Making Hay Monday – November 3rd, 2025

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David Hay

Editor

Haymaker

Making Hay Monday

A Crisis of Power

“We’re a superpower with a Third World grid.” – Bill Richardson, former U.S. Energy Secretary

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A Crisis of Power: How the Grid Is Rewiring Under AI

When you think of the energy transition, you probably picture the classic symbols of the renewable movement, a la wind turbines, rooftop solar panels, and electric vehicles. But what’s flying under the radar is the fact that the electricity system itself is entering a new era. And it’s not being driven by environmental policy, but by the wild growth of data centers, AI infrastructure, and the impending reality that electricity will likely soon become a bottleneck for both industrial capacity and digital progress.

We view it as a quiet but urgent shift in how power is generated, consumed, priced, and monetized. And for investors, it could be one of the most significant realignments in modern market structure. While electricity demand in the U.S. was flat for much of the 2010s, the need for power today is going into hyperdrive. According to the Energy Information Administration, U.S. power consumption is projected to break its all-time high again in both 2025 and 2026.

The scale of new demand is staggering, as the International Energy Agency (pardon our skepticism as to their precise accuracy) forecasts that global power consumption by data centers will nearly double by 2030, reaching roughly 945 terawatt-hours. To put this into context, that’s about the total electricity used by Japan today. It’s no secret, or surprise, that AI is the primary driver. Power demand from AI data centers is projected to quadruple, as generative models and machine-learning workloads displace traditional server operations. BloombergNEF expects U.S. data center load to more than double by 2035, jumping from about 35 gigawatts in 2024 to nearly 80 gigawatts. (A gigawatt is approximately the energy required to power a U.S. city with a population of 500,000.) And according to McKinsey, data centers could account for as much as 40% of all net new electricity demand through the end of the decade.

At the risk of stating the obvious, the U.S. power grid wasn’t built for this tsunami of demand and throughput. Interconnection bottlenecks, aging transformers, and regional load spikes are already straining transmission and distribution systems. In response, some utilities have been forced to revise their 10-year capital spending upward by billions. The system is groaning under pressure, and much of the investment world hasn’t yet caught on to the severity of the situation.

In the 2000s, global electricity demand was driven by industrialization in China and emerging markets. In the 2010s, demand growth stalled across developed economies. Now, the pattern is reversing, but in a new direction. Unlike traditional industrial power use, which is dispersed and relatively flat, the new AI loads are concentrated in high-density digital campuses: hyperscale data centers packed with GPUs (graphics processing units), cooling infrastructure, and 24/7 power needs. These campuses require direct access to substations, high-voltage feeders, and uninterrupted energy flows.

This shift is redefining what infrastructure even means, and there’s a convergence underway between digital and utility players in the space. The biggest tech companies in the world are now among the biggest buyers of power. And the utilities, once viewed as sleepy yield plays, are suddenly responsible for enabling cloud growth, AI training, and national capacity for computing power.

Beyond just being delivered, power is being traded, dispatched, stored, monetized, and routed in real time. Now, more than ever, electricity is becoming a financial asset in the data economy. As we’ve mentioned, AI is the obvious catalyst since training a single cutting-edge model can use as much electricity as a mid-sized U.S. town. The more complex AI gets, the more power it demands to process larger amounts of data.

Speaking of which, data center geography is shifting, too. Hot zones like Texas, Georgia, and Virginia are seeing huge build-outs because they offer access to cheap power, land, and favorable permitting. But local pushback is mounting, as interconnection queues (i.e. the waiting list for energy projects waiting to connect to the grid) are now years long. Some utilities have begun charging speculative data centers even before they go live.

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Making matters worse, grid infrastructure is increasingly aging as transformers are in short supply, substations are bottle-necked, and permitting timelines can stretch past five years. Utilities are being forced to up their capital spending on a scale not seen since the post-war expansion. Meanwhile, large power users are starting to take matters into their own hands. The rise of behind-the-meter generation (think: microgrids, captive renewables, modular nuclear) reflects a broader shift toward energy sovereignty… and proximity. Power has simply become too strategic, and vital, to outsource.

Regulators are also starting to rewrite the rulebook. Some jurisdictions are now exploring tariffs specifically targeted at digital infrastructure. Others are introducing capacity charges and adjusting time-of-use pricing. Rate structures built for residential consumers simply no longer make sense when your average customer is using advanced language learning models.

This paradigm shift in usage makes clear that infrastructure long taken for granted is now backed by real and massive demand growth. For the first time in decades, utilities are facing multi-year demand increases driven not by climate mandates but by private sector digital expansion. Rate bases are growing, capex is accelerating, and regulated monopolies are back in the growth business. Power is now a strategic input for digital infrastructure. If you control access to power, you control the future of resources used to process data and run AI models.

New monetization models across the energy landscape are also emerging. Capacity reservation, dynamic pricing, and dispatch premiums are turning power into a tiered service. Just as bandwidth became differentiated in the telecom boom, electricity is becoming classified by quality, availability, and location. The regional story matters, too, since not all grids are created equal. Texas offers low costs and fast permitting but is vulnerable to extreme weather. California has high renewable penetration but unreliable capacity margins. Virginia has power density but is known to experience interconnection delays. Ultimately, capital will flow toward flexible areas where megawatts can be monetized quickly.

Along with any structural boom, there are also real risks. Many planned data centers may never be built and utilities may delay or deny interconnection. Tariffs could spike unexpectedly and we’re already seeing public backlash as power-hungry AI campuses soak up local generation. Some utilities may even walk away from growth opportunities they can’t support operationally.

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Unlike energy debates of the past, today’s paradigm isn’t about renewables versus fossil fuels. It’s about compute-adjacent electricity and the new logic of the grid. The prize is control over the power flows that underpin AI, data, and automation. The public markets have been slow to reflect this. Many utility stocks are still priced like slow-growth dividend plays, though some have rallied substantially and are breaking out to new all-time highs (that always attracts our attention!).

Most data infrastructure companies are merely valued for their real estate. But the firms sitting at the intersection, with rights-of-way, direct substation access, flexible dispatch capacity, and tenant demand from AI giants, are building the equivalent of digital-era pipelines. To all of us who have profited from traditional fossil fuel pipelines, this has an encouraging echo.

The aforementioned intersection is where the next leg of infrastructure outperformance will emerge. The best-positioned companies won’t just deliver power. They’ll own the rails, lease the sites, write the tariffs, and sell capacity as a premium service. The winners will be those who understand that electricity is no longer a background utility, but the hard currency of a new energy economy.

Now, to deliver the goods you’ve come to expect from every MHM, let’s get to our specific investment play…