America’s Electricity Demand Just Hit Overdrive - 2025

Oil & Natural Gas / Conventional Oil & Gas Resources / Economics

Paraskova reported in mid-December 2025 that 1) U.S. electricity generation hit a record high in H1 2025, 2) Rising natural gas prices pushed coal’s share of electricity generation to 16%—its highest January-June level since 2022, and 3) solar power generation jumped 30%, but fossil fuels still provided over half of total output.

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Electricity generation in the United States hit a record high in the first half of the year, as power demand is growing with data center expansion. Electricity provided by utilities in the U.S. rose by 4% in January to June, to an all-time high of 2,188 terawatt hours (TWh) for the period, according to data from clean energy think tank Ember cited by Reuters columnist Gavin Maguire.

Fossil fuels continued to supply more than half-or 54.8%-of all electricity. Clean sources held a record-high 45.2% share of electricity generation, up from a 44.2% share a year earlier. That's mostly thanks to a surge of more than 30% in solar power generation. [Nuclear power still at around 20%, but will be rising soon]

Natural Gas Share Falls as Coal Rises 

However, the share of coal in U.S. power generation rose to the highest level for a January-June period since 2022, at 16% of total electricity supplied, according to Ember's data. The rise in coal consumption in power generation was largely due to a 20% spike in the winter, in the first quarter of 2025, per estimates by the U.S. Energy Information Administration (EIA). Coal-fired power generation increased because the price of America's single-largest power source - natural gas - jumped in the first half of the year compared to the same period of 2024.

Moreover, the growing generation from solar has displaced some natural gas generation in some areas, the EIA said in its latest Short-Term Energy Outlook.

"With higher generation from renewables and increased fuel costs, we expect U.S. natural gas generation will fall by 4% in 2025, followed by an increase of 2% in 2026," the administration noted.

The EIA forecasts the electric power sector will generate 124 billion kilowatt-hours (BkWh) of electricity from solar this summer (June-September), which would be 34% higher compared to last summer. Total power generation is surging to record highs, and so is demand from residential and business consumers, as the surge in AI and data center expansions drives demand growth.

Soaring Demand

Onshoring of manufacturing activity and AI-related data centers are driving an increase in U.S. electricity consumption, Goldman Sachs said in a report earlier this year. U.S. electrical power demand is expected to rise by 2.4% each year through 2030, with AI-related demand accounting for about two-thirds of the incremental power demand in the country, the investment bank said.

"The US is reaching a power demand inflection point due to the rise of energy-intensive artificial intelligence (AI), the need for more AI-ready data center capacity, and the reshoring of manufacturing," Goldman Sachs noted in its report.

The world's biggest economy will need all energy sources to ensure power demand is met. Natural gas is the biggest near-term winner of AI advancements, but renewables will also play a key role in powering the data centers of next-generation computing, analysts say. More than $700 billion of grid investment is expected in the country through 2030, as the U.S. infrastructure needs to be updated to accommodate the unprecedented growth of electricity demand, according to Goldman Sachs.

Electricity Prices Rise

To meet demand growth and ensure electric power can be transmitted and distributed, utilities are raising their capital expenditures. Investment in transmission and distribution (T&D) by investor-owned utilities has surged in the past decade-from just over $50 billion in 2016 to more than $100 billion in 2025, according to estimates by Wood Mackenzie.

And as electricity demand rises, utility companies have lengthening lists of grid maintenance, hardening, and development projects, many of which require key electrical equipment, the energy consultancy says.

U.S. power utilities are set to spend $212.1 billion in capex this year, which would be a 22.3% increase on the year as they race to secure new electricity supply for data centers, the Financial Times has reported, citing data from Jefferies. The rise in utility spending and demand growth have contributed to rising retail electricity prices in the U.S., whose increase has outpaced inflation since 2022 and is set to continue rising above all consumer prices through 2026, the EIA said in May.

While nominal prices for many fuels have declined since the peak in 2022, particularly for those closely tied to crude oil prices such as gasoline and heating oil, electricity prices have continued to show a steady increase. Electricity prices include more than the cost of generating electricity-they include transmitting and delivering electricity to ultimate customers, as well as taxes and other fees, the EIA notes.

U.S. utility spending on electricity distribution has surpassed spending on electricity transmission and production. The continued rise in electricity prices since 2022 reflects in part the growing capex of utilities, which are scrambling to prepare for the AI boom. Apart from facing increased expenditure on delivering power to consumers and upgrading grids, electric utilities face a high degree of uncertainty over future revenues as the data center boom generates widely varying forecasts of peak demand in many areas across the country.

The latest report from the U.S. Department of Energy (DOE) puts data center consumption at anywhere between 6.7% and 12% of total U.S. electricity by 2028.

"The report estimates that data center load growth has tripled over the past decade and is projected to double or triple by 2028," DOE said.

There is a huge difference between double or triple growth in data center load, and utilities, the power-hungry Big Tech, and retail residential customers must brace for a period of uncertainty about the cost of supply amid growing demand.

Related Article: PJM Issues Grid Alert Amidst Soaring Temperatures (here).