We believe the accelerating electrification super-cycle will persist for at least the next decade. Electrification is the core of the biggest investment themes in our economy, creating the center of necessary investment to ensure that the United States economy can deliver on its potential growth. This future reliance on electrification for growth stands in stark contrast to the de-linking of economic growth vs electricity demand growth in the US over the last two-plus decades. As GDP grew more than 115% since 2005, electricity demand only grew only about 10%. Simply, electricity intensity collapsed.
Beginning in 2023, this trend reversed, and a convergence of influences has set our country on a path that will see a meaningful cycle of increased intensity – eventually reaching a scale for new technology that allows efficiency to win.
The next decade will see the unification of demand from new manufacturing, artificial intelligence (AI) data center development, transportation fuel transition and grid re-engineering that will all contribute to a wave of increased electricity intensity. In important ways, this will create an intensity feedback loop as we transition to an economy that efficiently supplies electricity through distributed generation, a shift away from fossil fuels and influence by AI in all aspects of our lives. Existing generation from fuels like natural gas will be critical to maintaining reliable baseload capacity, but the investment in burgeoning technologies like hydrogen and modular nuclear are being pursued with unprecedented speed with billions of dollars in committed funding from private and public sources. To establish this new infrastructure that sets the stage for long-term resilience and efficiency we must invest through a period of inefficiency first.
To some extent, this may look like the 1950’s when industrial and personal adoption of new technology (automation, urbanization, air conditioning, appliances) required increasing amounts of electricity for each unit of GDP. After intensity peaked in the late 1970’s, efficiency gains has endured for fifty years. However, much of that old infrastructure remains and must be replaced, modernized and added-to, to allow us to maintain the quality of life improvements Americans expect.
Important Disclosures & Definitions
1 Melek, N.C. and Gallin, A. (09/25/2024). Powering Up: The Surging Demand for Electricity. Federal Reserve Bank of Kansas City, Economic Bulletin, September 25, 2024.
AAI000939 05/13/2026
