Uncertainty dominates the 2025 US power outlook

The new US administration has engaged in a barrage of new policy actions aimed at boosting domestic oil and gas production, while casting doubt on the future of long-term public policy support for renewables and electrification. The spectre of trade wars hangs over the supply chains of critical minerals and renewables components. 

Significant changes in supply and demand dynamics, meanwhile, are adding to price volatility. Large-load electricity demand for artificial intelligence (AI) data centres, power-hungry manufacturing and crypto mining is in sharp focus, as global AI competition ramps up and the new administration attempts to reshore more US production. 

Added to that, extreme weather events, such as storms, freezing temperatures and wildfires, are increasingly impacting power markets from a supply and demand perspective. As such events increase in frequency, monitoring their effects will be crucial. 

Wood Mackenzie experts recently hosted a power and renewables briefing for an audience of investors and financial companies to update them on the outlook for the US power market in 2025, setting out their base-case and worst-case scenarios. Fill out the form at the top of the page for a complimentary selection of slides from the presentation and read on for a brief introduction. 

Policy uncertainty is the new normal 

The Republican sweep in November’s elections and the likelihood of radical policy shifts have created uncertainty over where opportunities will lie in the power industry. President Donald Trump has indicated a policy of “US energy dominance”, focused on relaxed regulation and the promotion of fossil fuels, although precise policies remain unclear.  

What is clear is that net-zero targets are at risk. The US’s withdrawal from the Paris Agreement will doubtless slow efforts to reduce greenhouse gas emissions and the transition to renewable energy and electrification of transport. We could see a rollback of climate regulation and a delay in investments in clean technologies. Major US investment banks were already abandoning climate alliances and reneging on environmental promises before President Trump’s inauguration. 

While state mandates, corporate sustainability goals and utilities’ commitments to decarbonise may offset some of the impact, trade policy risks are set to increase the costs of new power generation, not least that of renewables.  

New and impending tariffs on Canada, Mexico and China could hit the renewables transmission and distribution (T&D) market hard and exacerbate the ongoing rise in prices for T&D equipment. Retaliatory measures could hamper the import of minerals and components critical to the manufacture of green technologies. The protectionist policies are more likely to impact distributed solar and storage, as these technologies are more dependent on overseas imports. 

Large loads to drive electricity demand 

The President’s embrace of the AI race will underpin electricity demand through 2030 to some extent. Constraints such as interconnection, transmission and supply-chain challenges will limit the ability of new supply to meet that demand in the near term, however, though reforms may reduce bottlenecks later this decade.  

States such as Texas and Virginia continue to see the strongest data-centre growth, though developers are currently availing of opportunities in emerging states ‒ such as Louisiana, Mississippi, Wisconsin and West Virginia ‒ to build their largest campuses to date.  

Information available to date suggests that the co-location of data centres with power-generation facilities remains rare, leaving data centres heavily reliant on the grid. Only 7% of the data-centre projects we track have co-located resources, excluding backup generation. While co-located gas generation is the most common, the presence of renewable and storage resources is notable. All projects co-located with wind that we are tracking are crypto projects in Texas, reflecting crypto miners pursuit of cheap power. Virginia deployments are mostly gas-oriented, reflecting the power crunch in the state. 

The overall picture for thermal generation looks better than it has in years, amid delays to coal retirements, new gas proposals and renewed interest in nuclear builds. Costs to build new generation are likely to be higher due to more expensive financing and capex expenditure, however, while transformers will remain a leading bottleneck.  

Download the presentation slides 

To learn more about our forecasts for the US energy sector, fill in the form at the top of the page for a complimentary selection of slides from our recent briefing in New York.