Electricity demand is growing after years of stagnation, driven by electrification, reindustrialisation, and artificial intelligence, which are outpacing infrastructure expansion. 

Today, power generation is a critical economic constraint, transforming utilities into growth assets with better earnings potential. Increased use in transport, heating, and industry, along with reshoring and AI-driven data centre demand, is straining the power grid.

Electricity demand in developed markets is entering a structural expansion phase after nearly two decades of stagnation. Electrification, reindustrialisation and artificial intelligence are coming together to increase power consumption faster than the necessary infrastructure can be expanded. Electricity generation is turning into a constraint on economic activity, rather than a utility service running in the background. This shift is helping to transform utilities from low‑growth defensive equities into infrastructure growth assets with improving earnings visibility and pricing power.

Electrification trends are gathering pace, as electricity is increasingly being used in transport (thanks to electric vehicles), heating, and industry, all of which are expected to lead to electricity’s share of final energy consumption to double over coming decades. On top of this, reshoring is set to increase demand for power in those developed economies that in recent years have relied on China and other nations to produce consumer goods for them. AI is also a significant source of new energy demand, accounting for around 3% of power use in the US, but which is set to rise to 8% or more by 2035. Data centres require continuous, around-the-clock power, seven days a week, at near full capacity; this is a challenge in itself, which is creating a stumbling block for the renewables that are being deployed, as these bring with them intermittency challenges.

Not so nimble

Electricity networks are capital‑intensive and take time to expand: generation facilities take years to build, and transmission networks require regulatory approval and legal permits. Nuclear projects take well over a decade to get off the drawing board and into the real world, and the waiting list for large gas turbines is currently around five years. Although solar and battery solutions are relatively quick to install at around 12–18 months, securing grid connections can take years.

As a result, power markets are tightening and safety margins (meaning the spare capacity to meet unexpected demand surges and outages) are running thin, with some regions approaching minimum thresholds. The consequence is structurally higher energy prices and large capital expenditure programmes to rebuild ageing infrastructure.

What does this mean for investors?

Utilities’ earnings are closely linked to regulated asset bases, meaning increased infrastructure investment translates directly into earnings growth. These companies therefore benefit from spending on grid expansion, new capacity build‑out, and reliability, with higher electricity prices providing an even greater support for profitability.

The investment opportunity extends beyond utilities to the full power value chain, which encompasses manufacturers of grid equipment, electrical engineering companies, and industrial suppliers, along with raw‑material producers supplying copper, aluminium, uranium and other critical minerals. However, regulated utilities remain the central beneficiaries, as they are the owners and operators of the key infrastructure.

Not risk free

As with any investment, utilities as a sector comes with risk. Principally, this includes a slowdown in the construction of data centres, higher interest rates, which in turn would increase financing costs, and political intervention in pricing. Nevertheless, long‑term demand growth and contractual revenue frameworks limit earnings volatility relative to other cyclical sectors.

Back to the future

Electricity is re‑emerging as a strategic economic resource comparable to oil in the last century. Modern economies are increasingly dependent on reliable power availability to support both digital infrastructure and industrial output. The defining investment insight is that the limiting factor for future technological growth is not computing capacity, but rather energy supply. Consequently, companies that can provide reliable electricity delivery solutions should experience a multi‑year structural growth cycle which today can clearly be seen in utility business plans and industrial company backlogs in those areas that are exposed to the build-out of energy systems and networks.

The opinions expressed herein are correct as at 18 February 2026 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.