For financial advisers and professional investors only – not for distribution to retail investors.
28 March, 2025
If you only have a minute…
1. Power demand from data centres, domestic manufacturing and electrification is set to surge in the U.S., necessitating more clean and reliable power supply.
2. Renewable energy sources will be essential in meeting this power demand, being quick to deploy and cost competitive in comparison to alternative electricity sources.
3. Transmission infrastructure will need to expand significantly to support the growth in clean energy, presenting significant opportunities within the global listed infrastructure space.
DeepSeek or no DeepSeek. Trump or no Trump. U.S. power demand is surging.
The beauty of renewables? It can be summed up with the slogan of a well-known battery company in the 1970s: No regular battery looks like it…or lasts like it.
Power is coming
Most up-to-date estimates from McKinsey & Co. suggest power demand from data centres will quadruple in the U.S. by the end of the decade to 80-100 gigawatts (GW)*. To get a sense of how much power that is – the entire New York State’s peak power demand was just 32 GW this past summer*.
Chart 1: Electricity Demand (GW)
Sources: McKinsey (Jan 2025), NYISO Summer Forecast (2024).
The surge doesn’t stop there. Expect more demand from these three themes:
1. Reshoring of energy-intensive manufacturing sectors like semiconductors
2. Electric vehicles
3. Broader electrification
Power demand in the next 10 years is expected to be vastly different from the last 20, which saw close to 0% annual growth. Realistically, we believe power demand may be growing close to 2.5-3% compound annual growth going forward.
Chart 2: Average annual load growth
Source: GridStrategies (Strategic Industries Surging: Driving U.S. Power Demand, Dec 2024). CFL - Compact Fluorescent Lamps, LEDs - Light Emitting Diode.
Impact on the grid…
According to GridStrategies, such growth would induce six times the planning and construction of generation and transmission capacities. Plus, datacentres are demanding power to be generated by carbon-free sources, and they want it delivered consistently and immediately.
The question many are asking is whether the U.S. grid is up to the task. It certainly won’t be easy. Today’s conventional power grid is powered largely by fossil-fuel-fired generators that run continuously to provide a stable supply of power. Reliable, baseload carbon-free power is scarce and limited to nuclear power.
Potential solution: build more nuclear
Long permitting and construction timelines mean taking 12-15 years to build a new plant. Plus, if history is any indication, nuclear plants are prone to significant cost overruns.
Potential solution: build more natural gas
That seems to be what the new U.S. administration prefers to do. But a new plant could still take four to five years to reach commercial operations.
Gas turbine availability is tight right now. Macquarie estimates that the two main global suppliers of gas turbine, Siemens and GE Vernova, produce 60% of the world’s 220 gas turbines annually and have limited manufacturing capacity. This results in new customers having to pay reservation fees to secure slots in the manufacturing queue.
Below we highlight the expected deployment timelines by generation type.
| Generation type | Deployment time |
|---|---|
| Renewables and storage | Ready now and fast to deploy |
| Nuclear restarts | 2027-2030 (only three across the entire US) |
| Unplanned natural gas (peaker) | 2030+ |
| Unplanned natural gas (combined-cycle glass turbine) | 2030+ |
| Small modular reactor | 2035+ |
Source: NextEra Energy (Earnings Presentation, 4Q24)
Renewables can fill the void
Renewables have the advantage of being the fastest to deploy. Construction time could be as short as 18 months.
More importantly, renewable projects in resource-rich regions are already cost-competitive with gas power plants on a lifetime cost basis. Renewables also don’t face fuel risk or potentially complicated environmental regulations in the long run.
New projects are not in short supply, but many are waiting to be connected following a long interconnection queue that requires projects to undergo a series of grid impact studies.
Virtually all new generation project requests, a whopping 1600 GW, are attributable to renewables today. For context, the current installed capacity in the U.S. is just 1250 GW*.
Even if these projects have the same historical rate of success in reaching commercial operations (about one out of four projects), 400 GW is still a massive amount.
Chart 3: Total capacity in U.S. interconnection queues
Source: Berkeley Labs (Queued Up: Characteristics of Power Plants Seeking Transmission Interconnection, 2024)
New opportunities abound for batteries and transmission
It’s important not to overlook the fact that an additional 1000 GW of new interconnection requests come from large-scale batteries. Batteries store excess energy produced by renewables during the day and discharge it during peak hours in the evening, a practice called “load shifting”. Batteries will be commonplace in the future grid and require a short lead time of roughly a year.
Demand for new transmission infrastructure will follow the expansion of generation capacity. The Department of Energy estimates intrastate and interstate transmission capacity will grow by 20% and 25%, respectively, leading into 2035. These figures will expand as clean energy growth accelerates.
What does this mean for investors?
Our Global Listed Infrastructure Team gain exposure to renewables in two ways. Mainly it resides in integrated utilities that incorporate renewables into their regulated operations. These assets earn a return equal to that of the overall utility rate base.
Second, and to a much smaller exposure in the portfolio today, renewables in contracted generation reside in companies that own and operate portfolios of renewable assets that produce steady and predictable cash flows.
Both exposures are important and likely a growing component of the global listed infrastructure universe and opportunity set.
Macquarie’s International Infrastructure Securities Fund (MIISF) is strategically positioned to capitalise on the increasing demand for power. As of 28 February 2025, the fund has allocated 16.96% to the energy infrastructure sector and 6.68% to electricity and gas distribution. At the stock level, MIISF currently offers investors exposure to companies the team sees as being at the forefront of the renewables transition, such as NextEra Energy Inc (NYSE: NEE) and EDP Renewables (ELI: EDPR).
Conclusion
U.S. power demand is set to surge, driven by data centres, domestic manufacturing and broader electrification. As a result, there is a critical need for more clean and reliable power supply.
Such a significant change presents a new paradigm with a range of potential opportunities. While there are expected to be opportunities across the energy stack (sources of power), renewables are, in our view, essential in this strategy. Utility-scale batteries and transmission infrastructure will also see significant growth to support renewables.
Macquarie’s global listed infrastructure strategy provides exposure to the energy transition through regulated utilities and contracted generation, which we believe are likely key beneficiaries of this major step change in power demand.
The Macquarie International Infrastructure Securities Fund is designed for consumers who:
- are seeking capital growth and regular income
- are intending to use the Fund as a minor allocation or satellite allocation within portfolio
- have a minimum investment timeframe of five years
- have a high or very high risk/return profile for that portion of their investment portfolio, and
- require the ability to have access to capital within one week of request.
The Target Market Determination (TMD), available at macquarie.com/mam/TMD, includes a description of the class of consumers for whom the Fund is likely to be consistent with their objectives, financial situation and needs.