In our last piece, we explained why energy is the foundation of economic prosperity. Now we’re looking at how the U.S. grid is a 20th-century machine straining under the demands of a 21st-century economy– and what it will take to fix it. 

A System on the Brink 

We’ve heard it countless times this year: we’re headed towards an electricity crisis. For most of the last fifty years, our electricity consumption has been nearly flat. Now, seemingly overnight, demand is soaring at the fastest rate since the post–World War II boom, driven by energy-hungry innovations that barely existed two decades ago: hyperscale data centers, electrification, and new high-tech manufacturing facilities.  

But why are we in this crunch? The problem is not just a rise in electricity demand from new technologies. The problem is that America’s economy is running on yesterday’s grid. Many older power plants and transmission lines are nearing the end of their operating life. The rules governing the planning and permitting of new infrastructure are almost as antiquated. That plus congested interconnection queues, inadequate transmission capacity, and our inability to build quickly compromises our ability to keep costs down – or keep the lights on at all. 

Ground zero for gridlock: PJM  

A lot of attention has been paid to how we can update our permitting processes or change the way we connect new power plants to the grid to ensure we meet rising demand. But less understood is the way that electricity markets inform which resources get built, how much customers ultimately pay for them, and why this model is no longer effectively working.  

In much of the U.S., power is bought and sold in wholesale markets, which include energy markets (coordinate the sale of electricity on a daily basis) and capacity markets (ensure adequate supply to meet forecasted load). In theory, forward-looking capacity markets send price signals that encourage developers to build new power plants to meet future demand. But in PJM, the largest U.S. grid operator overseeing the power system for 13 states and the District of Columbia, things are not working out this way. 

Despite skyrocketing capacity auction prices, new generation has been slow to materialize, increasing the risk of supply disruptions and leaving customers footing the bill. Part of the challenge is that load growth is arriving faster than previously anticipated while the capacity market is not sending the correct price signals to incentivize enough new generation. Several governors have threatened to pull out of PJM entirely, opening the door for alternative models like coordinated, state-led capacity procurements. 

America’s Competitive Edge Is on the Line 

The implications of an overstressed, underpowered grid go far beyond inconvenience, they threaten America’s economic and technological leadership. Consider the “Magnificent Seven” – the U.S. tech giants Apple, Microsoft, Alphabet (Google), Amazon, Nvidia, Meta, and Tesla. These firms are major drivers of the U.S. economy and they run on electricity. Data centers nationwide already draw on the order of 17 gigawatts (GW) of power, and that could rise to around 130 GW by 2030–nearly 12% of all U.S. electricity. Northern Virginia, home to the world’s largest data center hub, has already had to pause new connections due to grid constraints. Without action, we’ll see more growth delayed, investments offshored, and jobs lost. 

Worries about energy availability adds cost and complexity that ultimately makes U.S. investment less attractive. If we can’t meet power needs, projects might choose to build abroad instead, taking with them the jobs, supply chains, and manufacturing capacity that come with building industries of the future here at home. 

Building Faster: How to Modernize our Grid Infrastructure and Market Rules   

The rules and incentives that govern our electricity market were built for a slower, more predictable world — and now they’re being stress-tested by rapid demand growth, aging supply, and new kinds of electricity users. America’s ability to lead the industries of the future is directly tied to our ability to meet their energy needs. By modernizing market design, we can ensure that as many of those electrons as possible are powered by new, innovative clean energy technologies, rather than leaving fossil fuels as the default choice. The good news is that we know how we can achieve this:  

• Deploy Smarter Tech Now: Deploy Grid Enhancing Technologies and high-performance conductors to maximize the use of existing infrastructure  
• Streamline Interconnection: Ease permitting and interconnection procedures to rapidly scale the deployment of quick-to-market resources such as solar paired with battery storage.  
• Standardize Rules for Large, Flexible Loads: Set standardized rules for expediting the interconnection of large, flexible loads such as data centers, especially those co-located with generation resources, in a way that protects ratepayers.  
• Build Transmission: Proactively build high-voltage transmission lines that will expand grid capacity to connect new power plants and manufacturing hubs. 
• Incentivize Innovation: Encourage regulators and customers to embrace novel power-purchase agreements for innovative technologies such as advanced nuclear, next-generation geothermal, fusion, and natural gas with carbon capture. 
• Reform Markets: Move toward market designs that reward reliability and emissions reductions, such as regional clean capacity markets. 

The growth of new power-hungry industries is an opportunity for utilities, tech companies, regulators, and policymakers to build the grid of the future. If we do, we supercharge America’s next era of innovation and growth.