Next in power and utilities 2025

Strategies for meeting surging energy demand, lowering costs and continuing a path to sustainability

Utility companies find themselves in a dilemma requiring deft navigation of colliding forces: Adding generation capacity to meet surging demand while adhering to climate commitments and amid shifting regulations. On the one hand, they need to keep up with growing energy demand brought on by the expansion of data centers and artificial intelligence (AI); the continued momentum of electrification and the potential for increased onshore manufacturing. On the other hand, their sustainability commitments may come under pressure as asset retirement dates are delayed and more natural gas generation comes online to meet growing demand. This all should be accomplished while managing changes in renewables subsidies and the role of sustainable energy in our economy.

To succeed in the years ahead, utilities should carefully balance the needs of meeting the growth in energy demand with:

Continuing the energy transition path.
Hardening the grid to enhance reliability and capacity.
Managing the cost to the customer.
Transforming business models to be more customer-centric and digital-focused.

While managing so many activities at once may seem like a high-wire act, there are many capabilities utilities can leverage to separate themselves from peers. Here’s our look at the top trends in the sector and the strategies your company can use in the face of today’s risks and opportunities.

Key actions companies can take now to:

Transform to meet energy demand and capture load opportunities
Continue on the path to sustainability
Leverage digitalization to lower costs
Build a workforce with the right skills and resilience

Transform to meet energy demand and capture load opportunities

Driven by growing power demand from data centers, AI, manufacturing and the electrification of transportation and buildings, power consumption is on track to set records in 2024 and 2025.¹ The federal Energy Information Administration (EIA) predicts that power demand will rise to 4,101 billion kilowatt-hours (kWh) in 2024 and 4,185 billion kWh in 2025.¹ That compares with 4,000 billion kWh in 2023 and a record 4,067 billion kWh in 2022.

While the overall electrification of the economy will continue to drive load growth, it’s the rapid expansion of data centers that brings the greatest challenges and opportunities.

While the estimates for growth in data center CapEx spend vary wildly — 2025 data center CapEx spend is estimated to grow between 15% and 40% with some reports estimating it to reach $1 trillion in 2027 — it’s clear that even the lower end of the growth forecasts will put significant strain on utilities to meet demand.

Data centers aren’t waiting for utilities to catch up, and tech companies are already exploring demand-side solutions, including on-site generation. Some may simply relocate. This could mark a trend in which modular demand needs are matched to distributed generation.

Key actions

To help meet the challenges presented by data center expansion, utilities should rethink their operating and business models to keep pace and take advantage of the opportunities this expansion creates.

Utilities need to consider dynamic models for generation and transmission planning that can help them pivot to meet quickly evolving needs. Companies should also incorporate asset risk monitoring and management to inform planning priorities. Supply chain management for critical equipment, infrastructure integrity, a skilled workforce and sophisticated cybersecurity measures should all be top of mind as well.

Rigorous capital portfolio and project management is paramount. To help deliver capital projects on time and within budget, establish clear governance, project management and controls capabilities and use that to refresh the portfolio regularly as demand forecasts change.

Utilities should leverage opportunities to provide adjacent services and solutions to help address energy resiliency and independence needs. Leaders should be open to making bold moves to enter existing and new markets to position the company for growth.

^{1. Source: “Short Term Energy Outlook”; U.S. Energy Information Administration, Dec. 2024}

Continue on the path to sustainability

Over the last few years, many power and utilities companies have set lofty clean energy goals with key reduction targets coming due in 2030 and 2050. Utilities seeking a more sustainable future have invested heavily in renewable generation, such as wind and solar, while relying on natural gas fired generation as a bridge to the future. This, coupled with significant investment from the federal government in the form of the Inflation Reduction Act, has led to a boom in renewable infrastructure, propelling the industry toward a more sustainable future.

At the same time, the opportunities presented by surging energy demand may put pressure on those sustainability targets.

A key challenge for companies in 2025 and beyond will be balancing the need for new capacity with prior and future sustainability commitments. The strain that load growth will put on sustainability targets has led some analysts to suggest that utilities may start to signal a move away from their interim targets, while continuing to focus on their long-term sustainability goals.

The obstacles in the path to sustainability become more acute when coupled with the desire of hyperscalers (large-scale cloud providers that offer a variety of services, including cloud computing, data solutions and storage) to meet their own sustainability targets and source power for their data centers from clean and sustainable energy.

This has led many utilities and hyperscalers to reconsider nuclear energy. One example of this includes a recently announced partnership between a mega-technology firm and a nuclear power company to power the tech company’s data centers using small modular reactors (SMRs). Other tech giants are rolling out their own nuclear strategies.

The Department of Energy has made clear it wants to include the production of nuclear energy, saying it wants to triple nuclear capacity — adding 200 GW — to meet net-zero emissions goals by 2050.

Even with the desire to “reawaken” nuclear as a key part of the future power generation mix, moving away from traditional energy sources will not be a seamless transition. Power and utility companies will need to embrace new operating models and new project delivery methods, leverage digital transformation and invest in workforce development.

Regulatory uncertainty is also in the path of the industry’s net-zero goals, as it’s widely held that the election of President Donald Trump will lead to policies favoring traditional energy sources, including a relaxation of environmental regulations and an uptick in investment in fossil fuel infrastructure. Still, a number of states will continue to pursue sustainability mandates and the jurisdictions in which utilities operate may be the key deciding factor in how aggressive they continue their energy transition. Uncertainty also exists around support of existing renewables policies, with the uncommitted funds from the Inflation Reduction Act at risk, while in-flight projects and committed funds are expected to continue.

Key actions

Address power constraints by looking at all renewable sources, including nuclear, solar and wind. Strategically assess opportunities to expand nuclear capabilities, including cost management, technology needs, regulatory hurdles, funding pathways, site options and selection, facility needs and supply chain implications.

Be flexible as the new administration’s policies may be unpredictable, as past experiences suggest that decisions can change based on the latest influences. Remain flexible and prepared for policy shifts.

Collaborate with customers to increase energy use when carbon-free energy is available on the grid. Providing clear reporting and incentives to C&I customers can help them make better and more informed decisions around using a cleaner mix of energy.

Focus on the near-term by prioritizing capturing near-term opportunities, such as load growth from data centers and AI, over long-term sustainability goals, unless these goals are core to your identity.

Consider portfolio rationalization of assets and or jurisdictions that are not optimal to your sustainability goals and objectives.

“To succeed in the years ahead, utilities should balance the needs of meeting the growth in energy demand with continuing the energy transition path, hardening the grid to enhance reliability, managing the cost to the customer and transforming business models to be more customer-centric and digital-focused.”

Kyle Long -Power and Utilities Leader, LMC US

Leverage digitalization to lower costs

Given the challenges facing the sector, many utilities are seeking to lower cost structures — both to create investment capacity and avoid impacting customer rates. To do so, companies are undergoing large-scale digital transformations to modernize their processes and IT architecture, and reduce the total cost of service. Many are upgrading legacy systems by investing in cloud-based ERP solutions and operational technologies, including geographic information systems (GIS) and automated metering infrastructure (AMI). They’re also investing in chatbots and virtual assistant technologies to drive cost savings and improve productivity and customer experience.

Key actions

With so many competing goals, utilities often have difficulty prioritizing and executing critical digital upgrades that will yield immediate and tangible value. Nevertheless, there are three primary ways companies can advance their technical agenda while incrementally improving their overall technical landscape.

Data modernization requires a significant amount of work to clean, organize and structure data — not only for enabling systems, but also as a platform for future growth. Data is a strategic asset and, to capitalize on this asset, diligence and discipline should be key considerations.
Application rationalization should be analyzed to compare value in the application stack to its cost and the ability to manage these applications under the umbrella of cyber security parameters. It is also important to weigh the necessity and cost of stand-alone applications when exiting platforms that can provide the same functionality. This should be explored in advance of any digital transformation.
Reporting simplification should be considered/reviewed given recent advancements in reporting capabilities with enabling technology. This tool can be used to create value as many reports are still being created manually from a variety of inputs, which not only increases the chance of error but also has resources focused on data and reporting aggregation instead of insights relative to reporting outputs.

Business and system integration will be an area of increasing importance as organizations embark on a digital transformation. Silo busting between IT and back-office functions with business facing stakeholders will require organizational maturity and discrete leadership to confirm the end-to-end transformation objectives create value for all impacted stakeholders.

Value realization should have a heightened sense of importance to identify, track and report the return on investment for significant technical costs associated with digital transformations. A board-approved business case should translate into a value realization dashboard that’s actively managed and visible to all business owners assigned to transformation objectives and value-driven outcomes.

Build a workforce with the right skills and resilience

Digitial transformation in the sector has heightened the urgency for power and utilities companies to transform their workforce to adapt. Newer technologies could require upskilling among your current employees, and/or hiring new talent with specialized knowledge.

The skills landscape will continue to evolve as the move to digital and GenAI pushes the workforce to operate differently. The good news is workers are embracing newer technologies. Legal Matters Consul’s latest Global Workforce Hopes and Fears Survey indicates that 75% of employees believe GenAI will increase opportunities to learn new skills. This mindset shift in the industry enables organizations to integrate newer, younger workers into its aging workforce.

But there’s a fine line leaders should walk between transforming enough to keep pace with industry trends, and changing too much, too fast. Failure to maintain an appropriate balance could have negative consequences in attracting and retaining talent, as 56% of employees in our survey say there’s too much change happening at once.

Leaders should build transformational resilience in their organizations by prioritizing retaining and attracting key talent, as there is continual competition in the sector for specialized talent that can help companies exceed their customers’ expectations.

Key actions

Organizations should proactively anticipate future skills requirements — while managing existing gaps — to keep skills at the heart of all people related decisions.

Utilities should differentiate their employee experience to attract talent with the digital skills to win in the market.

Build a change-resilient organization by starting at the top with leaders who need the capability, influence and desire to lean into change as the new normal.

The path forward

While the future of the power and utilities sector has never been less clear, it is certain that companies will need to change the way they do business today. Those that seek the right operating models, capabilities and cost structures to meet the growing demand for energy, while maintaining a path to sustainability, will come out on top in the future.