Electricity is the new oil: Load growth and grid investment supercycle
A historical inflection in electricity demand coupled with massive underinvestment is a recipe for investor returns
Twice a week, I will release deep dives into stocks and sectors that fit into the three themes that I see winning in this age of tariffs and deglobalization: resilience, sovereignty & reshoring, China. I will then deep dive into the opportunities in the AI data center value chain.
Take advantage of this once in a generation opportunity to build long term wealth by investing in great stocks that will deliver returns for your portfolio for years to come.
Electricity is the new oil
The emerging energy megatrend: Load growth and grid investment supercycle
Electricity demand is surging after two decades of stagnation — driven by data centers, electrification of transport, and aging infrastructure. Yet grids, neglected for decades, are now the bottleneck. This imbalance is triggering one of the largest infrastructure investment cycles in history.
After two decades of sluggish load growth in the West, electricity demand is now surging. Aging infrastructure, chronic underinvestment in the grid, and a historic AI-driven infrastructure boom (as covered here:) are fueling one of the largest buildouts in modern history, spanning the entire electricity value chain. From electrical equipment and utilities to grid operators, clean energy, cabling, data center power, and software, a broad range of sectors is positioned to benefit.
Today, we’re kicking things off by taking a deeper look into why we’re entering the Golden Age of Electrification and Grid Investments.
We’ll explore how the rapid electrification of society, the rise of renewables, aging infrastructure, and a historic investment cycle in AI are fueling an electricity boom. The entire electricity ecosystem is being restructured and heavily invested in to meet this surge in demand.
Together, we’ll walk through the full electricity value chain — from generation and transmission to the equipment that keeps it all running — while highlighting key players across every vertical. And we’ll begin to ask the bigger question: are we entering a new Golden Age of Electricity?
And this is just the start. Over the next weeks and months, we’ll continue publishing detailed breakdowns and stock deep dives into the companies best positioned for this generational trend. Make sure to sign up both of us, so you don’t miss anything.
Overview
Today, we’ll talk about the following:
How Electricity Networks Work and Why They Require Massive Investments
Outlook for Power Demand, Networks vs Renewables
A Golden Age of Grid Infrastructure
A Golden Age of Electrification
The Data Center Boom
Key Players in Each Vertical
Final Thoughts and Stock Deep Dives To Read
1. How Electricity Networks Work and Why They Require Massive Investments
Electricity networks are the backbone of the energy system:
Electricity is a very strategic asset.
Electricity doesn't completely escape market rules.
Electricity can't be stored at a large scale.
Networks are the essential systems that carry electricity from where it’s produced to where it’s used.
How do they work?
Generation at the Power Plant
Electricity is produced at a power plant. This can be done using fossil fuels (like coal or natural gas), nuclear energy, or renewable sources such as solar, wind, hydro, or geothermal power.Transmission Over Long Distances
Once generated, electricity is sent through high-voltage transmission lines. These lines carry electricity efficiently across long distances, usually from remote power plants to populated areas.Voltage Reduction at the Substation
The electricity then arrives at a substation. Here, the voltage is reduced to a lower level that is suitable for local distribution. This process is necessary to make the electricity safe and usable.Further Reduction by Transformers
Before reaching end users, transformers reduce the voltage again to levels that can be safely used by household appliances and machines.Local Distribution to End Users
Finally, the electricity travels through local distribution lines to homes, businesses, schools, and other buildings where it is consumed.
Who operates these networks?
The electricity system involves multiple players, each with distinct roles and business models:
Unregulated activities: The production of electricity (generation) and the selling of electricity to consumers (retail) are often unregulated and open to competition.
Regulated activities: The transmission and distribution of electricity are usually tightly regulated by government authorities to ensure reliability and fairness.
Utilities are the companies that generate electricity, manage the networks, and handle customer billing. Some are vertically integrated (handling generation, transmission, and distribution), while others specialize in just one or two functions.
Grid operators (Transmission System Operators or TSOs, and Distribution System Operators or DSOs) are responsible for physically moving electricity across networks. In the US, utilities are often fully integrated. In Europe, these roles are more often separated. This creates investment opportunities in:
Pure TSOs: e.g. Terna (Italy), Elia (Belgium/Germany)
Pure DSOs: e.g. E.On
Integrated utilities: e.g. National Grid (UK), Enel (Italy), Iberdrola (Spain)
Why are Electricity Networks Attractive Investments?
Electricity networks operate under regulatory frameworks designed by national authorities. These frameworks determine how much revenue and profit a network operator can earn, based on:
The Regulated Asset Base (RAB): the value of the assets operated.
The allowed return on capital (typically the WACC, or weighted average cost of capital).
Depreciation and performance-based incentives (e.g. for efficiency or service quality).
For investors, this means electricity networks offer predictable, stable cash flows with limited downside risk, a rare feature in today's volatile markets.
Changing Regulation: A New Era of Investments
For years, regulators pushed down allowed returns to lower electricity costs for consumers. But the tide is turning. With rising interest rates, inflation, and the urgent need to modernize infrastructure, regulators are now increasing allowed returns to attract capital.
This shift, combined with the sheer scale of upcoming investment needs, makes networks one of the most compelling areas in energy today.
Now, I hope you understand why networks are such attractive investments, especially given their unique visibility linked to it being a regulated activity.
The Energy Transition is Grid-Intensive
Electricity networks will be the backbone of the energy transition.
The global push for electrification is putting massive pressure on grids. Two forces are driving this:
On the supply side, renewables like wind and solar are being deployed at record speed. These sources are intermittent and decentralized, making grid management more complex.
On the demand side, electrification is accelerating across sectors: EVs, heat pumps, battery storage, and data centers are all expanding rapidly.
Yet grid investment has lagged behind. And that forms a problem.
The Investment Gap is Huge, but Closing Fast
In the EU, annual investments in electricity networks are expected to double during 2020–2030 from €36bn/year in 2019 to €71bn/year. Between 2030–2050, they are forecast to quadruple to €134bn/year.
Key investment drivers include:
Integrating renewables
Electrification of heating and transport
Replacement of assets
Grid digitization and smart systems
Cross-border interconnectors
Since 2010, over $10 trillion has been invested in the energy transition with $5 trillion going into renewable energy alone. Installed capacity reached 4,500 GW in 2023, with China and the US leading the way.
But here’s the issue: renewables can’t work without stronger grids.
The IEA estimates that for every €1 invested in renewables, at least €1 must go into networks and €1.25 in advanced economies. Yet today, only 22 cents go into the grid for every dollar spent on power generation.
Old Grids, New Demands
Europe’s grid is 45–55 years old. The US grid isn’t much younger. Meanwhile, over 3,000 GW of renewable energy projects are stuck in grid connection queues, five times the amount of new solar and wind added globally in 2022.
If we want a clean energy future, this has to change.
The IEA’s Net Zero scenario calls for $800 billion per year in grid investments by 2030, more than 2.5x today’s level. Without that, the clean energy transition stalls.
Electricity networks are no longer the boring, behind-the-scenes infrastructure they once seemed. They’re the backbone of the energy transition and entering a Golden Age of Investment.
Their regulated nature offers predictability. Their importance in enabling renewables and electrification creates urgency. And their underinvestment offers enormous potential upside.
For long-term investors, grid infrastructure might just be one of the most compelling megatrends of the decade.
2. Outlook for Power Demand, Networks vs Renewables
For nearly two decades, electricity demand in developed markets has been mostly flat.
However in Europe, demand has dropped by around 10% over the last 15 years and still hasn’t returned to pre-Ukraine war levels. Today, electricity usage across developed European countries remains 15% below early-2010s levels. This is largely due to declining industrial activity and improved residential efficiency.
And in North America, the situation is slightly better but demand has still remained flat since 2018.
The Turning Point: Load Growth Returns
After years of stagnation, power demand is now set to grow again. A structural shift is underway, driven by electrification and digital infrastructure expansion.
Global electricity demand is projected to grow by around 3% annually by the end of the decade, a sharp increase from the flat growth seen in recent years.
What’s driving the growth?
Primarily, heating and industry electrification because they account for roughly 25% of new demand. Secondly, electric vehicles and data centers contribute another 20% each and finally green hydrogen which adds a final 20%, but this growth driver remains the most uncertain driver out of all of them.
According to the IEA and ICIS, data centers alone could add:
0.4–0.6% to Europe’s annual demand growth
1.0% in the US
Winners and Losers in the New Power Economy
Utilities: Mixed Signals for Renewables
While renewables still offer long-term promise, near-term sentiment has turned more cautious.
Political Headwinds
In the US, a Republican sweep could bring new barriers to wind development and cut tax credits tied to the IRA. Solar may fare better, supported by low costs, reshoring, and strong data center demand.
In Europe, Germany’s incoming government may slow deployment, while EU-wide targets are already falling short.
Economic Pressure
Higher interest rates and rising project costs are eroding the returns on renewables. Many utilities and oil majors are pulling back:
Some utilities have slashed renewable capex by up to 50%.
At the same time, grid investment is up 30–120%.
PPA Pricing Trends
In Europe, PPA prices are falling. In the US, they’re still rising, though convergence is expected.
Generators are more exposed to price volatility, unlike integrated utilities with both generation and retail operations.
The Greenout Problem: When Clean Power Is Wasted
As more renewables come online, a new issue is emerging: greenouts, periods when electricity from wind or solar is curtailed due to limited grid capacity.
Greenouts happen when:
Renewable supply outpaces demand
The grid can’t absorb the excess power
This results in:
Negative power prices
Clean energy being turned off
Grid instability
Slower PPA adoption
Lower political support for renewables
Developers especially suffer when their output is uncontracted and exposed to market volatility.
Grid Infrastructure: The Silent Winner
While generation assets face uncertainty, grid operators are becoming a standout investment theme.
Grid investment is up 15% year-over-year in 2024, the first meaningful growth in years.
Political and regulatory support is improving across the board.
More countries recognize that without a modern grid, none of the green transition is possible.
This trend is accelerating. As electrification and decentralization advance, the need for flexible, resilient grid infrastructure is only growing.
Remaining Macro Risks
Interest Rates
Utilities are extremely rate-sensitive due to the long duration of their assets.
Between the April peak and September low in 10-year US yields, utilities outperformed the broader market by 12% (including dividends).
Looking ahead:
US rates may stay high under inflationary Trump-era policies.
European rates may ease, offering some relief to regional utilities.
Gas Prices Still Matter
Despite renewables’ rise, power prices still track natural gas prices closely. Risks to gas markets include:
New LNG supply from 2H 2025, which could depress prices.
A Ukraine ceasefire, which may reintroduce Russian supply into Europe.
US gas exports shifting global pricing dynamics.
3. A Golden Age of Grid Infrastructure
The rising demand for grid infrastructure is fueled by two major trends: the electrification of everything — from transportation to industry — and the rapid adoption of renewable energy sources. As renewables become a dominant part of electricity generation, and electricity demand continues to climb, investments into the grid must scale accordingly. Global infrastructure is adapting, not just in scale, but in resilience, flexibility, and intelligence.
The Acceleration of Electrification
Electrification is no longer a distant trend, it’s a structural shift. Buildings, vehicles, and industrial processes are all being powered by electricity as part of a global push toward decarbonization. In the past, electricity demand grew in line with GDP, but that link is breaking. After years of flat demand growth in developed countries, electricity consumption is now growing steadily again, driven by this broad electrification wave.
This transformation means utility and grid investments are no longer cyclical, they are becoming long-term, structural priorities.
The Rise of Renewable Energy
The share of electricity generated by renewables is rapidly expanding. As more solar, wind, geothermal, and hydro sources come online, the grid faces new challenges. Unlike traditional power plants, many of these renewable sources are intermittent and distributed. Integrating them into the existing grid demands significant upgrades, in both physical infrastructure and digital coordination.
Recent blackouts, such as the one in Iberia, highlight just how vulnerable existing systems are to these changes. Future energy systems will need to be smarter, more decentralized, and more robust.
Ageing Grid Infrastructure
One of the greatest barriers to a clean and electrified future is the grid itself. In many developed regions, especially Europe and the US, power grids are decades old. Much of the infrastructure was built in the 1960s and 70s, with a lifespan of 30 years. Today, the need to modernize is urgent. The grid must not only be repaired, it must be expanded and reimagined to meet future energy needs.
The Power Grid Renaissance
Across Europe and the US, power grid investments are accelerating. Transmission systems long neglected, are now being revived. As electricity becomes a larger share of the energy mix, the grid must adapt to handle more volume, more volatility, and more complexity.
New connections between renewable power sources and population centers are essential. So is building resilience into the system to cope with climate-driven disruptions and peak loads.
Energy Security as a Driving Force
Geopolitical tensions and energy shocks have underscored the importance of secure, domestic energy systems. A modern, well-connected grid is essential for national resilience. Countries are increasingly focused on upgrading their grid infrastructure not just to support clean energy, but to ensure their energy independence and economic competitiveness.
The AI and Digitalization Effect
The digital economy is emerging as a major source of electricity demand. Data centers, in particular, are power-hungry and expanding fast. AI chip racks, high-performance computing, and the growing complexity of cloud infrastructure are driving a new wave of grid investment.
To power this growth, more transmission capacity is required, but also specialized cabling and fiber-optic networks. Companies like Prysmian are capitalizing on this opportunity, providing high-voltage cables and communication infrastructure tailored to digital infrastructure needs.
Catalysts for Further Grid Investment
Several factors are converging to drive continued investment in grid infrastructure:
Utilities and operators (TSOs and DSOs) are increasing their capital expenditure plans.
Power outages and grid failures are highlighting the urgent need for upgrades.
The growing demand for medium- and low-voltage cables is being driven by digital infrastructure, defense initiatives, and reshoring trends in Europe and the US.
4. A Golden Age of Electrification
After two decades of stagnation, electricity demand in Western economies is finally inflecting. Since 2008, consumption has cumulatively declined by 10%. But the rapid expansion of data centers and the steady electrification of transport, industry, and heating are set to reverse that trend. Over the next decade, Europe’s power demand could rise by 40–50%.
Energy Sovereignty in a Post-Ukraine War World
The war in Ukraine marked a shift in Europe’s energy policy. In 2021, Russia supplied:
25% of Europe's crude oil
46% of its coal
40% of its natural gas
Overall, energy made up 62% of EU imports from Russia, costing €99 billion. By 2023, gas imports from Russia had fallen to just 15%. Wind energy even surpassed gas in electricity generation, a symbolic and strategic pivot.
Decarbonization as a Structural Growth Driver
Global decarbonization efforts are accelerating through renewables, clean hydrogen, and electrified mobility and heating. At COP28 in 2023, every country pledged to triple renewable energy capacity by 2030 from 3,382 GW in 2022 to 11,174 GW, mobilizing $2.2 trillion in annual investment. Key growth areas include:
Solar Power
CAGR: +23% (from 1,055 GW in 2022 to 5,457 GW by 2030)
LCOE (levelized cost of energy) has dropped 90% since 2009, from $300/MWh to $31/MWh
Onshore Wind
CAGR: +18% (from 836 GW to 3,040 GW)
One of the most competitive sources, with LCOE below €50/MWh
Offshore Wind
CAGR: +29% (from 63 GW to 494 GW)
LCOE dropped 48% from $162/MWh in 2010 to $84/MWh in 2020
As a result, the IEA expects:
Industrial electricity demand to rise by 60% by 2040, driven by direct electrification and green hydrogen
Transport electricity demand to grow 4x by 2030, and nearly 20x by 2050
Buildings to see electricity reach 60% of total energy use within 15 years in Europe
Digitalization and the Power Needs of AI Data Centers
AI and digital infrastructure are major power consumers. AI-driven data centers use up to 10x more electricity than traditional ones. European electricity demand from data centers could grow 8–14% annually, especially in:
Countries with abundant baseload power (nuclear, hydro) like the Nordics, Spain, and France
Countries offering strong incentives and hosting major tech or financial companies, such as Germany, the UK, and Ireland
Electricity’s Rising Share in Total Energy Consumption
As electricity replaces fossil fuels across sectors, its share of total energy consumption is expected to rise:
From 20% in recent decades
To 28% by 2030
To over 40% by 2040
This shift demands a significant expansion of electricity grids, long-term planning to safeguard reliability, and a sharp increase in renewable capacity. Energy storage will also play a key role in balancing supply and demand around the clock.
Regulation and the Net Zero Transition
Governments are aligning regulatory frameworks with Net Zero goals. Examples include:
United States
Target: Net Zero by 2050
$370 billion in subsidies and tax incentives under the Inflation Reduction Act to support clean energy and technologies
European Union
Policies: RePowerEU, European Green Deal, and Fit for 55
$300 billion committed by 2030 for decarbonization and energy security
United Kingdom
Target: Net Zero by 2050
Fully clean electricity by 2035
80% of new car sales to be zero-emission by 2030
20–30 million tons of CO₂ captured and stored annually by 2030
600,000 electric heat pumps installed per year by 2028
As part of this shift, regulators are also focused on modernizing and expanding electricity networks to support a greener energy system.
US Reshoring and Electricity Demand
Reshoring, bringing industrial production back to the United States, is a structural growth driver for electricity demand. It’s particularly relevant in energy-intensive advanced manufacturing hubs.
For example, Iberdrola’s $20+ billion US investment plan focuses on renewable energy leadership and grid modernization. Reshoring is expected to add 0.5–1% to annual US electricity demand through 2030. Iberdrola’s integrated strategy allows it to benefit from both new power capacity and network expansion, while also supporting decarbonization.
5. The Data Center Boom
As we discussed in our AI data center value chain deep dive, the adoption of AI and growth in AI data center infrastructure to fuel this will significantly accelerate electricity demand (something unimaginable only a few years ago).
Data centers have historically only modestly grown as a share of global electricity consumption rising only from 1% in 2005 to 1.5% in 2024, despite explosive growth in digital activity and internet usage, largely due to advances in energy efficiency. However, with most gains from consolidating enterprise data centers already realized, AI servers already highly optimized, and physical limits to further chip miniaturization approaching, future efficiency improvements are becoming more challenging.
As AI adoption accelerates, energy use by data centers is now set to surge. In 2024, data centers consumed about 415 TWh, or 1.5% of global electricity, but this is projected to more than double to roughly 945 TWh by 2030, driven mainly by generative AI, which will account for 41% of total data center demand by then, up from 16% today. While this will mean data centers make up about 3% of global power use by 2030, their contribution to total electricity demand growth will remain under 10%, less than sectors like industrial motors, air conditioning, or electric vehicles.
The impact will be uneven: in advanced economies, data centers are expected to drive over 20% of electricity demand growth to 2030, and in the US, their share of national electricity use could climb from 4% today to as much as 9% within a decade. In Ireland, data centers already account for 21% of electricity consumption. This concentration will put significant pressure on local grids, with the risk that up to 20% of planned data center projects could be delayed due to grid connection bottlenecks and infrastructure constraints.
So, while data centers’ global energy footprint will remain a relatively modest slice of total demand, the rapid expansion of AI is making their growth a key driver of electricity demand in many regions, raising new challenges for grid management, energy infrastructure, and generation and therefore opportunities for many companies providing solutions to those sectors.
6. Key Players in Each Vertical
The Electrification megatrend means major investments in everything from power generation and transmission to distribution and specialized electrical equipment for data centers and many other segments of the economy. Effective power management is critical, not just to deliver electricity to individual chips, but also to ensure constant uptime and system stability.
Power generation:
Utilities: Constellation Energy, Vistra, AES Corp, Nextera Energy.
Pure Power Generators/Renewables: Brookfield Renewables, Solaria, EDP/EDPR, Acciona Energia, RWE, Orsted, Sunrun.
Energy Generation Equipment/Components: First Solar, Enphase, SolarEdge, Siemens Energy, GE Vernova, Infineon, Vestas, Nordex, Array Technologies.
Networks:
Pure Grid Operators (TSOs/DSOs): National Grid, E.ON, Terna, Iberdrola, Redeia, Elia.
Grid equipment & services providers: Quanta Services, Itron, Hubbell.
Cables & transformers: Prysmian, Nexans, Eaton, Hitachi.
Batteries: Tesla, LG Energy Solution, CATL, Fluence, Panasonic.
Data center power:
EMEA: Schneider Electric, Siemens, ABB, Legrand, Munters + indirect (Halma, Alfa Laval, Infineon)
US: Eaton, Amphenol, TE Connectivity, Cummins, Vertiv, nVent, Cummins, Enersys.
APAC: Delta Electronics, Hitachi.
Software: Bentley Systems, Oracle.
Distributors: Rexel, Wesco.
Engineering & Construction: Jacobs Solutions, Arcadis.
7. Final Thoughts and Stock Deep Dives To Read
If you want to stay ahead, make sure to subscribe to us so you don’t miss a thing!
Dive into companies benefiting from this megatrend (see the Electrification & grids tab in my newsletter here for all the investment cases):
Arista Networks: Powering the future of cloud networking
Synopsys: A Chip Design Powerhouse
AMD: A Forgotten Chip conglomerate ready to pick a fight with nvidia
Disclaimer: The information provided on this Substack is for general informational and educational purposes only, and should not be construed as investment advice. Nothing produced here should be considered a recommendation to buy or sell any particular security.
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I really enjoyed thinking about the less obvious regional beneficiaries, and have come up with two ideas:
Chongqing Electric and Machinery Co is a conglomerate that has stakes in a Cummins JV and a Hitachi JV. The Hitachi JV appears to have ramped transformer production quite quickly.
Wasion Holdings is supplying smart meters to utilities in China, South-East Asia, and everywhere else from Tanzania to Turkey. They also have a fast growing modular data centre solutions business that has secured Day One as their main customer. Day One in turn counts Bytedance and Oracle as customers.