The U.S. power grid is facing significant challenges as electricity demand is set to grow faster than at any point in decades. According to a recent webinar sponsored by SS&C ALPS Advisors, the grid isn’t ready for what’s coming, with $1.4 trillion in spending required by 2030 for upgrades.
Roxanna Islam, VettaFi’s head of sector and industry research, moderated the webinar, which featured panelists Mark McLain and Paul Baiocchi. They argued that electricity demand is accelerating due to various factors beyond AI chatbots.
Aging Power Grid
Baiocchi noted that electricity demand grew less than 0.5% a year over the past 25 to 30 years, but this pace is expected to climb to about 7% by 2027. This shift matters for investors, as most portfolios are tilted towards companies creating electricity demand, rather than those building the infrastructure to support it.
Energy makes up less than 5% of the S&P 500 by weight, with only four midstream companies in the index. McLain compared the current moment to the post-World War II era, when electricity became a necessity with the arrival of television, refrigeration, and air conditioning.
Demand Growth
New technology, such as AI data centers and robotics, is driving demand, which is showing up unevenly across the country. Virginia, a hub for data centers and new factories, is forecasting electricity demand growth of 7% to 9% through 2030. Texas is approaching 10% load growth, according to McLain.
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The ALPS Electrification Infrastructure ETF (ELFY) was built around the entire supply chain, investing in companies building the infrastructure to deliver electricity, rather than those using it. ELFY weights each of its roughly 105 to 110 holdings equally, spanning regulated utilities, independent power producers, and electrical equipment makers.
As the U.S. power grid continues to age, with 70% of transmission lines over 25 years old, the need for upgrades and investment becomes increasingly pressing. They spent $1.4 trillion upgrading the grid over the past decade, and another $1.4 trillion is expected to be spent by 2030.
In terms of renewable generation, 15 gigawatts were added last year, enough to power roughly 11 million homes. Meeting clean energy mandates in 32 states will require another 100 gigawatts by 2030 and 360 more by 2050, according to McLain.
For investors, the ALPS Electrification Infrastructure ETF (ELFY) offers a way to tap into the growing demand for electricity infrastructure. As the U.S. power grid continues to evolve, ETFs like ELFY may provide a unique opportunity for investors to support the buildout of the grid, while also generating returns.
Natural gas remains the largest single contributor to U.S. power generation, at about 42%, according to Baiocchi. Pipelines, turbines, and storage remain central to keeping the lights on as renewables expand, making the ALPS Electrification Infrastructure ETF (ELFY) a potentially attractive option for investors, particularly those interested in Semiconductor ETFs.
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