastructure that powers progress while maintaining the core promise of safe, affordable, and reliable energy for everyone.
Are you in the midst of implementing change with your team? Reach out to learn how to realize true value from your investment.
