Home Insights Fixed income U.S. power market in a period of unprecedented growth and transformation
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U.S. power market in a period of unprecedented growth and transformation

September 19, 2025
Jason Bae
Analyst, Private Infrastructure
Nick Beauregard
Director, Origination and Structuring, Private Infrastructure
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At a glance

Following nearly two decades of stagnation, power demand is now surging, with an average annual growth rate of over 1% between 2021 and 2024, and approximately 3% growth in 2024 alone. Current long-term growth expectations range from 2% to well above 3% per year; by some measures, the U.S. is expected to add the equivalent power demand of New York over the next five years. The consistent upward revisions to predictions highlight both the struggle of forecasts to keep up with growth as well as their uncertainty. Clearly, the U.S. power market is at a critical inflection point with multiple forces fundamentally reshaping both market dynamics and the investment landscape: data centers are consuming energy at unprecedented rates and recent federal policy changes are bringing new legislative paradigms, while critical infrastructure bottlenecks and regulatory hurdles are impeding supply expansion and developers are grappling with increasing capital costs amid elevated interest rates. These factors are actively rewriting the power market investment playbook, creating both challenges and compelling opportunities for power market participants and infrastructure investors alike.

This historic power market transformation is being driven by four major shifts:

  1. AI-driven power demand: Explosive growth in AI, cloud computing, and digital infrastructure is projected to more than double U.S. data center electricity consumption by 2030. This unprecedented demand is straining regional grids and accelerating the need for new generation, storage, and transmission investments.
  2. Evolving policy landscape: The transition from the Inflation Reduction Act (IRA) to the One Big Beautiful Bill Act (OBBBA) marks a decisive shift away from longstanding clean energy support, restricting incentives, compressing project timelines, and increasing regulatory complexity. These changes are driving an acceleration of development activity in order to qualify for tax credits, providing a near-term catalyst for debt financing. While the long-term implications are less clear, the fundamental outlook remains positive.
  3. Renewable growth with bottlenecks: While renewables are set to account for over 81% of U.S. power capacity additions in 2025, significant longer-term challenges exist in grid integration, transmission capacity, and interconnection queues. Large-scale investments in infrastructure modernization is required across the value chain.
  4. High-interest rate environment: Rising interest rates are stressing traditional financing mechanisms, with utilities facing credit rating pressures and pursuing record-high rate increase requests. Higher discount rates are also negatively affecting equity valuations and making longterm, capital-intensive investments harder to justify. Private debt capital and more nuanced financing solutions are being increasingly relied upon to fill any gaps in the capital stack.

Significant capital will need to be deployed rapidly as these forces reshape the power market. Success will depend on the ability to identify and structure high-quality opportunities with strong fundamentals, while navigating increased policy, regulatory, and financial complexities. Asset managers with extensive industry knowledge and established relationships are best positioned to provide resilient, long-term results in this highly competitive, relationship-driven power market—leveraging privileged access to proprietary deal flow and appropriately structuring capital to maintain financial resilience amidst potential volatility.

Read the full paper for the complete analysis of the four trends transforming power market opportunities.

Conclusion

The U.S. power market stands at a critical juncture shaped by four transformative forces: unprecedented AI-driven power demand, shifting policy frameworks under the OBBBA, renewable energy growth despite regulatory and infrastructure constraints, and a high-interest rate environment. The intensifying competition in the market has also led to more aggressive deal terms and compressed returns, requiring careful risk assessment and a disciplined investment approach.

Success in this evolving landscape requires strategic navigation of these interconnected challenges while capitalizing on emerging opportunities. Asset managers that can combine deep industry expertise, strong relationships, and creative financing approaches while maintaining prudent underwriting standards will be best positioned to achieve resilient, long-term results in this complex and rapidly changing market environment.
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Investing involves risk, including possible loss of principal. Past Performance does not guarantee future return. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed. Infrastructure companies are subject to risk factors including high interest costs, regulation costs, economic slowdown, and energy conservation policies. Infrastructure investments are long-dated, illiquid investments that are subject to operational and regulatory risks.

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MM14684 | 09/2025 | 4811629-092026
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