The Power Buildout: A Multi-Decade Investment Cycle

Power Demand – The Situation in 2026

The U.S. is currently in the midst of a once-in-a-generation shift in electricity market dynamics, as power demand growth, driven by AI and cloud datacenters, industrial reshoring, and electrification,¹ is outpacing power supply growth. The U.S. Energy Information Administration’s (EIA) latest forecast sees electricity consumption growing by 1% in 2026 and 3% in 2027, after growing 2-2.5% annually in 2024 and 2025, “marking the first four years of consecutive growth since 2005-2007, and the strongest four-year period of growth since the turn of the century” (see Figure 1).²

The resultant supply shortage is driving up electricity prices, especially in power markets with concentrated datacenter buildout such as PJM Interconnection (covering 13 mid-Atlantic and Midwest states), where the latest capacity auction cleared at the record price cap of $333/Megawatt-day for the 2026/27 delivery year, up ~10x from 2023-2024, and would have hit $530/MW-day in the absence of a price cap. The auction still fell 6.6 GW short of its reserve margin target, meaning an emergency backstop auction may be required to alleviate reliability concerns.³

Energy affordability, which was already a hotly debated topic during election campaigns in 2025, is set to become a political flashpoint ahead of the 2026 midterms, as datacenters are blamed for rising power prices, blackouts, and water shortages. Several states are considering a pause on new data centers and legislation requiring tech firms to fund grid upgrades.

Looking ahead, the U.S. faces a multi-year power crunch. Since January 2021, $3 trillion in mega project investments have been announced across North America, of which only 16% have broken ground,⁴ implying a strong pipeline for future construction and power demand growth. Large and fast-growing AI/cloud computing companies (“hyperscalers”) continue to accelerate their datacenter buildout and are on track to spend over $650 billion on AI investments this year (60%+ higher than 2025).⁵

Power demand is projected to grow ~2.5% annually through 2030⁶, and 50-100% by 2050,⁷,⁸ creating significant multi-decade investment opportunities across the power value chain in both the production, delivery, and consumption of power.

Supply-Side: Building and Fueling the Next Grid

Meeting this unprecedented growth in demand will require a massive buildout of low-carbon, reliable, and dispatchable generation from a diversified mix of energy sources, as each energy source has its own constraints:

• Renewables offer the quickest path to power and are preferred by hyperscalers for their emissions reduction goals. However, in addition to interconnection delays, the intermittent nature of renewables is incompatible with the 24/7 power needs of datacenters without additional backup generation or battery storage.
• Natural gas, as a transition fuel, is a reliable and relatively lower carbon source of energy, but faces permitting and pipeline bottlenecks, and a 5+ year wait for gas turbines.
• Nuclear power continues to gain momentum, but near-term capacity additions remain limited to restarts and uprates of existng plants, with any new advanced reactors unlikely to be operational before 2030.

Consumption-Side: Three Structural Drivers of Growth

Although data centers dominate media coverage, they only account for about 40% of projected annual demand growth through 2030, and roughly 11% of total power consumed in 2030. Through 2030, demand growth will be driven by three distinct forces: the rapid expansion of data center infrastructure (~40% of total projected demand growth), a reversal of decades-long industrial power decline as manufacturing re-shores (~17%), and accelerating electrification across transportation and buildings (~43%).⁹

• The datacenter revolution is reshaping infrastructure needs. Training and inference workloads are growing exponentially, driving up demand for high performance chips, and power and thermal management systems, and AI infrastructure platforms that can deploy, customize, and monetize models at scale. Additionally, grid constraints, equipment and construction backlogs are changing where and how data centers are built, driving up demand for modular data center construction, distributed energy resources such as utility-scale batteries, diesel generators, and repurposed engines, not just for emergencies, but as primary power.
• Annual industrial power demand in the U.S. peaked in 2000 and has since declined 4-6% in aggregate, stabilizing at around 1,000-terawatt hours in recent years (~25% of total U.S. demand)¹⁰ due to the large-scale offshoring of manufacturing during the height of globalization. This trend is now reversing as manufacturing increasingly returns to the U.S., driven by a prioritization of supply chain resiliency and security and bipartisan support.
• Electrification across transportation and buildings is emerging as a significant driver of long-term electricity demand growth. Despite federal policy shifts, Electric vehicles (EVs) are projected to increase their share of the U.S. retail auto market from roughly 10% in 2024 to 27% by 2030¹¹, supported by state and local policy incentives, declining component costs, improved battery ranges, faster charging speeds, and continued expansion of charging infrastructure. Residential and commercial building electrification is accelerating as consumers and businesses increasingly adopt electric heat pumps, air conditioners, cooking appliances, and other electric technologies. This shift is driven largely by economic and efficiency gains, including lower upfront prices, reduced operating and maintenance costs, and access to utility and government incentives.
  • Growing loads from transportation and building electrification are expected to intensify load volatility and create localized surges in electricity demand because charging tends to be highly concentrated in the evenings and at specific locations, such as homes and public charging stations. This pattern is already prompting utilities and grid operators to invest in grid hardening equipment, smart charging infrastructure, and other localized grid upgrades to manage peak loads and ensure reliability as adoption scales.

The rising power demand and power-intensity of end uses is placing significant stress on new and ageing U.S. grid infrastructure. Demand for electrical capital goods has led to 2-3 year lead times for transformers and switchgear. Additionally, engineering and construction companies that build and repair electrical grids and datacenter infrastructure are experiencing record backlogs and labor shortages. Materials companies are also benefiting from this sustained and resurgent need for capital investment, as demand for steel, copper, concrete, and other critical materials and metals pushes up global commodity prices.

The TCW Edge

The U.S. is entering a new era of power scarcity and reinvention. The transition to a digital and electrified economy is colliding with the physical limits of the grid and geopolitical tensions. But this challenge is also a generational investment opportunity.

TCW Transform Systems (PWRD) and TCW Artificial Intelligence (AIFD) ETFs aim to capture and navigate this moment. PWRD targets companies enabling the power buildout: from gas turbines and nuclear developers to grid equipment suppliers, Energy Performance Certificates (EPCs), and energy storage innovators. AIFD focuses on the demand side: the AI infrastructure leaders building, training, and scaling next-gen models, often in power-constrained environments.

^{1 Chintalapati, Varun, and Eli Horton. America’s Thirst for Power: More Than Just Data Centers. TCW, 14 July 2025.
2 U.S. Energy Information Administration. Short-Term Energy Outlook. U.S. Department of Energy.
3 PJM Interconnection. 2027/2028 Base Residual Auction Report. PJM, 17 December 2025.
4 Eaton Corporation Earnings Call Q4 2025 (February 2026)
5 Company announcements
6 Goldman Sachs Research. AI/Data Center Power Demand: The 6 Ps driving growth and constraints. Goldman Sachs, 13 October 2025.
7 National Electrical Manufacturers Association. A Reliable Grid for an Electric Future: NEMA’s Grid Reliability Study. Make It Electric, April 2025.
8 Gagnon, Pieter, et al. 2024 Standard Scenarios Report: A U.S. Electricity Sector Outlook. National Renewable Energy Laboratory, December 2024.
9 Goldman Sachs Research. AI/Data Center Power Demand: The 6 Ps driving growth and constraints. Goldman Sachs, 13 October 2025.
10 U.S. Energy Information Administration. Monthly Energy Review - February 2026 (Table 7.6). U.S. Department of Energy.
1 1 BloombergNEF Electric Vehicle Outlook 2025, June 2025.}

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